Your Debt Action Plan

Since credit cards are so easy, you probably didn’t need an action plan when you were spending and accumulating credit card debt, but you will need one to pay it down.   You have complete control over how much debt you accumulate; you also control how to pay it down.   You may just need a reminder.

Step #1 – Always Pay Your Credit Cards Bills.

At the very least, pay the minimum amount due on your credit cards; your payment history is very important to the national credit reporting agencies.

You want to avoid missing a credit card payment or paying it late.   Missed payments and late pays are what credit reporting agencies use to evaluate your credit score number.   They will lower your credit scores when they think you are being careless with your payment history.

Step #2 – Pay Highest First.

Get organized. Read the fine detail in your credit card contracts, learn the interest rates and late fee charges.

Sort your credit cards with the one charging the highest interest rates first.   Pay down the credit card with that highest rate first because it’s costing you the most money.   Then pay down the next highest rate, and so on and so on until you have paid them all down to zero.

Step #3 – Stay Clean

Once you pay down the credit card balances to current balances, stay there, don’t rack up the debt again.   You worked very hard at paying down the debt, why would you want to go through that pain-staking process again.

Step #4 – Stay Within Your Limits.

Credit card debtLimit yourself.

Avoid charging your credit cards past your credit card limits.   You will pay higher interest rates on the amount you go over the limits, plus, your credit scores will drop.   Credit card companies set limits for a reason; they base your limit on your credit history; they don’t like when you exceed the limit they set.

Step #5 – Know Your Credit Score

Your credit score is more valuable than you may realize.  Credit scores are the way you are evaluated by creditors, retailers, credit card companies and loan companies.   If you have a poor credit score, the entire financial industry will charge you more.

You are entitled to order a free credit report every year from each or the 3 national credit reporting agencies.   You want to take full advantage of this opportunity.   Since your credit scores have such a big impact on your financial life, you really want to know where you stand.   If there are problems with your credit report or credit scores, when you know it, you can correct it.