How can I get out of debt?

One of the best ways to start repairing your credit is to make, and follow through with, a plan of debt reduction. Reducing your debt load is probably the best thing you can do to improve your credit. If you use a technique of aggressive debt reduction (sometimes called a "debt snowball"), you will find that you can get out of debt and repair your bad credit much faster. Here's how it works:

Say you have four debts. Order them from lowest balance to highest balance. (You can also order them by highest interest rate, but many people find that they are more encouraged when they order debts by balance. Results are seen much faster.)

1) $1,500 credit card: $45 minimum
2) $2,300 credit card: $69 minimum
3) $6,500 car loan: $200/month
4) $12,500 private student loan: $125/month

Next, you will decide how much extra money you can apply each month to reducing debt. Let's say you can apply $125 per month for debt reduction. You keep paying all your minimum payments, but to your first debt, you add the $125 extra. This means that you pay $170 on the first debt until it is paid off. Then you take that entire $170 and apply it to the next debt, for a total of $239, until debt No. 2 is paid off. You can see how quickly this aggressive debt reduction starts to work.

What Are Other Ways to Repair My Bad Credit?

While you are working on your debt snowball, there are some other things you can do to help your credit improve:

• Make all payments on time.
  
• Always pay at least the minimum.
  
• Avoid applying for new lines of credit or loans.
  
• Check your credit report and fix any mistakes you find.

With the proper steps, determination and a plan, it is possible to repair bad credit and get out of debt.

Jean Marquit