How to Get Out of Debt With Bad Credit

If you’re struggling with debt and poor credit, you are not alone. Many Americans face these financial problems in their lives, according to the Federal Trade Commission (FTC). Get control of debt by evaluating the behaviors that contributed to the challenge and creating a plan for change. Tallying up debt obligations and figuring out how to maximize monthly payments will help.

Make a list of debt obligations. Make a list of debt, such as credit card payments, personal loans and any other outstanding bills. Include the debt’s current interest rate and balance.

Brainstorm ways to find extra funds. Small daily purchases can add up each month. For example, if you make a long commute to work each day, check into carpooling. This can significantly reduce transportation costs. Money saved can be paid towards debt to help you pay it off quicker.

Pay off high interest debt first. Review your list. Circle the debt that has the highest interest rate. Concentrate on paying this debt off first. Make minimum payments on all other debt obligations during this time. After the highest interest obligation is paid off, move down your list until all debt is paid off.

Research loans to consolidate your debt. Contact local credit unions in your area. Many credit unions make local lending decisions. The branch manager has the authority to review your situation and how you’re currently handling credit to make a decision. Credit unions may also offer lower interest rates. These organizations are non-profit, which means the returns are given back to members with better interest rates.

Settle accounts in collections. Some collection agencies will accept a payment lower than the debt value. At a minimum, the agency can set up a repayment plan to help you pay off debt. This will also positively affect your credit score.


  • Examine the behavior that contributed to the large debt. For example, if you struggle with credit card use, freeze your cards. This way, if you really want to make an impulse purchase, you’ll have to wait for the cards to thaw.


  • Don’t be late to make payments on debt obligations. It won’t just hurt your credit score, it can raise your interest rate as well. The higher the interest rate, the longer it will take to get out of debt since less money goes towards the principle.