How to Get Out of Credit Card Debt without Ruining Your Credit

How to Get Out of Credit Card Debt without Ruining Your Credit

July 8, 2019         Written By Bill Hardekopf

Getting out of debt is an important pursuit. Not only can paying debt every month rob you of disposable income, it can also make saving for emergencies or large purchases (such as a home) nearly impossible.

However, before tackling your debt, you will want to put together a realistic plan that will not further harm your credit.

Step #1: Take Stock

The first thing you should do when creating a debt elimination plan is take a good look at your financial situation. Track exactly how much you make and precisely what you spend each month. From this information, create a budget that reflects your income and expenses. As you view your expenses, check for those that are fixed or variable. As much as possible, you want to decrease your spending so you have more money to devote to paying down your debt. Have an expensive cable package? See if you can eliminate it and opt for a streaming service instead. Stop by Starbucks on your way to work each morning? Buy a travel mug and brew your morning coffee at home.

After you know how much you can devote to paying off your debt each month, it is time to get a clear picture of your debt. You can request a free copy of your credit report once a year, and you should do so as you put together your debt elimination plan. Make sure all of the information is accurate, including balances and accounts. If something is incorrect, you can request the credit bureau investigate the information, and they must delete and incorrect information within 60 days.

Step #2 : Contact Your Creditors

While they are under no obligation to do so, it is worthwhile to call your creditors and politely ask if they can offer a lower interest rate. Explain you are a loyal customer and are trying to pay down your debt. Even if the customer service representative cannot permanently change your rate, it is possible they can offer you a lower rate for a certain period of time. It doesn’t hurt to ask.

Step #3: Choose A Card To Pay Off First 

If you have multiple credit cards, you need to choose which card you want to focus your efforts. You want to choose one card to pay off first and make only the minimum payment on all other cards. Once that card is paid off, you choose the next card on your list, and so on, until they are all paid off.

You have two options when choosing which credit card to pay off first: the one with the highest APR or the one with the smallest balance. The theory behind paying off the card with the smallest balance, sometimes referred to as the “snowball theory,” is that you will gain confidence and momentum from paying off a card quickly, and be able to ride that high to pay off the rest of your cards.

However, if you have a card with a particularly high APR, it makes more sense to pay off that card first, even if it carries a high balance. You are wasting lots of money on interest that would be better spent paying down your balances or going into a savings account.

Step #4: Don’t Close Cards!

The final step is to follow these words of wisdom: do not close your credit cards after you pay off the balance. While you may think closing your account will help you fight temptation, it will actually hurt your credit score. The reason for this is two-fold. First, one of the most important factors in determining your score is your debt-to-credit ratio. Whenever you close a card, you are decreasing the amount of credit available to you, which means your debt-to-credit ratio will increase.

Secondly, another important factor in determining your credit score is the average age of your accounts. If you close an account you have had open for a long time, you are decreasing the age of your accounts and damaging your score.

While you cannot expect to eliminate your debt overnight, if you follow these steps, you can pay down your debt without ruining your credit.

The information contained within this article was accurate as of July 8, 2019. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and may be compensated if you take action with any of our affiliate partners.


About Bill Hardekopf

Bill Hardekopf is the CEO of and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.
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