Does increasing spending to more than 90% of one's credit limit on a credit card ruin one's credit score? If so why?
It does affect your credit score in the short term. As one of the factors that determines your credit score is the ratio between credit used and credit available .
The lower the percentage of credit used as compared to the credit available the better it is for your credit score . Over utilization of your credit limit shows that you are over leveraged and in case of exigencies the probability of default / delay in payment goes up . Thus the risk profile increases in such case .
However if it's a one off case the rating agency will give low weight-age to such events as time passes.
Cut your coat as per your cloth
1) Write to all your credit card companies expressing your willingness to pay them back and request them to give some reductions in interest charges .
2) Negotiate with the credit companies to convert your balance into EMIs with the option to prepay and get waivers on interest in case you can do so.
3)Start paying back as agreed. Try to prepay the card with the highest interest rate , followed by the cards with lower interest rate.
4) Calculate your funds available .( Income - Mortgage payment - EMIs- Funds to be saved for emergency expenses - Insurance premiums = Funds available for expenses and future savings)
4) Start saving for an emergency fund .
5) Cut back on all your excess expenses . Bring down your excess expenses and plan to live within your means.
6) Once your debt is paid off , just have one credit card and keep it under lock and key . Use it only when you have to , and pay back on the due date .
7)Try to start a small business / take a second job and develop multiple streams of income .
8)Do not forget to celebrate small successes on the way and reward yourself !! If there is no one around to pat your back then pat your own back and congratulate yourself for having started the journey !
9)Enjoy and fight for your financial freedom.