Don’t let maxed out credit cards keep you from having credit when you need it.

3 minute read

Are you feeling overwhelmed by maxed-out credit cards? Maxing out a credit card means you’ve used up all available credit up to the card’s credit limit. For example, if your card’s credit limit is $5,000, and your balance is $5,000, the card is maxed out.

If your credit cards are maxed out, it’s time to get the situation under control, for at least a few reasons. For one thing, if you’ve used up your credit limit, you can no longer charge on that card, so you won’t have available credit when you need it. Also, if you maxed out several cards, you probably can’t pay as much as you’d like each month to get the balances down and free up credit on the card.

And maxed-out credit cards also lower your credit utilization ratio – the amount of revolving debt to your available credit – which can lower your credit score. If you’ve maxed out your credit cards, don’t be discouraged. With focus and discipline, you can lower card balances so you once again have available credit.

Below are five ways to bounce back from maxed-out credit cards

1. Find ways to raise extra cash

One way to make headway on paying down a credit card is to quickly scrounge up as much cash as possible. Do you have a nice bike you never ride that you can sell? Maybe you could sell an extra chair or loveseat online. You could even take a second job or start a side hustle, like petsitting for neighbors or mowing grass for extra income.

Then apply most of the cash you earn or raise to one credit card until you pay it off, while still making smaller payments to other maxed-out cards.

Find out: Which Credit Card Best Fits Your Lifestyle

2. Create a budget

The first step to paying off maxed-out credit cards is creating a monthly budget that factors in a strategy for paying off (or even down) credit cards so the balance is well within the credit limit. If all your credit cards are maxed out, you also need to face the fact that your money management skills and spending habits can stand improving.

So, find a budget template or app you like online and get started allocating income towards those credit card balances and other expenses.

Find out: 6 Easy Ways to Track Your Spending Habits

3. Put together a debt payoff plan

For help coming up with a debt payoff plan or guidance on consolidating debt, consider meeting with a credit counselor at a free (or nominal fee) nonprofit credit counseling agency. An experienced credit counselor has seen the worst financial scenarios, so rest assured you won’t be the first person to walk in with maxed-out credit cards and no idea how to get back on track.

Find out: How to Set Up a Debt Repayment Plan That Works

4. Focus on improving credit

When you’ve maxed out credit cards, your credit can take a hit. For one thing, a high amount of debt can result in making late payments or defaulted accounts – and credit history accounts for roughly 35% of your credit score. Meanwhile, maxed-out credit cards typically lower your credit score due to the high credit utilization ratio on your credit report.

Once you start paying down credit card balances, however, your credit score will likely improve and continue to improve as you lower your credit utilization rate. And late payment history automatically drops off your credit report after seven years.

That may seem like a long time, but keep in mind that as older negative payment history accounts drop off one by one, your credit should improve as long as you consistently make all payments on time.

Find out: How to Improve Your Credit Score for Free

5. Don’t run up more debt

You can’t bounce back from maxed out credit cards if you pay $500 towards the balance and then charge $500 to the card the following week. So, avoid charging any purchases on credit cards while you’re working on improving your maxed out status.

Once you’ve paid off your credit cards, created a budget and learned to manage money better, you can make purchases with a credit card again. For now, though, pay off maxed out credit card balances first, so you can charge responsibly later.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

Published by Debt.com, LLC