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I have always carried more debt on credit cards than I should have. However, I have always been responsible in making payments. Before the economic crisis, my credit scores were around 780 and I had all the access to credit I needed. But my lenders have slashed my credit lines and closed accounts. Suddenly I find myself using 90% of my available credit, not because I’m spending more but because my credit lines have been reduced. Last I checked, my scores were around 690, and I haven’t had a late payment in more than seven years. Now with interest rates so low, I would like to refinance my house (that I am underwater with), but that seems impossible with this new “credit reality” for me. What is my best course of action? And no, I can’t just pay off all my credit card debt without a significant lifestyle change such as putting the kids back in public schools, eliminating vacations, etc., which I am not willing to do at this time.

Answer: If you can’t pay off your credit card debt, you can’t afford your current lifestyle.

• Liz Weston
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You never could, really, but that fact was obscured by loose lending practices that didn’t punish you for carrying big credit card debts. Times have changed, and you need to change with them.

Carrying credit card debt has always been foolish, of course. It’s expensive and a signal that you’re living well beyond your means. Furthermore, as you’ve learned, you’re vulnerable to the changing whims of credit card companies, and those whims can have serious effects on your perceived creditworthiness.

Paying down your balances may not boost your credit scores right away if your lenders continue to slash your available credit — an industry practice known as “chasing down the balance.” But you need to do so anyway to free yourself of this toxic debt.

Your problems refinancing aren’t just due to your scores, in any case. Your current scores won’t necessarily prevent you from refinancing (although you would get a higher interest rate than if they were 740 or above). Your bigger problem is the fact that you owe more on your loan than the house is worth. You could explore the federal government’s Home Affordable Refinance Program at http://www.makinghomeaffordable.gov to see whether you qualify for an underwater refinance; otherwise, you’re probably out of luck.

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