Manage Your Debt

If you feel like it’s getting more and more difficult to pay off your bills every month, it may be time to reevaluate your finances. Your credit rating can affect everything from job prospects to your ability to buy a home, so it’s never too soon to take control of your debt. Here are some steps to take:

1. Understand Your Credit Report

You should order a copy of your credit report once a year to make sure that everything on it is accurate. You can get a free copy if you were recently denied credit, and can purchase one for a small fee anytime. Contact one of the three major credit bureaus: Experian (800-682-7654), Trans-Union (800-888-4213), or Equifax (800-685-1111).

Note: Be cautious of “clinics” that offer to “repair” your credit. They may offer special strategies for improving your credit score. But there are no hidden secrets about repairing credit. You should focus on cleaning up any negative information yourself.

2. Figure Out Where You Stand

Before you make a plan to get out of debt, get a sense of where you stand financially. Look over your outstanding debt–credit cards, car payments, mortgage, and student loans–to help you determine what your true needs are and what has become hardest to manage.

3. Switch to Lower Rate Cards

Pay off more than the minimum payment every month and look for a competitively priced interest rate on the card. A $1,000 stereo could take you 12 years to pay off on a card with a 17% interest rate, and cost you an extra $979 in interest if you pay only the minimum each month.

4. Consider Consolidating Your Debt

Rolling all your debt into one low rate card or other consolidation loan can reduce your monthly payments and make tracking easier. Merging your debt into your mortgage is often a good choice, by refinancing your home or taking out a home equity line of credit.

5. Create a Budget

Look at fixed as well as variable expenses. Do you need really need a $50 haircut? Watch out for impulse purchases, and consider a relaxing vacation camping instead of a European tour.

6. Start Saving Now

Even if you’re focused on paying off debt, you shouldn’t put off saving for your future. Take advantage of any 401(k) or other retirement plan your company may offer, or use an IRA if you are self-employed.

7. If You Feel You Are In Over Your Head.

Go see a credit counselor if you can’t see a way out on your own. Consumer Credit Counseling Services (800-208-CCCS) is one national non-profit that can help you explore your options and make a plan to get you out of debt.