The latest data shows that over 189 million Americans are in credit card debt, which can quickly become a dark cloud that is challenging to get out from under. The interest rates on most personal credit cards can be as high as 20-24%, which only makes the debt continue to accumulate, resulting in overwhelm.
Credit Yurcisin, the founder of Credit Class, has been there. After graduating from college with debt, he invested $20,000 into a get rich quick scam that doubled his original debt. He realized, according to the $38,000 salary in his first post grad job, that it would take him eight years to pay off all the debt. He had to come up with a different plan — and quickly. So, he learned how to use credit to help himself. Now, he teaches individuals of all backgrounds, and credit scores how to do just that (and more) in Credit Class.
Use Debt to Consolidate Debt
A major concern for many individuals is how to get out of credit card debt. In fact, the idea of leveraging credit may sound intimidating or precarious if you already have a fraught relationship with credit because of accumulating debt. What Yurcisin teaches is how to use business debt to consolidate personal debt in his course.
“The first step in consolidating personal debt is to gain access to business debt (a business credit line), as business credit limits are typically three times the amount of your personal credit limit,” Yurcisin explained. “So, if your personal credit limit is $10,000 and you have three credit cards, you could access around $30,000 in credit through a business credit card, which could pay off the personal credit.”
This debt consolidation on a business card is important for two key reasons. The first is because business cards usually have an introductory offer of 0% interest for one year, which means you have a year to pay off your debt. And, consolidating all of the personal debt you’ve accrued onto a business card helps you save money on the interest rates you would be paying from several maxed out cards.
Accessing Business Credit
Of course, if you have three maxed out personal credit cards, no bank or credit card company is going to approve you for a business card. However, there are ways to improve your FICO score (the credit score that banks and lenders see) quickly.
“I tell my students to reverse engineer the FICO process,” explained Yurcisin. “One of the top components of the FICO score is your overall utilization, which is how much of your credit line you currently are using. The lower the utilization, the better.”
This can be a challenge if your personal credit cards are maxed out and you have no way to pay them off, of course. So, Yurcisin advises to see if a family member or a friend can cover the cost of paying off the debt (or, at least lowering the utilization as much as possible). Then, once you access the business credit, you could immediately liquidate the cash and pay them back.
In addition to lowering the overall utilization, another trick you can do is add an authorized user account. This is something Yurcisin explains at length in the Credit Class, and can be a major booster to a credit card score depending on who the authorized users are.
Interest Rates
“The major goal when paying off excessive debt is to make sure you are paying as low of interest rates as possible, which is why it’s so important to consolidate your debt on a 0% interest credit card,” Yurcisin advises. “Even if you’re not approved for a 0% interest card, a business line of credit is always going to give you a larger credit line and a lower interest rate than a personal credit card.”
Once this consolidation occurs, you can work at chipping away on the actual debt rather than wasting your money on the interest rates. Plus, depending on which business credit card you get, you could be entitled to some perks — travel or otherwise. Yurcisin shares all about how to leverage credit for your goals: whether they may be starting a business, getting out of debt, or traveling the world (or, all of the above!) in Credit Class.