Dear Debt Adviser,
I have $35,000 worth of credit card debt. I used the debt calculator to get on a plan to be debt free in 4.5 years. I always make more than the minimum and have never missed or been late on a payment. I’ve been trying to apply for new credit cards to do a balance transfer and get better interest rates, but am always rejected due to my large balance. My balance is high compared to my income, which is $45,000 a year. How much debt do I have to pay off before I will be able to get a better deal? I hate paying this much interest and would like to see the numbers go down more quickly! What should be my next step?
— Louise

Dear Louise,
In New England, we have a saying: “You can’t get theah from heah.” You are looking for a shortcut that doesn’t exist and every time you try, you are setting yourself back further.

When you apply for and are rejected for new cards, you create inquiries on your credit report, which result in lowering your overall score. This, in combination with your debt-to-income ratio, makes you stand out as a credit risk to potential lenders. You also may be pushing yourself off a cliff unknowingly. If you lower your score sufficiently, your exiting cards may notice and reset your already unattractive rates to what is called the penalty rate. Even if you don’t miss a payment, a change in risk profile (that is, your credit score) can cause a universal default provision to be applied, resulting in a 30-percent-or-so interest rate!

So what can you do to keep from paying so much interest and see your balances reduce more quickly? First, stop applying for new credit. Then target the card with the highest interest rate and aggressively pay this account down. You may have to reduce or cut out altogether the amount over the minimum payment you are making on your other cards. Be sure you continue to make at least the minimums on your other cards on time, every time. Once this account is paid off or at least close to being paid off, you can begin paying over the minimum on the next highest interest rate card. This plan will result in the greatest interest rate savings.

Your other option would be to pay off the card with the lowest balance, using the same formula. Again, once the first card is paid off, move on to the next one with the smallest balance and tackle it. You won’t save as much in interest payments with this plan, but the satisfaction of seeing those cards drop off may be worth it so that you feel like you are moving closer to the finish line. One note: Don’t cancel the cards as you pay them off, as doing so can lower your credit score, especially if you have had a card for a long time. They have their own saying in the credit business: “Old credit is the best credit.”

Another way to see your balances shrink is to apply any “new” money to your debt. This is money that you get from pay raises, three pay periods in a month, income tax refunds, bonuses, overtime, the sale of property or any other unexpected cash that comes your way. Put this money in a separate account just for debt reduction so you won’t be as tempted to spend it. This should be fairly painless, since it’s money you haven’t counted on to make your budget. If you don’t want to go all the way with this plan, target half of this money for your debt.

For now, shred those offers for better rates and keep doing what you’ve been doing. You can get where you want to go from there!

Good luck!