Americans and Credit Card Debt: How to Change Your Future

Not so fun fact: Credit card debt is up 15% for Americans. This is the highest annual jump in over two decades! Will we be able to get out of debt and change our financial futures? Keep reading to find out.

60% of people in America who carry a balance each month have held that debt for over a year. As we see interest rates fluctuate coupled with high inflation, it’s taking more discipline than ever for people to eliminate that debt.

It’s understandable that many people have relied on credit cards to get through day-to-day life. With grocery prices (among everything else) almost 10 percent higher than this time last year, stretching paychecks has become increasingly difficult. However, it’s important to remember that credit cards are a short-term solution to what will end up a long-term problem.

With credit card debt hitting $930 billion toward the end of 2022, it’s safe to say something isn’t working.

Many are using credit cards to alleviate the stress of day-to-day life, but it’s only adding to their stress later. No one wants to pay seven dollars for a carton of eggs, but it’s much better than paying seven dollars plus interest that keeps piling on!

So, the question is, how do we make different choices individually when the current economic state is tricky for most of us, collectively?

1. To start, it’s best to have an understanding of how your credit score works. You can download your current credit report for free once a year, as well. This will show you what your score is and how much debt you’re in, and to whom.
   
   
2. Once you’re aware of what you owe, you can best decide how to start paying down your debts. Some may be easier to pay off than others. For example, if you have a credit card that you only use for certain items and has a balance of $200, that can be paid off much more quickly than a card with a balance of $5,000.

Much like anything worthwhile, getting out of credit card debt will take time. You likely didn’t get in debt overnight, and getting out of it won’t happen overnight, either.

• Start by simply going over your budget and looking at areas you can cut back on. This may mean canceling a streaming service or deciding not to eat out. Small changes can add up to big savings!
  
  
• Once you’ve gone over your budget and chosen which expenses to eliminate, stop using your credit cards (if possible) and start attacking that debt.
  
  
• Conquer your smallest debt first while making minimum payments on the rest and then move on to the next one.

As mortgage lenders, we’d be remiss to not explain how carrying debt effects your home buying. The more debt you carry, the higher your interest rate is likely to be. This is called your DTI, or debt-to-income ratio. In simple terms, it’s the money coming in each month versus the money going out each month.

If you’re overwhelmed by debt and are trying to get a mortgage:

Just get started. Trust us when we say, you aren’t alone in this. Remember, America has $930 billion in credit card debt…there’s no way you did that on your own! Meet with a Home Loan Specialist and see what you can do to get on a smarter mortgage plan. You may not be ready to buy today, but you will learn how to get on a path toward homeownership.

If you have no debt history and are trying to get a mortgage:

At Churchill Mortgage, we offer No Credit Score financing. This is a type of home loan for those who have a credit score of ZERO, not a low credit score. While this option may seem tempting for those who’s credit is lower than preferred, it’s only available for those with absolutely NO credit score. This means you have no debt history at all.

Don’t stress too much over how you got yourself into credit card debt. What’s done is done, and now you’re taking the steps to relieve yourself of the burden of debt. Choosing to change your financial future is something to be VERY proud of!

This article does not, and is not intended to provide legal, financial, or accounting advice. Readers should consult their financial planner concerning debt in your particular situation.