Getting out of debt based on your credit score and income | finder.com
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How to get out of debt — based on your credit score and income

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Manage your finances with tips tailored to your overall financial health.

Tackling your debt is nothing short of intimidating. But breaking down this financial task by your specific situation and income might make it easier for you to face it head on — before it puts a major crunch on your credit history.

Here are our top tips to paying down your financial commitments while taking into account your income and overall debt.

Freedom Debt Relief

Freedom Debt Relief

Potentially resolve your debts in as little as two years with monthly payments you can afford.

  • Free consultation
  • No upfront fees
  • Helpful customer service
  • Accredited by the Better Business Bureau with an A+ rating

    Good credit + enough income to pay your minimum — or more

    With a strong credit score and regular income, you could qualify for the best interest rates on a debt consolidation loan. These loans are generally available to people with good or excellent credit and can help you consolidate credit card balances, medical bills and more into one monthly payment, ideally at a lower overall APR than you’re paying across each bill.

    Or you could consider a 0% balance transfer credit card. These credit cards allow you to move the debt you owe on one credit card to another one with a lower or no APR for a set period of time. Still, even if you’re approved for a balance transfer card offering a 0% APR promo, you’ll likely pay a fee for transferring your balance — often 3% or more of the balance you transfer.

    These simple tools allow you to shift one or multiple debts to a loan or card offering lower interest or longer repayment terms — while preserving your ideal credit.

    Fair credit + enough income to pay down your debt

    Even if your credit isn’t perfect, commit to paying more than your minimum monthly payment to avoid unnecessary interest.
    If high-interest debt is holding you back, you might benefit from consolidating your debt through a personal loan or 0% balance transfer credit card.

    Or you could look into reducing your monthly minimum payments with an installment loan.

    Another potentially counterintuitive strategy?

    Leverage your credit utilization by opening up new credit cards. Your credit utilization ratio compares your card debts to your total credit limit across all of your open cards. By more evenly spreading your debt over your bigger total credit limit, you’re ideally lowering your credit utilization ratio.

    And by keeping all credit card balances below 20%, you’re also knocking down your debt-to-limit ratio — another factor to qualifying for low-interest installment loans and 0% balance transfer credit cards.

    Poor credit + enough income to pay down your debt

    Poor credit limits your choice of lenders. Yet if you make enough money to pay down your debt, you could find one that offers a lower APR than what you’re paying.

    Look into online lenders that typically offer stronger rates and more lenient requirements than you local bank or credit union.
    Or consider a secured credit card, an excellent choice for building or rebuilding your credit through responsible spending. For these cards, you put down a security deposit that’s typically equal to the credit limit you’re ultimately approved for.

    The key is finding a card that reports your on-time payments to all three credit bureaus, paving the way to a higher score and financial health.

    Fair credit + not enough income to pay your minimums

    Even with fair credit, you might find a lender willing to extend a debt consolidation loan to help you better manage payments on your existing income.

    Consolidating your debt into one payment within a strong, realistic budget might more easily help you stay on top of your finances.

    Use our calculator to see what you could save by consolidating your debt with a loan.

    Poor credit + enough income to pay your minimums

    If your credit score is under 580 and you make only enough to pay your minimum monthly, it’s not as easy to qualify for an installment loan. But it’s not impossible.

    Installment loans generally don’t mean lower monthly payments. Rather, if you find a willing lender, you could borrow what you need to pay off your debts and then pay down your loan’s principal and interest over three to seven years.

    But if you’re not approved, you can still find strategies to pay off your debt, including building your credit by climbing the credit ladder or renegotiating your debt on your own or through an agency.

    Poor credit + no or low income

    If you can’t pay your monthly bills and haven’t found success in getting a debt consolidation loan or a balance transfer credit card, look into these alternatives that could improve your short-term needs:

    • Find quick ways to extra cash. The Internet’s opened up a gig culture that could help you sharpen your skills while bringing in more money. Still others sell unwanted items or participate in market research online, paying down balances faster without paying interest on a loan.
    • Look hard at your budget. It’s not always practical to cut your spending if you only have enough to pay your minimums. By diving deep into your everyday expenses, you might find that you have enough to pay more toward your debts. And if you need a helping hand, look into a reputable nonprofit through the National Foundation for Credit Counseling.
    • Renegotiate your debt. Whether you contract with a debt settlement agency or take on the task yourself, you might be able to get your creditors to settle for less than what you owe. Agencies generally take 20% to 40% of the money they save you as a fee, but you might find it a fair trade for the sheer time and energy renegotiating requires.
    • Leverage bankruptcy. You might decide that bankruptcy is the only option for digging out of your debt. If so, consider protecting yourself with solid legal advice — not merely info you find online. Despite a long-term stain on your credit report, bankruptcy could help save your house or other major assets while discharging your debts.

    Bottom line

    It can be daunting facing your debt head on, but it’s better to address the problem before it gets out of control.

    You’re already being proactive by researching your debt relief options. The next steps towards getting out debt is comparing solutions, coming up with a plan and sticking to it.
    Our guide to debt

    Debt relief services to consider

    Rates last updated September 21st, 2018
    Unfortunately, none of the short term loan providers currently offer loans in your state. Learn more about short term loans in your state to find an alternative.
    Name Product Product Description Costs Requirements
    Freedom Debt Relief is a debt settlement company that works to help people with unmanageable, unsecured debt get back on their feet.
    Monthly payment based on enrolled debt, no upfront fees
    Must have at least $15,000 in unsecured debt and live in a serviced state.
    Get back on your feet with a top-rated debt relief company that works with multiple types of debt.
    18–25% of total enrolled debt
    Must have a legitimate financial hardship which is preventing the ability to pay creditors and a minimum of $7,500 in debt.
    This debt settlement alternative can help you find a path to financial freedom.
    Fees regulated by client's state of residence, can range from
    $0 to $69 with an average monthly fee of $35. No upfront or contingency fees.
    Debt must not be payday loans or secured loans.
    This company claims to significantly reduce your consumer and tax debt.
    Typically 20% of enrolled debt
    Must have verifiable income and more than $10,000 in unsecured debt or tax debt — excluding payday loans.
    This A+ BBB-rated service offers free consultations to lower your monthly payments help you get out of debt faster.
    Charges and fees vary by the company you're ultimately connected with
    Must be at least 18 years old and a legal US resident; additional terms may apply based on services and products used.

    Compare up to 4 providers

    Jonathan Brodsky

    Jon Brodsky is finder.com’s US country manager, leading the company’s growth across international money transfers, personal loans, credit cards and shopping comparisons. Jon brings to his role at finder.com a background in private equity plus extensive digital experience. Most recently, he was senior vice president, digital at Chicken Soup for the Soul, where he was responsible for product changes that helped grow the reach of monthly content from about 300,000 people to 1 billion.

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