Strategies for Handling Credit Card Debt?

[consultant]

I'm wondering if canceling the card would have any beneficial impact on either my credit score or on my negotiating leverage. I would never stop making payments realizing that would hurt my credit rating. Whenever I've canceled a card I always requested a letter in writing indicating it was canceled on my request in case it is every improperly reported - which did happen once time!

So I'm wondering if I cancel the card if by lowering my total available credit it would help the score as I believe the score would take into account that I may have a high total balance but also how much higher it can go. On the other hand I heard that your score is higher if your total balance is below 50% your total available credit - in that case it would hurt the score to cancel the card possibly?

Regarding negotiating, I would think if you canceled the card before negotiating a lower rate that may raise red flags with them making them more apt to deal since they know someone is less likely to pay off a card they can't use any more?

Also wondering if it is better to request a lower rate and/or payment plan in writing as opposed to over the phone?

[jIM_Ohio]

I'm wondering if canceling the card would have any beneficial impact on either my credit score or on my negotiating leverage. I would never stop making payments realizing that would hurt my credit rating. Whenever I've canceled a card I always requested a letter in writing indicating it was canceled on my request in case it is every improperly reported - which did happen once time!

So I'm wondering if I cancel the card if by lowering my total available credit it would help the score as I believe the score would take into account that I may have a high total balance but also how much higher it can go. On the other hand I heard that your score is higher if your total balance is below 50% your total available credit - in that case it would hurt the score to cancel the card possibly?

Regarding negotiating, I would think if you canceled the card before negotiating a lower rate that may raise red flags with them making them more apt to deal since they know someone is less likely to pay off a card they can't use any more?

Also wondering if it is better to request a lower rate and/or payment plan in writing as opposed to over the phone?

In general closing cards lowers your credit score.
There are 3 primary factors which contribute to your score...

1 is payment history
1 is percent of available credit you use (lowering available credit lowers the score)
1 length of time of accounts

the best way to improve credit score is to leave all cards open and make payments on them. My wife improved her score by 200 points (mid 500s to 700+) in 2 years. She did this by paying her student loans, paying her car off, and paying off all her cards and leaving them open.

[consultant]

Thanks Jim. One other question. I'm reading that entering into a Hardship program due to loss of income will most likely end up on my credit report and raise red flags with other companies in addition to lowering my credit score. The other companies might then close my account or lower my available credit.

Is this true?

I'm also wondering if I request a Hardship Agreement, and the card issuer denies it, will there be any record of that on my credit report?

I'm okay making my payments for now, barely. But if I have another drop in income I want to know my options and be quick to act to avoid the problem getting out of hand.

[wincrasher]

There isn't much information on how denials effect your score. I do know that if you apply for credit, and are denied, it has an effect.

Your bigger risk on asking for a hardship waiver and are denied, is that your rates could go up further.

Also effecting your score is the number of fixed payment loans you have. Car loans and other type loans that have fixed payment amounts are looked at more negatively than variable items like revolving accounts (credit cards). The thought being is that you are locking up cash flow with fixed payment accounts.