Educational Consumer Tips

Debt Relief Strategies

Author: Better Business Bureau
Category: Finance


First and foremost, accept that improving any financial situation will take time and effort. Patience and solid planning will be key. Making a budget and sticking to it can eliminate a lot of unnecessarily expenses. Make sure to understand what is something you want vs what are thing you need. Track your spending for 1-3 months to find your buying habits and see where you can cut spending.

Direct Deposit

Whenever possible, use direct deposit, especially for your paychecks. By have the money automatically sent to your banking account, you can get faster access to your funds and avoid cash cashing businesses which can change large fees.

As soon as possible, set up an auto deduction from your checking account and start a savings account. By having your bank automatically withdraw from your checking account and deposit into your savings account, you don't have to think to do it or worry about not doing it. You just sit back and accumulate a separate fund that can help out in case of emergencies or unforeseen expenses.

Credit Reports

Unfortunately, several credit reporting companies that claim to offer free credit reports do not. Per the US Government, you are entitled to  one free credit report every 12 months. This report will contain your credit scores from each of the three main credit bureaus. You can order your report online at Another helpful resource is

Understanding Credit Scores

Your credit score is based on your bill paying history, debt profile and several credit factors. A low credit score can cost you a lot of money because it can increase loans, credit and insurance rates and it can impact your ability to receive certain jobs or purchase a home. The higher your credit score, the better.

One of the best ways to maintain a high credit score or improve a lower one is to always pay bills on time. Another way to raise a credit score is to actually pay off debt and not just use credit to move debt around - companies can see this. try to avoid frequent credit inquires because they can add an alert to your credit score.

Part of your credit score is your Credit Utilization, which is how much of your credit you are actually using compared to your credit limit. An example would be using $18,000 of credit while having a $20,000 limit. 30% utilization is ideal and can greatly help improve a lower credit score. Because of this, it can be favorable to keep a line of credit open even after it has been paid off. Only use that line of credit the bare minimum amount to keep it open and improve your credit utilization.


Consumers should be wary of debt consolidation and settlement companies. Debt consolidation is done by a company and can often cost a lot of money. In some casing, it may not improve or even hurt your credit score.


One of the best ways to pay off debts is called Debt Stacking. This is done completely by the individual with no involvement from a settlement company. This payment strategy involves paying off the lowest outstanding balance first and working your way up to the largest. Once a  balance is paid off, apply that payment to the next lowest balance until it is paid off. Repeat this process until you have paid off all outstanding balances. By closing the lowest balance first, you can more quickly resolve your total debt and make fewer total payments. Keep adding the payment amounts from the now settled debt to the remaining debts and soon, you will be out of debt.

Interest Rates

Always put your money where ever the interest rates are higher. This applies to paying off loans and credit cards and retirement plans.