Damage Control

• The first and most important step to take is to cease spending more money than you earn in income every month. The first step anyone should take is to reduce discretionary spending as much as possible. For many people, this will free up additional funds to be used to create a safety net of savings and begin to pay down debt. For people with especially bad debt problems that have more debt obligations to pay every month than they have in income, more drastic measures will need to be taken. If you can take on additional jobs or find higher-paying work, it will reduce your debt load that much faster if you can get your spending under control simultaneously.
  
  

Refinancing And Consolidation

• Refinancing large loans and consolidating many high interest loans into one lower interest loan can be an effective debt management strategy. Refinancing loans, such as mortgages, is best performed alone, but there are many nonprofit credit counseling and for-profit debt consolidation firms that can assist you in this. To consolidate debts, you use a lower interest secured loan such as a home equity loan or an unsecured personal loan to pay off many higher-interest debts such as credit card bills. You can then pay off the consolidation loan at a lower rate. Be wary of using for-profit consolidation firms, as they will tack on fees for their services that may make the consolidation less beneficial than it would otherwise be.
  
  

Monitor Credit Report

• Order your credit report from all three major credit bureaus (Equifax, Experian and TransUnion. You can order a free credit report from each bureau once a year. Dispute any errors that may be on your reports. Your credit report will show most of your debts and their current status. Remaining apprised of your status will assist you as you repair your credit, so you can monitor your progress and make sure any agreements that you make with your creditors are followed through in your report.
  
  

Settle Delinquent Debts

• Contact any creditors that you may have delinquent accounts with. Request that the debt be settled for less than the total amount, asking for a "pay for delete," "pay in full" or "paid in settlement." Start your offer for a "pay for delete" at 10 percent of the total amount owed and work your way up from there. If you want the most benefit to your credit rating, get a "pay for delete," but if you don't mind it taking longer to improve your score, you can ask for a settlement. Ensure that you get any settlement agreement with your creditor in writing.
  
  

Be Better Credit Citizen

• Once you have taken care of all the delinquent or late accounts on your credit report, maintain good credit behavior to improve your score over time. If you have received "pay for delete" settlements on all bad entries on your credit report, your score can improve massively in a short period of time. Otherwise, make all loan payments on time every month. Pay all bills on time. Maintain a mixture of secured and unsecured debt to improve your credit rating faster. As you continue to demonstrate responsible credit behavior, more companies will be willing to extend you loans at more favorable rates.