How to Clear Credit Debt

Excessive credit card debts can greatly reduce your disposable income and create unnecessary stress. Maintaining a good credit rating calls for managing debt wisely. And accumulating excessive debt is a surefire way to reduce your credit score. What's more, high debts can hinder your ability to qualify for loans such as car financing and mortgages. Fortunately, there are ways to clear credit debt and obtain peace of mind.

Instructions

1

Cut your credit cards in half. Stop using credit cards and replace plastic with cash. Lock your credit cards in a safe, or grab a pair of scissors and cut them in half. Do not close your accounts. This method reduces your credit rating.

2

Calculate your debts. Grab your statements and use a calculator to compute your total debt.

3

Request a lower interest rate. Look at your interest rate for each credit card, and then contact individual creditors to ask for a lower rate.

4

Budget your money. Subtract your monthly expenses from your take-home pay to determine leftover for the month. Do not include extras such as shopping or other personal luxuries in your monthly expenses--only the essentials such as housing, food, insurances, transportation and utilities.

5

Deposit disposable income. Put your disposable income or leftover funds in a separate bank account. Use this money to pay off your debts.

6

Submit higher payments. Avoid paying the minimum payment each month. Aim to pay at least two or three times the minimum payment to clear your debt faster.

7

Explore ways to increase your income. Pick up a second job or start a side business such as babysitting, mowing lawns, freelance writing or office cleaning to generate extra income to pay off your debts.

8

Pay debts on time. Stay within your credit card limit to avoid over-the-limit fees, and avoid late payments to alleviate late fees and higher interest rates.