You can take some very basic steps to start the process of getting your debt under control. The key to improving your credit is to pay on time if you have a balance and reduce the total debt load you carry.

But lets talk a little about what is good debt and bad debt. In my eyes there really isnt such thing as good debt. Before you jump out of your seat and scream well a mortgage is good debt Let me explain my positions, a mortgage is a necessary debt and the faster you can pay it off the better. Being in debt means you are not able to take that monthly payment and invest it in interest creating entities. I understand thats a very simple model but its accurate.

So with that lets look at a bad debt and necessary debt. Also I will include some things you should not do.

Bad Debt:

1. Credit Cards. (Most cards have interest rates in the teens!)
2. Personal loans
3. payday loans

Necessary debt:

1. Home loans
2. Borrowing for school
3. Auto Loans

Things not to do:

1. Dont let your spending get out of hand. Create a budget and live within your means. Hey if your grandparents did it so can you.
2. Dont just pay the minimum on your cards. It will take you 30 plus years. Its a credit card and not a mortgage. Go after that debt and crush it!
3. Do not go over your limit. You are just giving your Credit Card Company the authority to push your interest rate up. Its in your terms of use, which none of us read but really should. The devil is in the details.

Things to do:

1. Aggressively pay off your credit cards. There are two schools of thought on this one.

   a. Pay off the highest interest rate cards first regardless of what is owed. Then take that money and apply it to the next highest interest rate card. Continue until you are debt free.

   b. Pay off the card with the lowest balance first. Then take that money and apply it to the next biggest card. Continue until you are debt free.

   There is really no right or wrong answer on which method is better. For me paying off the smaller debts worked best because it caused momentum. Much like when you are starting a diet and you see results quickly you are more likely to stick with it. Again its what works best for you. The most important thing is to go after the debt.

2. Have an emergency fund. Believe me you will need it. Its Murphys Law when you can least afford for something to break it will happen. The car dies; the roof is leaking, doctors bills, etc. Folks it will happen. So be ready. I suggest at least a minimum of $1000 in the bank. Ideally you want six months of pay check in the bank. I know this is unrealistic for most people who are struggling to make just the minimum payment. So start the $1000 fund and keep growing it so when Murphys Law strikes you are prepared.

3. If you need help with your debt situation please face the music sooner than later. Your credit Score will thank you. Word of caution; be very wary of all the debt reduction and relief sites and programs out there. There are a lot of snakes in the grass so dont get bit!

Again these are simple ideas but applying them to your life is the difficult part. If you stick with it and keep paying that debt down your reward will be a life free of debt and all the stress it causes.