Many people, especially young adults, find themselves in sticky situations when they open and use credit cards without having the funds to pay them off when they receive the bill. If you're not careful, this can hurt your FICO score and make it impossible for you to get a loan. However, you can get out of debt without applying for bankruptcy and ruining your credit score. You're going to have to cut back on spending, make sacrifices and possibly get an extra part-time job.
Step 1
Stop using your credit cards immediately and cut them all up except one in case of emergencies. If you can't buy something using your debit card or cash, don't buy it.
Step 2
Cut back on spending. Before you purchase anything, make sure it's something that you need and not something that you want. You're going to have to change your spending habits to get out of debt.
Step 3
Add up all your monthly bills including rent, mortgage payments, groceries and utilities. Only include monthly expenses that you have to pay.
Step 4
Figure out how much money is coming into the household each month. What are you and your spouse's combined monthly income? Subtract the amount from the last step from the amount in this step. This is the amount of money you have to spend each month on unnecessary purchases, but most of it needs to go towards paying your credit cards.
Step 5
Get out all of your credit card statements from last month. On a piece of paper, write down the minimum payment, the interest rate and the balance for each card. Then put them in order from the highest interest rate to the lowest interest rate.
Step 6
Negotiate reduced interest rates with your credit card companies.
Step 7
Add up all the minimum payments. This is how much you have to pay towards your credit cards each month. If you miss payments, your credit score will suffer and your interest rates could sky rocket. Ask yourself how much more money can you pay towards your credit cards each month. For example, if you realized that you have 1500 dollars in bills, 3000 dollars in monthly income and 500 dollars in minimum credit card payments, then you still have 1000 dollars each month to work with. You should put at least half of this amount toward paying off your credit cards.
Step 8
Pay the minimum payment on every card each month except the one with the highest interest rate. Put any extra money that you're paying towards your credit cards toward paying off this credit card first. Once it's paid off, go to the credit card with the second highest interest rate and start paying it off until they're all paid.
Tips and Warnings
- If you can't pay your monthly payments and need help, call the Consumer Credit Counseling Service at 1-800-388-2227 to organize and consolidate your debt.
Things You'll Need
- Paper
- Credit card statements
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