The article recommends first making a list of all of your debt and checking your list against your credit report to be sure that you’ve remembered everything.
Second, the article recommends creating a spending plan that outlines all of your expenses; listing how much you will spend on each item, including dedicating a set amount each month toward paying off debt.
Third, pick a payment strategy that will work for you. Prioritize your debt and decide the order in which you will pay off your accounts. You may decide to prioritize by interest rate, focus on paying down the debt on the account with the highest interest rate first. If you do this, remember to continue to pay at least the minimum balance on all of your other accounts. Once you have paid off that first account, use the money that you were spending on it and put it toward paying off the account with the next highest interest rate—and then move down your list of debt accordingly. Some experts recommend if you have a small debt on one account (even if it doesn’t have the highest interest rate), going ahead and paying off that account first to give you momentum and extra funds to start paying off larger debts. The article also says to remember that paying off a credit card doesn’t mean canceling it. Keeping the card open, but not using much or any of the available credit decreases your credit utilization ratio, which can help improve your credit score.
If you are paying high interest rates, contact your creditors if you qualify for a lower interest rate. If you have been consistently paying your bills on time, and making the minimum payments, they may oblige.
Lastly, track your spending and make adjustments as needed along the way. Keeping track of your expenses will help you see how you may be wasting money. Stay on pace by keeping up with your expenses all year and dedicate more money to paying down debt when you can.
Get more tips on reducing debt, improving your
credit score, protecting your identity and more on the Equifax Finance blog.