How to Get Out of Debt & Repair a Credit Score

Countless ways exist to improve a credit score. If time is of the essence because you must obtain a low rate on home loans and auto loans, eliminating your debt is an effective remedy. Many people desire to eliminate their debt, but don't create a realistic plan, or stick with a plan. Understanding your debt and prioritizing your spending is key to getting rid of credit card balances and other debts. With so many available options, it's possible to clear your debt and raise your credit score.

Instructions

1

Confront your spending problem. Pull out your credit card statements and calculate the amount you owe.

2

Assess your budget. Determine your disposable income by calculating your total monthly expenditures and subtracting from your take-home pay. Eliminate unnecessary expenses such as impulse buying or entertainment.

3

Prioritize debt. Read each credit card or loan statement carefully and look for your interest rate. Pay off debt with the highest interest rate first.

4

Use your extra money to reduce debt. Create a plan to get out of debt. Use your disposable income to pay down debts each month and resist the urge to spend frivolously. If your debt load is $5,000, and you have an extra $300 a month, plan to be debt-free in roughly 17 months.

5

Stop paying the minimum. If possible, pay double or triple the minimum payment and eliminate debt much faster.

6

Earn more money. Lack of funds can impede your efforts to get out of debt and raise your credit score. Be creative and think of ways to bring in extra money. Sell personal items, get a part-time job, start a home-based business or consider other employment options.

7

Get rid of credit cards. Closing credit accounts decreases your credit rating, so keep your accounts open, but destroy the cards. Aim to use cash.

8

Consolidate debt with the help of an agency. A debt consolidation agency will help simplify your finances, manage debt and also offer credit counseling. They will speak with your creditors to negotiate lower interest rates. Choose a non-profit agency.