I maxed out my credit cards during covid/the last two years.
I want to enter into the financial hardship program for my highest card, but they close my account at the end of the program. Will this hurt my credit more than it’s currently being damaged from being at my total limit on all my cards?
There is nothing under the name Financial Hardship Program. Many salespeople and debt relief marketers have used that phrase over the years, but it is just marketing BS. There is no such program and it means nothing.
So let’s tackle the issue of dealing with your debt, which is admirable.
Finding the right solution is not as straightforward as people hope. The best answer depends on several factors and the individual’s goals. Also, so many people incorrectly perceive the different strategies for eliminating debt.
Here is an overview of the significant debt reduction strategies.
I think this recent podcast with Damon Day will help to open your eyes as well.
Listen to the Podcast
You also seem to be giving equal weight to competing factors. For example, the idea of reducing debt for financial reasons or maximizing credit scores are very different goals with different strategies.
You should not close the cards you pay off if you want to get the most value out of your past credit activity. In addition, the length of open accounts helps to increase your credit score.
But let’s not kid ourselves. A credit score is not an indication of how well you manage finances. Instead, it is a numerical risk measurement so future lenders can gauge your risk and profit potential.
People with higher credit scores pay less to borrow money because they are statistically less risky to lend to. But there is not just one credit score. There are many depending on what you are trying to purchase.
Here is another podcast with Damon Day that talks about this in more detail.
And then we need to factor in the cost of eliminating debt without saving for retirement. See my online calculator here.
So you see, like a fingerprint, each person’s debt situation is different and a bit unique. You can go it alone and hope for the best solution for your situation. Or you could talk to Damon Day and have a conversation about your particular situation.
You could also give me more details about your debt, savings, age, and financial goals in the comments below, and I could provide a bit more guidance.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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