The Best Ways to Get Rid of Debt & Keep Good Credit

Few debts and a high credit score together make you an ideal candidate for loans and credit cards. Sadly, some consumers devalue the importance of maintaining low debts and they spend unnecessarily and use credit cards to pay for such purchases. Approximately 80 percent of American households use credit cards, and 44 percent of these families maintain a balance on these cards, according to the U.S. Department of Treasury. But even if you have high debts and bad credit, there are effective ways to flip your situation.

Exceeding Minimum Payments

Credit card companies require a minimum payment from consumers each month. And while this amount may prove convenient and affordable, paying this money doesn't reduce your debt fast. If paying a high interest rate on the credit card, minimum payments may only knock a few dollars off your principle balance each month. Get out of debt faster with higher monthly payments. Rather than send in a small $20 or $25 payment, get into the routine of paying double or triple this amount to bring down your balance, and use any extra funds to pay off the card.

Cash Only

Adopting a "cash only" policy helps get rid of debt because you're not tempted to spend money you don't have. Removing credit cards from your wallet and keeping them out of reach can help accomplish this. If you don't have the strength to store away your cards, cut them in half or have a trusted friend or relative keep the cards in their possession. Continue to use cash until you've completely paid down the balance. Only then is it okay to use credit cards. If possible, only use credit during an emergency, and always pay off new charges at the end of each month to avoid accumulating new debt.

Pay On Time

Eliminating debt is one step toward better credit. But while you're in the process of getting rid of debt, it's vital to maintain a good payment history and send in payments on or prior to the due date to avoid late fees and negative credit remarks. Lenders offer several payment options to help eliminate late payments such as telephone payment systems and online payment systems. Sign up for these services to help improve your payment history.

Check Credit Reports

Never checking your credit report can result in overlooking serious credit mistakes or identity theft, which can lower your credit rating. Free reports are available to each consumer from the three credit bureaus a year, and Annual Credit Report is authorized to supply consumers with this information. Check your report annually and challenge any discrepancies or mistakes.