Debt relief is an issue that many consumers have faced over the past months, or even years, as there are aspects of our economy that have not been favorable for certain consumers who may have seen employment problems arise and, as a result, have either suffered from long-term unemployment or are underemployed. Sadly, there are also some consumers who are still combating debt they have acquired after the recession when many were facing job loss and attempting to stay afloat by using credit cards or racking up debt from other lines of credit. However, when it comes to budgeting and repaying debts, particularly credit card debts, some consumers are unsure of what steps should be taken after they achieve their debt relief goals, as some will continue to keep their cards and make smart, affordable purchases while others cancel their cards altogether.
What a consumer must keep in mind is what they hope to accomplish in their personal financial life if debt relief has been a long battle which has been fought and, currently, these men and women are in a position where they are relatively debt-free in terms of unsecured lines of credit like credit cards or even loans. Understandably, if a consumer has paid off a loan they are unlikely to acquire more debt after a long and troublesome debt relief process, but credit cards are a temptation that stay in place for many and, as a result, we see consumers constantly fighting a battle of paying off credit card debts and acquiring credit card debt in a cycle of consumer credit use.
There are those who, upon erasing their credit card debts, simply cancel their credit card accounts so that they will no longer be faced with the temptation or problems that can arise with having active credit cards available. However, it can be beneficial for consumers, particularly in the area of their debt to available credit ratio or when building a their credit score, as certain aspects of the consumer’s financial life will require that they prove themselves to be capable of maintaining and paying off debt obligations.
Also, consumers may see a decrease in their credit score if they cancel their credit cards, as this will typically lower their debt to credit ratio, or credit utilization ratio, and for those who still have aspirations to either purchase a home, refinance their mortgage, or acquire debt in the future, like a car loan, it will be vital that a positive credit history and credit score be in place.
Understandably, some consumers may be able to benefit from closing some credit card accounts, but cards with a long credit history can be beneficial, if used properly, when it comes to establishing and maintaining a positive credit score. For consumers who have trouble handling their credit cards or simply repaying their debts in general, they may be able to consult counselors that will help them get better control over their financial life and implement more responsible repayment habits, but this will obviously differ from one consumer to another. However, some advisers have suggested that after a consumer finds the debt relief they have been seeking, this is a point where they may be able to take a step back and reassess their situation before simply canceling a credit card account, as there are benefits that can be seen if responsible credit card use is in place in the life of a cardholder.