Debt Management
Don’t despair — digging yourself out of debt is doable. Here’s how.
Make a Plan
About four out of 10 Americans say they have too much debt. Take these steps to start whittling it down.
Set up a budget. First things first: create a budget. You need to know exactly how much income you have coming in and what expenses you have to pay.
Tackle credit card debt. Think about these two ways to approach credit card debt.
Debt avalanche: Pay off the card with the highest interest rate first. Make that debt your priority and pay more than the minimum each month until you pay off that card. Then, move on to the card with the next highest interest rate. (Remember, you’ll need to keep making the minimum payment on all credit cards during this time.)
Debt snowball: With this approach, don’t focus on the interest rate. Start with the smallest debt and pay that off. Then, work your way up to the larger balances. Financial advisors like this approach because it creates momentum and helps you stay motivated as you see progress.
Deal with private student loans. After you make a dent in credit card debt, tackle any private student loans you may have. These typically have a higher interest rate than government student loans. You may be able to deduct student loan interest but only if you meet the requirements. A good rule of thumb is to pay down loans that have interest rates above 8%.
Stay on top of government student loans, car loans, and mortgages. Financial experts agree you can make the minimum payment on this type of debt. Typically, this debt has lower interest rates and you may be able to get tax benefits. For example, mortgage interest is deductible for tax purposes up to a certain limit, depending on when you purchased your home. However, take care not to fall behind, especially on your mortgage or car loan. Otherwise, you could have your car repossessed or your house might go into foreclosure.
Seek relief. Can’t make even the minimum payments? Contact your creditors to see if you can work out a modified payment plan. For example, mortgage lenders might agree to extend your repayment period to make your monthly payment lower. However, additional fees may apply so ask about the terms. Bottom line: don’t wait to act until the debt collector calls..
Get help from the experts. Still struggling? Credit counselors can help. These experts can advise you on managing money and debts, help you develop a budget, and offer free educational materials and workshops. Many nonprofits offer these services, but that doesn’t mean they are free. Look at universities, military bases, and credit unions to see what services are offered.
Be wary. Avoid anyone who says they can fix your debt or mend your credit quickly. Do your homework and search the Better Business Bureau for any complaints about the company.
Know the Numbers
Take a look at the debt the average U.S. Household owed in 2022:
Credit cards
$18,054
Auto loans
$29,251
Student loans
$59,149
Mortgages
$227,188
Source: nerdwallet.com
Upwise Can Help You Manage Debt
As a Conduent associate, you have access to a free app from MetLie to help improve your financial health. Learn more about the app features and how Upwise can help you budget and deal with debt. You can also visit Upwise.com for details.
Download Upwise from the App Store or Google Play. Register using our company name Conduent.
Know Your Credit Score
When borrowing money, your credit score plays a big role. Lenders use your credit score to rate your “creditworthiness.” That’s a fancy way of saying whether lenders think you’re worthy of receiving credit. Your score helps lenders determine how likely you’ll repay them on time.
These components determine your score:
Payment history on loans and credit cards, including the number of past due payments
Your total debt and the amount owed
Length of credit history
How many types of credit in use (new versus old)
Number of inquiries for your credit report (checking your own credit does not impact your credit score)
What Your Credit Score Means
More than one type of credit score exists. Created by the Fair Isaac Corporation, FICO is the most well known. Your score can range from 300 to 850.
Below 670: You may have trouble obtaining credit or you may have to pay higher interest rates.
670-799: Lenders consider this a good credit score, and you may receive better-than-average rates.
800 and above: A score in this higher range is exceptional and will net the lowest interest rates.
How To Get Your Credit Score
Check your credit report for accuracy. You may receive one free report every year from each of the three credit reporting agencies (Equifax, Experian and TransUnion). To obtain your reports, visit annualcreditreport.com or call 1.877.322.8228. The free credit report does not typically include your credit score. Your bank or credit card company may provide a free score, so check with them first. You can also purchase your score directly from one of the three credit reporting agencies.
Improving Your Credit Score
Fixing your credit score has no easy, overnight solution. Avoid anyone who makes that promise! Improve your credit score with these smart moves.
Pay your bills on time.
Don’t run a balance on your credit card or other lines of revolving credit.
Limit the number of credit accounts you have.