How to Deal with Credit Card Debt When You Have Bad Credit

For the vast majority of people, paying off debt isn’t easy. And, if you have bad credit, it can be even more challenging.

However, just because your credit score is poor, that doesn’t mean you can’t tackle your debt. You do have options; you just need to know where to look. If you need help dealing with credit card debt and have bad credit, here are a few things worth exploring.

Use the Slow and Steady Approach
Having bad credit doesn’t always mean you can’t afford your payments. If you can manage all of your living expenses and your credit card bills, then being diligent about paying down your balances is often the best approach.

Consider cutting up your credit cards so you can’t use them to make additional purchases. Then, make all of your minimum payments and any extra money you can find to pay down your balances.

This approach isn’t glamorous, and you may need to cut back on certain expenses (like meals out, cable, or other non-necessities), but it is entirely functional. Plus, your efforts will lead to an improved credit score, something that can help over the long-term. If you are in a position where you need help with bill repayments, there is assistance for essential services like utilities.

Debt Management Plans
If you’ve reached the point where your credit card payments are unmanageable, contact a reputable credit counseling agency. Often, they can help assess your situation, assist you with designing a new budget, or provide you with access to a debt management plan.

A debt management plan involves a credit counselor working with your credit card issuers to secure lower interest rates and smaller payments, giving you the ability to pay off your debt. In exchange, you typically have to close the credit card account and pay a small monthly fee to the credit counseling agency.

Typically, the actions associated with a debt management plan can damage your credit. However, as you pay down the debt, the harm is generally offset, allowing you to repay what you owe and improve your credit score. Additionally, they are usually far less damaging than bankruptcy and can be completed within a handful of years, making them a viable option.

While bankruptcy can harm your credit score for up to 10 years, that doesn’t mean it isn’t worth considering if you are genuinely in over your head. It can give you the ability to protect certain assets, like your house and car, while otherwise eliminating your credit card debt.

However, not everyone qualifies for bankruptcy, and you will owe fees to your attorney. If you do qualify, after it goes through, your credit score will be significantly damaged, and information about your bankruptcy will remain on your credit report for up to a decade. This means obtaining new credit will be challenging, but it may be worth it if you are truly in trouble.

It's important to note that certain debts cannot be discharged in bankruptcy, including federal student loans and child support. Additionally, if you have a mortgage payment and choose to keep your home, you’ll have to keep paying that as well. The same can go for car loans if you retain the vehicle. In certain instances if you need some assistance for a short period of time before considering bankruptcy, there are different subsidies, grants and loans which may help.

Ultimately, paying down credit card debt is rarely easy. However, all of the options above can make it more manageable, even if you have bad credit.