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With the new year just around the corner, many of us have already started thinking about what our New Year’s resolution is going to be. While resolutions will typically vary, there is one resolution that many people will more than likely be sharing this year, getting their finances back on track. And with credit card debt being one of the leading debts in the country, consolidating credit card debt is where many people are looking to start. If you are one of the millions that are taking a financial hit because of too many credit card balances, consolidating them could be a wise choice, so long as you do it correctly.

In this article, we are going to cover the five steps you need to take if credit card consolidation is in your plans for the new year. The steps provided will help to ensure that whatever method of credit card consolidation you choose will be effective.

  1. Situation Report = The first thing you need to do is to take a close look at your current financial standing. You can do this by checking your credit scores and reports. Errors are common on credit reports and such incorrect entries could prevent you from getting the help you need for your consolidation. If you do identify an error, dispute the error with the credit reporting agencies. If you have not done so within the past 12 months, you can obtain a free credit report from the three major reporting agencies, TransUnion, Experian, and Equifax, by going to Once you have fixed any errors and have an accurate picture of your financial situation, you will have a better idea of what you need to do and what actions to take next.
  1. Evaluate The Options = There are several methods you can use to consolidate your credit card debt and various factors will determine which is best for you. Before settling on a specific method, you will want to closely look at each one and see if you are able to financially afford it, or if your current credit history limits you.
  • Personal Loans – A personal loan typically has terms of three to five years and only charge simple interest. Using this as your method of consolidating your credit cards is a better option financially as the interest rates attached to consolidation credit cards is usually pretty high. If this is the option you would like to use, make sure you ask about credit requirements. If you want to take advantage of lower interest rates, you are going to need great credit report.
  • Consolidation Credit Cards – You have probably seen one of the many commercials currently being aired on the television that talks about how you can consolidate all of your credit cards onto one single card. While these claims are true, you have to use some caution. Many of the companies that are marketing these cards are only offering the lower interest rates for a specific period of time. If you cannot pay off the total balance before the end of the offering period, you will be stuck with interest rates that are more than likely going to be as high as the original cards you consolidated, to begin with. However, if you have good credit and know you can pay off the balance before the end of the offer period, these types of credit cards are a good option.
  1. What Additional Costs Will You Face = Once you have decided which plan is better for you, you will now need to figure out what additional fees you will be facing. Whichever option you decide to go with will lead to additional costs. Once you know these additional costs, you will have to take an overall view of your situation and determine if the option you have chosen is financially beneficial.
  • Credit Counseling = Reaching out for help from credit counseling professionals is a great option if you feel that you have severe debt problems or if you are having little to no success on repaying the balances on your credit cards. There are many credit counseling agencies that will help by having you pay them one monthly payment and they will pay your lenders. Participating in such a plan may also lead to the lenders lowering your interest rates. These types of plans usually have a term of three to five years.
  1. Prepare for the Ding = Now that you have selected the option that works best for you, compared additional costs, and have enacted your plan, you will have to be prepared for the possibility of hits, or dings, to your credit score. Why? For starters, you will be opening a new line of credit which causes a hard inquiry regarding your credit report. Next, a new loan or line of credit lowers the average age of your credit history. However, your scores will eventually improve as your balance on the new loan or card lowers.
  1. Remain Determined= Now that you have initiated your plan, make sure you remain determined to eliminate these high debts and make decisions that are more financially sound by avoiding the use of your credit cards or other lines of credit.