Debt

Destroy Your Debt

If used properly, credit cards, personal loans and student loans aren’t bad for your credit rating. In fact, making payments on time and keeping your account up-to-date actually improves your score, helping you qualify for more credit and lower interest rates in the future.

What happens when you skip a couple of payments or start making only the minimum payments on your accounts? Debt slowly creeps up and, if you’re not careful, it can quickly become a problem!

Not paying back the money you borrowed is like skydiving without a parachute! Loans and credit card debt are serious obligations. Late payments are reported to consumer reporting agencies and reflected on your credit report. Defaulting on your loans can lead to many negative consequences, including wage garnishment or even legal action against you. Ouch!

Unfortunately, our credit history isn’t a slate that’s easily wiped clean. Credit mistakes made early in life can follow you for many years. For example, did you know that many employers and landlords regularly check credit reports before making hiring or renting decisions? That’s right - excessive credit card debt or failure to repay a student loan can cost you that dream job or perfect apartment! Poor credit history can also impact your ability to get a mortgage or car loan!

This is why it’s important to make every effort possible to pay your bills in a regular, timely manner, and to make more than the minimum monthly payment.

Having trouble paying your debt? Contact your creditor(s) immediately! Most will work with you if you’re serious about staying on track, but you must let them know what’s going on as soon as possible.

--- If you’re having trouble paying down the debt you already owe, try the “debt snowball” approach. Here’s how:

1. List your debts in order from smallest to largest with the smallest balance first.

2. Next, dedicate a set amount of money to debt removal each month.

3. Then, while still making your regular payments on all other debts, add your extra lump sum to your regular payment for the debt with the lowest balance.

4. Repeat this process each month until that debt is paid off, then start again with the next lowest balance, including the amount of your regular payment on the debt you just paid off. Below, the $35 for the first payment is added to the second debt making a new payment total of $95. Keep adding old debt payments to your remaining debt payments to get rid of debt fast!

The chart above is an example. See how quickly payments on your smaller debts will “snowball” to eliminate your large debts?

--- If your debt is a situation you can't handle, talk to someone. Seek the advice of a trusted adult, parent or credit counselor. For more information about credit counseling services, contact a nonprofit provider, such as:

• Consumer Credit Counseling Services of Central Oklahoma
800-789-2227
www.cccsok.org

• National Foundation for Credit Counseling
800-388-2227
www.nfcc.org

Additional Resources

Debt_Snowball_step_by_step.pdf

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