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If you’re struggling with debt, whether it is due to a car loan that you can no longer afford, piles of credit card charges or medical bills, there are a number of things you can do to get out of debt. When figuring out what is the best way to repair your credit, you’ll need to consider who and what you owe as well as what your income is. Depending on your circumstances, you’ll probably either want to work with creditors and get on a payment plan or file for bankruptcy.

Know Where You Stand

The first step in figuring out how to improve your credit is to know what you owe and whom you owe. Each year, you can get a free credit report which will detail your debts, lenders and list your credit score. It’s also a good idea to get a credit report so that you can verify that it is accurate. Lenders do not always send updates when you’ve paid off a debt, and there’s no need to let your credit rating suffer for debts you’ve paid.

You’ll also want to determine just how much of your income you can throw at your debt and if you can increase your income or reduce your spending. While the amount of your debt plays a large part in determining how feasible it is that you can pay off what you owe, how much you can afford to pay is also a critical factor. Your ability to pay off debts hinges on having the money to realistically deal with what you owe.

Work With Creditors

The next step for most people is working with creditors. You can either do this on your own or get assistance from a financial counseling service. Whether you go through a counseling service or not, you’ll be doing just about the same thing. You’ll need to create a budget that you can stick to and afford, and you’ll also need to talk to creditors to find out what accommodations can be made.

Depending on the creditor, you may be able to reduce the amount of money that you owe, lower your interest rate and/or have late fees and overage fees waived. You may also be able to reduce your minimum monthly payment amount. If you are considering filing for bankruptcy, you may want to go ahead and go through financial counseling since counseling is a prerequisite for filing.


If you have debt that you cannot realistically pay back, your may want to consider filing for Chapter 7 bankruptcy. This type of bankruptcy filing can eliminate unsecured debt, which includes credit cards and medical bills, and you don’t owe anything after debts have been discharged.

Filing for bankruptcy will cause an immediate and significant drop in your credit rating, but you can start rebuilding almost immediately. Many people are able to obtain a home loan within two years of filing, and credit cards may be available within months or even immediately after a bankruptcy has been finalized.