How to Get Out of Credit Card Debt Without Ruining Your Credit

Debt doesn’t have to control your future. You’ve got real options to turn things around—like creating a budget that works, negotiating lower interest rates, consolidating balances into one manageable payment, or using DIY debt payoff methods to pay down debt step by step. 

We’ll help you find the right approach that protects your credit while you make steady progress and protect your credit. Pick a strategy, and you could feel that weight start to lift.

First, let’s look at how your debt affects your credit score.

Freedom Debt Relief isn't a Credit Repair Organization and doesn't provide or offer services or advice to repair, modify, or improve your credit.

Understanding the Relationship Between Credit Card Debt and Credit Scores

Your credit score is kind of like a report card for how you handle money. Carrying a lot of credit card debt could bring your grade down, because it makes it look like you’re stretched too thin. With on-time payments and lower balances, your score could go up. 

A stronger score matters if you ever want a loan—for a car, a home, or anything big—because lenders use your score to decide if they’ll approve you and what interest rate you’ll pay. Here’s how credit scores are calculated.

The two most often used credit scores—FICO and VantageScore—reward on-time payments, low balances, and a healthy mix of accounts. The exact percentages differ, but the factors that build a good score are about the same.

Credit utilization ratio. One of the most important factors is your credit utilization ratio, or the percentage of available credit you use. For example, if you have a credit limit of $10,000 and carry a $5,000 balance, your utilization is 50%. 

The standard recommendation is to keep this below 30%, since higher ratios could signal financial strain and hurt your score. If it’s possible, keep your credit card balances under 30% of your credit limits for breathing room. That way, you could have an acceptable ratio and the option of drawing on extra funds. 

A quick breakdown of how lenders might view credit utilization ratios:

• Low (below 10%): Excellent. A sign you’re managing credit well.

• Moderate (10-30%): Good. A green flag, nothing to be concerned over.

• High (30-60%): Concerning. A yellow flag, could disqualify you from some products.

• Very high (60%+): Very concerning. A red flag, probably hurts creditworthiness.

Credit utilization is calculated for each credit card and overall. If you have a personal line of credit, utilization matters there, too. Maxing out a single card could hurt your score, even if that card only makes up a small portion of your available credit. Ideally, you keep usage of all products low.

Many people assume they should close credit card accounts once they’re paid off, but that could have an unintended negative impact on your credit if you still have other credit card debt to pay off. Closing an account means you lose the available credit on that account, and that could raise your utilization overall.

Let’s say you have two credit cards, and each one has a $1,000 limit. Your total available credit is $2,000. If your balance is $900, your utilization is 45% (900/2,000). If you close one card, your utilization shoots up to 90% (900/1,000) and that’s bad for your score.

Payment history. This accounts for about 35% of a standard FICO Score, making it the single most important factor. On-time payments show lenders you can pay bills on time. A single late payment of more than 30 days could remain on your credit report for up to seven years and reduce your score. Late payments also lead to fees and more interest.

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3 Steps to Pay Off Your Debt Without Ruining Your Credit

Each step could affect your credit, and getting to know how each works could help you improve your score.

1. Make a plan 

Creating a debt repayment plan is key to getting out of debt. A simple step-by-step plan keeps you organized and focused.

A solid debt payoff plan starts with visibility. Create a debt inventory spreadsheet that lists each card,  balance, interest rate, and minimum payment. This helps you prioritize which debts to tackle first.

Next, set realistic payment goals based on your income and essential expenses. If you can put $100 or $200 each month toward debt, choose either the snowball method (smallest balance first) or avalanche method (highest interest first).

Remember your emergency fund. Even a small buffer—$500 to $1,000—could mean you don’t have to use credit cards for your next unexpected expense.

Try out some budgeting tools and apps that track spending and highlight opportunities to redirect money toward debt. Many apps allow you to visualize progress, which could be motivating during your repayment journey.

Here are some tips to consider:

• Stick to one credit card. This could help you avoid increasing your debt.

• Keep your credit cards open. Paying off debt lowers your credit utilization ratio (how much of your available credit you’re using). Utilization is a big credit score factor. Having a lot of available credit with little or no credit card debt is the goal.  

• Choose a plan you can follow. We’ll explore debt snowball, debt avalanche, and consolidation options.

• Stay disciplined. If you’re tempted to overspend, stash your cards and switch to cash or a debit card. Building new habits takes time, so pat yourself on the back for every week or month you stick to your budget.

Pro tip: Sometimes there’s a good reason to close a credit account. For example, if an Amazon rewards card motivates you to keep spending on Amazon to get the points, you may want to close that account. 

2. Make your payments on time

Making your payments on time is key for getting out of credit card debt without damaging your credit score. Your payment history has more influence on your credit score than any other factor. 

On-time payments reassure potential lenders. Timely payments also help you avoid late fees and extra interest costs.

To stay on top of your payments:

• Keep your debt organized. Use a spreadsheet or digital tool to track your balances.

• Set up direct payments. Cover minimum payments, and pay more if possible.

What if you miss a payment? You typically have about 30 days to make the missed payment before it’s reported as overdue. Pay the minimum as soon as possible to protect your credit.

Pro tip: Making at least the minimum payment helps keep your account in good standing, but it doesn’t stop interest from adding up on the rest of your balance. Paying more—the full balance if you can—saves you money on interest and could give your credit score a boost by lowering your utilization.

3. Take care of problems with creditors quickly

Work out problems with creditors right away. Generally, it could make your life easier. You might assume that creditors are inflexible, but that’s not always the case. You may be able to negotiate payment terms, and you could have more leverage than you think.

Negotiate payment plans. Unexpected challenges like layoffs or illnesses can hit anyone. If something happens and you’re hurting for money, contact your creditors to negotiate a payment plan. They may prefer working with you over involving debt collectors. After all, creditors make a lot less money selling your debt than they would if they collected it from you directly. This could give you leverage in negotiations. Bottom line, your creditor wants you to afford payments. 

Enroll in a hardship program. Some lenders offer hardship programs that include temporarily easier terms, like lower payments or late-fee waivers, until you overcome your financial difficulties. Credit card companies don’t advertise these, so call the number on the back of your card and ask. Or call the customer service number on the company website. 

Hardship programs usually don’t affect your credit score if you negotiate them before you fall behind. That said, your lenders may report the arrangement to the credit bureaus. Anyone who checks your credit report would be able to find out that the account is enrolled in a hardship program. Being enrolled in a hardship program could make other creditors less willing to open a new account for you, but it doesn’t have the same negative impact as defaulting on a debt. 

What Not to Do: Common Mistakes That Damage Credit

Strategies to pay off debt matter, and so is avoiding missteps. Mismanagement during repayment could damage your credit score for years.

Miss payments. Once your payment is more than 30 days late, creditors usually report it to the credit bureaus. This could drop your score sharply, sometimes by more than 100 points, depending on your profile. If your score is already low, the impact may be small. If your score is excellent, your score is more likely to nosedive.

Max out cards. High balances that come close to your credit limits raise your utilization ratio. A card at 95% of its limit signals high risk, even if you’re making minimum payments. Maxed-out cards could be a warning signal to lenders even if your overall credit utilization ratio is good. If possible, spread out spending between products instead of maxing out a single card. 

Close paid-off cards. Many people feel relieved and want to cancel credit cards after clearing balances. But shutting down accounts could shrink your available credit and inadvertently raise your utilization percentage. It’s best to keep old card accounts open.

Make only minimum payments. While it keeps your account current, interest accrues on the remaining balance. Over time, this means paying far more than the original transaction amounts and possibly getting stuck in a cycle that drags down your credit score. Work towards getting to a point where you can pay the full balance due every month.

Debt Repayment Plans That Don’t Hurt Your Credit

Choosing the right repayment plan is key for getting out of credit card debt without damaging your credit score. The debt snowball and debt avalanche are effective repayment strategies.

Debt snowball or debt avalanche

The debt snowball and debt avalanche are proven strategies to get out of credit card debt.

• Debt snowball. Pay off balances from smallest to largest. Quick wins when you wipe out smaller debts could boost motivation.

• Debt avalanche. Tackle debts with the highest interest rates first. This saves money over time by reducing interest costs.

Both approaches could work if you make at least minimum, on-time payments on the other balances, since overdue payments hurt your credit. Paying down debt also lowers your credit utilization, potentially boosting your score.

Debt consolidation loan

A debt consolidation loan could help you get out of credit card debt by merging multiple debts into one loan, potentially with a lower interest rate. Managing one payment could be simpler, and you might qualify for better terms, depending on your credit score and debt-to-income (DTI) ratio.

How it affects your credit:

• A hard inquiry from applying for the loan may slightly dip your score in the short term. It stays on your report for two years but only affects your score for one year.

• Paying off credit cards lowers your utilization, which could improve your score, even with new installment debt. The key is to avoid running new debt up on the paid-off cards.

• A mix of credit types (credit cards and installment loans) could benefit your score.

Pay the new loan on time to avoid negating these benefits and to fully support your efforts to get out of credit card debt.

Balance transfer

A balance transfer could help you clear your debt by moving balances to a card with an introductory 0% APR (often 12 to 21 months). That gives you a short time to make headway against your balance while paying no interest. Check your current cards for offers, or apply for a new one if your credit is good enough to qualify.

What to consider:

• Expect a balance transfer fee (usually 3% to 5% of the amount transferred).

• A hard inquiry from a new card application may temporarily lower your score.

• Any balance that’s not yet paid off at the end of the promotional period will be subject to the card’s regular interest rate. Credit card interest rates are almost always high.

Negotiating with Creditors Before It's Too Late

If you’re struggling to make payments, contacting creditors early could prevent damage to your credit. Ideally, reach out before you’re 30 days late, when late payments are typically reported to credit bureaus.

Hardship programs. Many credit card issuers offer temporary relief if you explain your situation. These programs might reduce your minimum payment, lower your interest rate, or allow you to pause payments without immediately reporting delinquency (late payment).

Forbearance. Some creditors allow structured repayment plans outside standard terms. For example, you might agree to fixed lower payments for 12 months while your account remains in good standing.

Documentation. Always get agreements in writing. Keep confirmation numbers and correspondence so you can prove the arrangement if there’s a dispute later.

Negotiating doesn’t guarantee your credit won’t be impacted, but it often results in less severe consequences compared to ignoring creditors.

Learn more about how Freedom Debt Relief works.

It May Be Worth Temporarily Harming Your Credit to Deal With Debt

Debt management plans, bankruptcy, and settlement programs prioritize dealing with debt over short-term credit concerns. Explore these options carefully. 

Debt management plan

A debt management plan (DMP) from a credit card counseling agency helps you get rid of credit card debt with negotiated lower rates. Your money goes into a special account, and is then sent to your creditors. Credit counselors are available to help you hone your money management skills while you’re in the plan. 

Here are some ways a debt management plan could affect your credit:

• Closing credit cards before they’re paid off—which is usually required—is likely to hurt your score.

• On-time payments could improve your score.

• Creditors are likely to report that you’re in a DMP, making it visible to anyone reviewing your credit.

Credit counselors may be able to help you sort out personal finances in general. They are funded by credit card companies, so they’re motivated to coach you to fully repay your debt.

The monthly payment on a DMP is typically very high. This is a good option to consider if you can afford to fully repay your unsecured debts in three to five years.

Bankruptcy

If you’re eligible, declaring Chapter 7 bankruptcy is an effective way to clear most unsecured debts, like credit cards, medical bills, or personal loans. First, you have to pass a means test—an evaluation of your income to determine whether you can make a monthly payment. If you can’t, you could apply for Chapter 7 protection.

In a Chapter 7 bankruptcy, you might have to sell some of the things you own. 

Here’s how declaring bankruptcy affects your credit:

• Your credit score drops. 

• Your credit score remains affected for 10 years.

• Credit options will be more limited and expensive while the bankruptcy ages off your credit report.

Chapter 7 bankruptcy is worth looking into when you can’t repay your debts, you don’t own much, and you can’t afford a payment. Consult a bankruptcy attorney to explore whether it’s the best strategy for you.

Debt settlement or debt resolution

Debt settlement negotiates a reduced payoff amount with creditors. You or a hired company do the negotiating. Creditors may accept partial payment if they believe they aren’t likely to collect the money otherwise. 

Here’s how debt relief could affect your credit score:

• If you miss any debt payments, your credit score is likely to suffer. Most people stop making debt payments and instead save money to make settlement offers to their creditors.

• Settled debts are reported to credit bureaus, impacting your score for seven years from the first missed payment.

Forgiven debt might become taxable income, but not if you’re insolvent. Insolvent means what you owe is worth more than what you own. 

Timeline of impact. During the settlement process, accounts typically show as delinquent, which lowers your credit score. Once accounts are resolved, your credit report will note them as settled.

Recovery after settlement. Completing a program frees up money that could be redirected into building savings and establishing on-time payment history.

When it makes sense. For those with significant debt and limited repayment options, who don’t qualify for Chapter 7 bankruptcy, settlement could provide needed relief. Financial stability often leads naturally to improved credit over time.

Read more in our comprehensive guide to debt settlement.