How to Eliminate Debt Without Damaging Credit

Eliminating debt can raise your credit score and give you peace of mind. Some people file bankruptcy or negotiate a debt settlement with their creditors to get rid of debt, but these methods will damage your credit rating and make it difficult to get future financing. Consider ways to get out of debt without damaging your credit rating.

Instructions

1

Increase your income. If unable to pay off debts with your present income, brainstorm ways to bring in extra income. Apply for part-time work as a newspaper delivery man or waiter, or work in a retail store during the evenings or weekends. Put your hobby or talents to use and make extra money running a home business. Use the extra income to eliminate debt.

2

Stop spending. Eliminating debt calls for prioritizing your spending and cutting out unnecessary expenses. Get rid of your expensive cellular phone plan, cable television or expensive extras such as professional lawn-care services, weekly hair appointments, massages and manicures.

3

Destroy plastic. Closing credit-card accounts can reduce your credit score. Instead, lock your credit cards in a safe, or cut them in half to eliminate the urge to charge purchases.

4

Pay more than the minimum. Put all your extra funds toward your credit-card debt and pay more than your minimum each month to eliminate debt. If you normally pay $20 a month, consider paying $100 or more until the card is paid off.

5

Get rid of high-interest cards. Paying a high interest on a credit card can slow your efforts because a chunk of your monthly payments will go toward the interest. Ask your creditors to reduce your interest rate, or apply for a low-interest credit card and transfer your balance.