How to Tackle Debt
- 1). Determine how much debt you have. Gather all of your credit card statements and your monthly bills. It is also helpful to reconcile your records with your credit report to ensure that you have a complete list of all of your financial obligations. Consumers are entitled to one free annual credit report from the three major credit reporting bureaus: TransUnion, Equifax and Experian. It is helpful to create a chart or spreadsheet outlining your creditors. For each account, list the name of the creditor, the date that payment is due and the amount of the minimum monthly payment.
- 2). Select a method for paying off debt. Some financial experts suggest that you tackle the debt with the highest interest rate first and by paying more than the minimum monthly payment due. Once that debt is paid off, under this plan, you would move the next debt with the highest interest rate, paying more than the minimum payment and utilizing any money you've saved from the previous debt to make additional payments.
Other financial experts dissuade debtors from paying off the highest interest rate debt first because typically this debt is larger and may take a long time to resolve during which the debtor may become frustrated with a lack of ability to change their present circumstances. As such, these financial experts recommended paying off smaller debts first in order to remain motivated to tackle larger debt.
Regardless of which method you choose, the most important thing is to select a plan that will work best for your circumstances and personality, so you remain committed to the plan. - 3). Refrain from using credit cards and begin using cash to pay for items needed. While you are tackling your outstanding debt it is vital that you refrain from adding to financial obligations by piling on more debt. While some experts suggest cutting up credit cards you may want to place them in a hard-to-reach place, but still have them accessible in the event of an emergency. Finally, be wary of closing the credit card account. Doing so may negatively affect your FICO score because by closing the account you are reducing the amount of available credit to you which is one factor used in determining a FICO score.
Source...