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Get Your Credit in Shape

Dec. 30, 2015
Personal Finance
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Credit card debt, like extra pounds, can sneak up on you — or any of us, really. Making a plan to get the bod you want is simple, but making one to take on your credit card debt isn’t. No matter what level of financial fitness you’re at, we’ll help you figure out what to do.

barbell3xLevel 1: Make a Marauder’s Map to find your way out of credit card debt

You might not be a financial wizard yet, but NerdWallet can equip you with the tools and strategy to map an escape from credit card debt. (Having zero debt is almost as awesome as sneaking into Hogsmeade.) Here’s how to get started.

  • TBH, if you had enough money to pay off all your credit cards, you wouldn’t be reading this, so pick which card to pay off first. Rank your credit cards from highest to lowest interest rate. Focus on paying off the one with the highest interest rate first; this means you’ll pay less in interest overall.
  • Put as much money as you can toward paying off your balance. Use any money in your budget that you’re not spending on needs (as opposed to wants) to get that card paid off. Look into ways you can make extra money to slay debt faster: Look for a second job, rent out your stuff, put your tax refund toward your balance.
  • Face off with your issuer. Just like Voldemort, your issuer might try to foil your plan, but now you’ve got the skills to deal with your debt. Write down what you want to say, including what you want (a lower interest rate or balance), why you can’t afford the current interest rate or balance, and the ways you’ve been a good customer. Find your credit card company’s contact info, and reach out.

Making a plan is hard, but laying out your options will help you free yourself from credit card debt and improve your credit.

barbells2-100px2Level 2: Manage the damage

You’ve got your plan of attack to solve current balances; now, minimize further damage. Here are a few ways to do that:

  • Make at least the minimum payments for each card to stay in good standing with your issuers. Calls from debt collectors and a hit to your credit are the last things you need.
  • Lower your interest ASAP. If your credit card company wouldn’t lower your rate, apply for a zero balance transfer card and move your debt onto it. Make sure you know when the introductory 0% interest rate ends and what the transfer fee is so you don’t spend more than you’d pay in interest otherwise.
  • If you can’t control your spending when you’re using credit cards (hey, you’re not the only one!), use your cards as little as possible. You don’t want to pile on more debt.
  • Keep paying off balances as soon as you’ve got extra money or as soon as your paycheck comes in. Make things easier by setting up automatic payments.

You’ve heard it a bajillion times: You need to build healthy financial habits. Well, 2016 is the year you can pay off your credit card debt and get in the habit of never racking it up again.

barbells3x-3Level 3: Upgrade
your credit, like a boss

Being an adult is awesome in some ways (you qualify for credit cards and can eat ice cream for every meal), but sucks sometimes, too (you rack up credit card debt and can’t metabolize ice cream as well). The best way to handle it all? Tackle everything like a boss.

So, you’ve already got paying off your credit card debt on lock, but now your credit could use some work. Whip it into shape with a financial workout plan. Some things will be easy, some more difficult, but anything you do will help.

  • Actually read your credit report. You can request one for free each year from the three major credit reporting agencies: Experian, Equifax and TransUnion.
  • Report any errors you find. Get those errors out of there; it’s an easy way to boost your credit.
  • Don’t apply for any new credit cards. Too many applications in a short time can ding your credit — whether you get the cards or not!
  • Understand what influences your credit score; it’s not as hard as you think.
  • Make and stick to a repayment plan — oh, hey, you’ve already got one!

If you want to spread out your efforts for better credit, check out our month-by-month guide.

Ready to get financially fit?

In a recent NerdWallet survey, 29% of people said that paying off credit card debt is their top resolution for 2016. If you’re one of them, follow these steps. You can kill it at getting rid of your credit card debt and making your credit better this year.

Heather Yamada-Hosley is a content strategist at NerdWallet, a personal finance website. Email:[email protected]. Twitter: @Curious_Heather.

Top image via Shutterstock; barbells via 530 Media Lab.