3 Strategies – NBC4 Washington

This article originally appeared on The 4Front, NBC Washington’s Work 4 newsletter. You, your family, your community, your health, safety, and money. Subscribe here.

Families increasingly rely on credit cards to offset the high cost of living. In the final months of 2022, credit card balances rose by $61 billion — the biggest quarterly increase since the US Federal Reserve began compiling data in 1999.

Want to control your debt?

Don’t put your head in the sand, just make the minimum payment and think that’s enough, says Sara Rathner at Nerdwallet.

Find a strategy that works for you.

Here are three popular debt service strategies to consider:

Motivated by crossing things off your to-do list? try snowball method. Make minimum payments on all accounts to stay in good standing. Put an extra dollar on your smallest debt balance. Once eliminated, move on to the next smallest debt.

Want to save money with interest over time? That landslide method Prioritize repayment of debt with the highest interest. This method can save you the most money, but it can take a long time to feel like you’ve reached your goal.

Want to take advantage of good credit? Consider debt consolidation, when you combine all your debts into one loan. Consolidation loans often have lower interest rates than credit cards — if you have good credit. If used properly, this method can help you pay off debt faster. But stay away if your credit score is too low to give you a competitive interest rate.

Many credit repair companies engage in unlawful business practices, plus you may not need a company to help repair your credit. Consumer Reporter Susan Hogan has steps you can take to improve your own credit score.

Credit Repair Companies: Are They Worth It?

You may have seen the FTC consumer warnings about credit repair companies regarding unlawful business practices.

While there are reputable companies out there, you can spend an hour or two doing it yourself — it’s free.

Here’s how, according to Rathner:

• Download your Equifax, Experian, and TransUnion credit reports from annualcreditreport.com — free until the end of 2023.
• Review each credit report for problems, such as accounts you can’t remember opening and inaccurate information. Make sure any public record information, such as evictions or judgments, is accurate.
• If you find inaccurate information, dispute it by contacting the three credit reporting companies. Send a letter explaining each error. Include supporting documentation. Credit reporting companies generally have 30 calendar days to investigate your dispute.

No credit repair company can remove negative information—such as bankruptcy or late payments—from your credit report if that’s accurate. However, most negative information can only appear on a report for about seven years (10 years for bankruptcy), according to the Consumer Financial Protection Bureau. Contact the credit bureaus to remove outdated information — it can increase your credit score overnight.

So when is the right time to use a credit repair company? It may be beneficial if the prospect of contacting a credit agency is overwhelming.

Just watch for red flags. Don’t hire companies that ask you to dispute accurate information, promise to remove valid negative information, or charge an upfront fee.