When you have bad credit, it sometimes feels like you're caught under the snow after an avalanche. No matter how hard you struggle to reach the surface, you rarely find purchase on anything solid beneath your feet.
Such difficulties coming out on top after taking negative hits to your credit can be overwhelming to say the least. And when you owe large amounts to credit card companies, you probably feel like there's no end in sight to your financial troubles.
However, there are a few solid ways you can climb out of credit card debt with bad credit. Through dedication and taking it one step at a time, you will come out on top. Have bad credit? Take a look at how to get out of credit card debt using our simple strategies.
1. Take It Easy
If you still have a job and steady income, even the most mountainous debt can be manageable over time. Just because the number is staggering (and possibly growing day by day), you can still make payments toward it to lower it.
Your first step should probably be to remove your credit cards from your situation altogether. Cut them up if you have to so you won't use them anymore. You may not like it, but any extra money you add to your total debt can cause you even more problems down the road.
Next, you should cut out on your unnecessary expenses. Stop going out to eat, cancel your streaming services, drop entertainment out of your budget altogether, etc. By limiting your spending to the essentials only, you may actually start to improve your credit score thanks to the extra money you can put toward paying down your debt.
2. Create a Monthly Budget
If you don't already have a monthly budget, it's time to make one. We are big fans of budgeting here at Atlas Credit because it helps you see where your money goes. If you want to know how to reduce credit card debts, you need to know where you're spending your money and how to redirect it toward your debt.
Keep track of every single thing you pay for over a two-month span. Nothing is too small to record, from a cup of coffee with a friend to a quick stop at the dollar store for soap. Once you see your spending habits on paper, you can find places to cut back and put that money toward debt solutions for bad credit. Making those consistent payments on your credit card will eventually improve your credit score.
3. Reach Out to a Debt Management Consultant
Some people may reach a point in their financial woes where they recognize it could be impossible to actually pay their existing debt as is. That's when a debt management plan comes in.
First, find a credit counseling agency in your area that specializes in credit card debt reduction. By working with your credit card issuer, it's possible for your counselor to secure a lower interest rate and possibly smaller payments each month. That way, if you continue to pay the same amount as before, your credit will slowly improve thanks to your strengthened efforts to pay down your debt.
However, debt management consultants often cost you both time and a small fee each month. Be certain ahead of time that their services are absolutely necessary and that they will help you reach your goal of becoming debt free.
4. Make On-Time Payments
One way to get out of debt with bad credit is to make sure you pay at least the monthly minimum on your bills on time. Making late payments hurts your credit score. It makes lenders think you are a poor risk because you can't pay money back on time. When you pay even a day late, it hurts your credit score.
Create a monthly reminder on your calendar to pay your credit card bill. As soon as you see that reminder, make your payment. Set the reminder a week before your payment is due, so that if you run into any issues with payment, such as a banking app being down or slow online transactions, it won't make you late.
5. Take Out a Home Equity Loan
Do you own your home? If so, you may be able to take out a home equity loan to pay off your credit cards. Home equity loans allow you to borrow against the value of your house by pulling out some of the equity you have built up. Often the interest rates for a home equity loan are lower than your credit card rate.
Getting rid of credit card debt becomes easy. You can wipe out all of your debt by drawing as much as you need from your home equity loan. Just make sure you make on-time monthly payments on your loan going forward. You want to strengthen your credit score, and falling behind or defaulting on payments will make your credit score worse.
6. The Nuclear Option: Bankruptcy
Nobody likes the word bankruptcy. But sometimes, it may be your only way out of debt.
Bankruptcy can severely harm your credit score for up to a decade. Plus, you'll have to take the issue to court and will owe attorney fees. Also, some debts cannot be erased, like child support payments, student loans, and some others.
Once you have declared bankruptcy, though, you are granted something of a clean slate. Your credit card debt is no longer a major burden, and you can work to rebuild your credit score over time. After your bankruptcy is removed from your credit history, your fresh start can truly begin, and the wisdom you gained along the way can help you reach true financial success in your future.
You can figure out how to pay off credit card debt with bad credit. For more financial tips, advice, and discussion, check back next week on the Atlas Credit blog!