How to Get Out of Debt

What can you do if you’re carrying too much debt? First, don’t feel overwhelmed. Debt can be managed. Start by taking at least some of these steps:

Call your creditors to discuss your options and call them before you miss a payment. This may be a difficult step, but it is less embarrassing than receiving phone calls from creditors demanding payment. If you bought a car and are having trouble making the payments, for example, it may be better to sell the car and pay off the loan than to let the creditor repossess the car. A repossession will hurt your credit rating.
If you owe money to many businesses, it may be time for expert help. Consider going to a nonprofit credit-counseling organization. Organizations such as the National Foundation for Credit Counseling can work with you and your creditors to set up a repayment plan. Many will provide this service at little or no cost. Your lender or creditor may be able to refer you to a credit counselor. Other places to look for a credit-counseling service include universities, military bases, credit unions, banks, and housing authorities.
Stay away from “credit-repair” companies. Legitimate, nonprofit, community-based counseling organizations provide a much-needed service to people who are having credit problems. Don’t confuse these organizations with so-called “credit-repair” companies that offer to fix your credit history for a fee. It can’t be done. Only you can repair your bad credit by repaying your debts and paying your current bills on time. Promises such as, “We can erase your bad credit, 100 percent guaranteed!” are not true. To check out a company’s reputation, contact the Better Business Bureau or your state’s Attorney General.
If you are in debt because of credit cards, try to pay off the credit cards with the highest interest rate first. You still need to make minimum payments on the other cards.
Limit yourself to one major credit card and use it only for emergencies. Close the accounts on the other credit cards.