Fixed rate student loan consolidation Cambridge

November 2, 2017
In this 2006 file photo

It’s a question I get all the time, “What’s the best way to get out of debt?” It’s often followed by a comment, “But I have good credit and I really don’t want to hurt it.”

Here are the main approaches to debt relief you may be considering, along with a review of the impact they may have on your credit reports and scores. There are a couple of things to keep in mind here. Just under one-third of your credit score is made up of the debt you carry. So when you pay off debt, especially credit cards that are close to their credit limits, you should see improvement in at least some of the factors that make up that part of your score. (You can check your credit scores for free every month on But I haven’t specifically included that factor in my analysis of these options, since all of them are designed to help you become debt-free (or to at least get you out of credit card debt).

Also keep in mind that it’s impossible to precisely gauge the impact of a particular approach on your credit. How far your score drops — and how quickly it bounces back — depends on a lot of different factors. If your payment history always shows on-time payments, for example, and you suddenly file for bankruptcy, your scores will probably drop more than someone who was already severely delinquent. Please keep that in mind, and understand that these are general guidelines but they don’t represent exactly what will happen in your case.

DIY: Snowballs and Avalanches

Whether you choose to first pay off your credit card with the highest interest rate (often referred to as the “avalanche” method), or the one with the lowest balance (the “snowball” method), doesn’t make much of a difference. Neither approach will hurt your credit, as long as you are making the minimum payments on all of your cards on time.

Credit Damage: None

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