One of the most pressing concerns for people who are considering debt consolidation programs for their credit card debt is whether or not they’ll lose their ability to use a credit card in the future. For many, the thought of having to go years without access to a credit card seems next to impossible, especially when money isn’t flowing freely.
The reality is, credit card debt consolidation can negatively affect your ability to use a credit card after the fact. In this article, we’ll cover some of the various ways to reestablish your ability to use a credit card after a debt consolidation program and the benefits and drawbacks of each.
Can You Use Credit Cards After They’ve Been Consolidated?
When you consolidate credit card debt, sometimes creditors will allow you to keep the accounts open. If this is the case, your credit won’t be impacted as harshly, but it’s still best to stop using them for a while. When credit cards are maxed out, your credit score suffers, so if you consolidate them, you’ll gain the benefit of the balances being slashed to zero. The longer you can keep your credit cards at a zero balance while open, the more your credit score will improve.
How Can I Consolidate Debt Without Closing My Credit Cards?
This will depend largely on your credit situation. If your credit is good and you have a limited amount of debt, you probably won’t need to close your existing cards.
You can often use a balance transfer or even get a debt consolidation loan without having to totally close the accounts.
Balance transfers never come with the requirement of closing your other credit cards. Even with a debt consolidation loan, you may only face an account closure restriction in some cases.
After Consolidation, Monitor Your Credit Report
After you consolidate your credit card debts, monitor your credit report closely to gauge progress. Check your credit around 30 days after debt consolidation to make sure the account status has been correctly updated.
If your accounts aren’t being updated properly, contact the credit bureaus and your debt consolidation company if you’re using one. It’s important to never assume that your credit report is being accurately updated.
Strategically Keep Low Credit Card Balances
The amount of the credit limit you use on a card is called your credit utilization rate. A good guideline is using less than 30% of your limit—the lower the better. Make sure you pay down your credit card balance before the billing cycle ends or pay the creditor several times throughout the month to always keep your balance low.
When your credit card reports a lower balance to the credit bureaus, that lower utilization will be used in calculating your score, giving it more of a boost with each month the utilization rate stays low.
How To Get New Credit Cards After Consolidating Your Old Ones
Become An Authorized User
If you have a close friend or family member that has a solid credit history that’s willing to help you out, they can add you as an authorized user to one of their longer-established cards with solid payment history and a low utilization rate. This is one of the fastest and easiest ways to reestablish your credit history and get approved for new credit cards. Just remember, both your use of the card as well as the main account holder’s will influence your credit rating.
Get A Secured Credit Card
One of the primary ways to build or rebuild your credit is with a secured credit card. With this type of card, you send the creditor a cash deposit which will become your credit limit. You then use it as a normal credit card, and you may eventually be offered an unsecured card by the creditor with enough on-time payments.
This is one of the most common ways to get new credit after debt consolidation that require old consolidated cards to be closed. The main drawback to secured cards, beyond the initial deposit, is that it can take several months before you’re offered unsecured cards with higher limits, and secured cards typically don’t build your credit as quickly as unsecured cards can.
Request Higher Credit Limits
When your credit limit increases but your balance remains the same, your credit utilization rate is instantly reduced, potentially boosting your credit score. Some reasons you may be able to get limit increases on your cards include recent pay raises, but most commonly they’ll be offered once you’ve established many months of positive credit experience.
Add Variety To Your Credit Mix
One of the most financially beneficial ways to increase your access to credit cards is by adding variety to your credit mix. Certain types of credit can have positive effects on your credit rating, such as mortgages and auto loans. Of course, this requires a strong history of on-time payments, and it does take considerable time to reap the credit rewards.
When you only have credit cards on your credit report, your scores won’t be able to reach their highest potential, because the rating bureaus are only getting a small snapshot of how you use credit. The more types of accounts you have, the more clear that picture becomes, raising your potential for a high credit score and better credit card offers.
Can I Get Help With Credit Card Consolidation?
If negotiating to consolidate your credit card debts sounds like a difficult task, the good news is Alleviate Financial has an experienced staff that’s ready to help. Reach out to our team today for debt consolidation program that accounts for your entire financial picture, including your credit access in the future. Contact Alleviate Financial today!