What Is the Smartest Way to Lessen Debt & Keep Good Credit Scores?

Paying off your debt is important to keeping good credit or improving your credit. It's also important to pay off your debt so that you can be trustworthy and honorable. Paying off debt is not easy because we often take the long road to get into debt and so we must take the long road out of debt. Dealing with finances can also be emotionally draining as well as financially draining. Learning how to pay off your debt without getting further in the hole is the best investment you can make.

Paying off debt

One of the most important things in paying off debt is to be consistent. Even if it is only a small amount, you need to pay off some of what you owe and lower your debt amount at least a little every month. The more you can pay off, the better. You must keep good records of your bills and what you pay to make sure your payments are being applied correctly and that you are not charged for fees you don't deserve.

There are two methods to paying off debt: One focuses on financial sense and the other focuses on the emotional toll of debt. You can put more money into paying off your highest interest debts first, which reduces your total interest payments over time and reduces the cost of reducing your total debts to zero. Or you can put more money into eliminating the smallest bills first to gain the emotional satisfaction of getting some creditors off your list as quickly as possible. You must pay at least the minimum payments on all of your bills every month, of course, as you follow either course.

Keeping good credit

The best thing you can do to keep good credit is to pay off your bills on time. The best way to lessen debt is not only to pay off your debt smartly but to start eliminating unnecessary spending. If possible it will also help to increase your income, possibly by adding another job, even if just temporarily. If you can't afford to pay all of your bills every month no matter what you do, you should seek help from a consumer credit counseling company. Be wary however, as some credit counseling services are run by credit card companies and others may be scams. Check the history of the service and look for a nonprofit service. They may be able to negotiate better rates and possibly arrange a consolidation loan. It is better to get credit help than to keep missing bill payments.

Find a link to a reputable agency in Resources.