Credit card debt can quickly become an ugly monster. As a reader of the HOPE4USA blog, you already know that outstanding credit card debt can significantly lower your credit scores, even if every single payment is made on time. (Check out The Ideal Credit Card Balance to Optimize Credit Score for more information regarding how credit card balances impact your credit scores.) If your credit card debt has gotten out of control, then it is time to step back, assess the damage, and come up with a plan of action to fix the problem before it gets worse.

Step One: Face the Facts

Now that you are ready to begin tackling your credit card debt problem, the first step is to make a list of all of your current credit card debt. List your credit card debt from the card with the highest balance at the top of the list and the card with the lowest balance at the bottom. Here is an example:

1. Capital One - $5,000
2. Chase - $3,500
3. Citibank - $2,800
4. Discover - $1,200

Step Two: Figure out How Much You Can Afford to Pay

Of course, you must maintain at least the monthly minimum payment on each of your credit cards in order to protect your credit scores. However, if the minimum payment is all that you pay then you can count on being stuck underneath a pile of credit card debt for a long time – potentially as long as decades! If you do not already have a monthly budget set up for yourself, then CLICK HERE for a complimentary copy of the HOPE Basic Budgeting Worksheet. Once you have filled out your budget sheet (and maybe made a plan to cut back on unnecessary spending) you will be able to determine how much “extra” income you can afford to pay on your credit card debt each month.

Step Three: The Snowball

One option for paying off your credit card debt is the “snowball effect.” Here is how it works. Begin by paying the minimum payment on all of the credit cards on your list, with the exception of the card with the lowest balance (#4 – Discover in the example above). For the card with the lowest balance you will want to use all of your additional funds and pay the largest payment possible. Your goal should be to pay off the card with the lowest balance first, then move up the list to the next card with the lowest remaining balance. Rinse and repeat until all of the cards from your list have been paid in full.

Step Three: Determine If a Consolidation Loan Is Right for You

If you find yourself in a situation where it is going to take you a long time to pay off your credit card debt, even if you use the snowball effect method above, then it may be time to consider a debt consolidation loan. There are 2 great benefits to a debt consolidation loan. First, when you consolidate your revolving credit card accounts into an installment loan your credit scores will likely see an almost immediate increase. The reason you will most likely see a credit score increase is because credit scoring models, like FICO and VantageScore, do not treat installment debt the same way they treat revolving debt. A credit card with a balance has a great potential to harm your credit scores. However, an installment loan (like a personal loan or a vehicle loan) does not have the same negative effect. The second benefit that comes along with a consolidation loan is that it has the potential to save you money. Most debt consolidation loans have a much lower interest rate than your credit card accounts.

If you do decide to use a debt consolidation loan as a tool to help get yourself out of credit card debt, keep the following in mind.

1. Do not charge your credit cards back up once they have been paid off.
You have to determine ahead of time that you will not allow it to be an option to charge up new balances on your credit cards. In fact, it would probably be a good idea for you to lock your credit cards up in a safe place and only use them about once a quarter in order to maintain some activity on the accounts.

2. You should still try to pay off your consolidation loan early.
Just because you consolidate your credit card payments into an installment account does not mean that you should not try to pay the loan off early. Paying extra money onto the principle balance of your consolidation loan each month is still a wise financial strategy to follow.

CLICK HERE to compare consolidation loans and personal loans to find an option which may be right for you.


Michelle Black is an 12+ year credit expert with HOPE4USA, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.