Managing Debt

What is debt?

When you owe money to someone, you are in debt. Owing money is not always bad.

You might have a loan. You might use a credit card. If you do, you might be in debt.

But if you pay your bills when they are due, it might help your credit history.

When is debt bad?

Debt is bad when you owe money you cannot pay back. Debt collectors might call you. You might have legal problems if you cannot pay back the money.

Does debt hurt my credit history?

Sometimes, debt can hurt your credit history. For example:

• owing a lot of money on credit cards
• paying bills late
• not paying the minimum amount due
• skipping payments

These things can hurt your credit history.

Who can help me with debt?

You can do some things yourself. A credit counselor can help you. Credit counselors can help you make a budget. Credit counselors also can help you make a plan to repay your debts.

Debt relief services companies might offer to help. These companies are different from credit counselors. They might charge you high prices. And they might not really help.

What can I do to get out of debt?

Start by making a budget. Write down how much money you make every month. Write down how much you spend every month. Include:

• rent
• car payment
• insurance
• utilities
• food
• gas
• credit card bills
• other bills

Look for ways to spend less money. You might not find ways to save. But it helps to write down what you spend. Then you can make a budget.

How else can I try to get out of debt?

Call the companies you owe money to. Explain why you have trouble paying your bill. Ask for a “payment plan.” Some companies might let you pay less every month until you have repaid all the money.

Call the company before it sends your debt to a debt collector. Many debt collectors will not accept a payment plan.

How can I get help?

Credit counselors can help you make a budget. Credit counselors also can help you plan to repay your debt.

A good credit counselor will spend time with you. The counselor will ask you all about your finances. A good counselor will:

• talk with you
• help make a plan that works for you

A good counselor will not:

• promise to fix all your problems
• charge you a lot of money before doing anything

How do I find a credit counselor?

Look for a credit counselor you can meet in person. Look here first:

• credit unions
• universities
• military bases

These groups sometimes have credit counselors who charge low fees to help you.

How do I choose a credit counselor?

When you find a credit counselor, ask questions. Choose a counselor who can help you make a budget. Choose a counselor who also can help you plan to stay out of debt.

Some counselors might suggest a “debt management plan” as your only choice. Others might talk about a “debt settlement plan.” If they do either of these things, go somewhere else.