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ABA: The American Bankers Association

Rebuild Right: Safe Credit Recovery & Responsible Debt Solutions

Learn how credit works, how to build it safely, and how to avoid costly debt and credit traps. 

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A Path to Good Credit

Good credit can help you build a more financially stable life.

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The Dangers of Debt Settlement

Debt settlement companies often advertise fast solutions for overwhelming debt, but many consumers experience damaged credit, increased costs and little relief.

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The Hazards of Credit Repair Companies

Credit repair companies falsely promise fast improvements, but charge high fees for services that provide little or no lasting benefit.

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Getting Out of Debt is Possible

Getting out of debt is possible regardless of how much you owe — but it requires a concerted effort and sticking to your goals.

You Can Improve Your Credit Score

The first step to improving your credit score is to review your credit report.

Frequently Asked Questions

Get clear, straightforward answers to common concerns.

Getting Out of Debt is Possible  

If you’re struggling with debt, you’re not alone. Getting out of debt is possible regardless of how much you owe — but it requires a concerted effort and sticking to your goals. These 10 steps will help: 

Debt Reduction Steps

1. Identify what you owe

List everything that you owe — including credit card debts, personal loans, auto loans, student loans, mortgages and anything else. Document all interest rates, total amounts owed, and minimum monthly payments.

2. Determine your monthly income

Review your financials to understand how much income you’re working with each month.

3. Create a budget based on steps 1 and 2

Subtract your expenses from your income to understand how much money is available to reduce your monthly debt. Be sure to tally your totals — add up your income and spending categories. Check out ABA Foundation’s simple worksheet to help.

4. Evaluate where you can cut expenses

Personal or entertainment expenses are often the easiest things to cut. Consider coupons, consignment shopping, reducing dining out, cutting streaming services, reconsidering subscriptions, or going on a spending freeze. Also consider contacting utility, cable, internet and phone providers to reduce bills.

5. Communicate with your lenders

Find out if your lender will offer you a lower interest rate. Sometimes lenders are willing to reduce your interest rate if you haven’t missed monthly minimums and have a history of on-time payments. Consider speaking with a supervisor if your first conversation doesn’t yield the results you want.

6. Consider ways to increase your income

Get a second job with part-time hours, work overtime or request a raise. Additionally, consider renting out a room in your home or getting a roommate.

7. Choose a debt reduction strategy

  • Debt avalanche: Pay highest-interest debts first while making minimum payments on others.
  • Snowball method: Pay smallest balance first, then roll that payment into the next debt.
  • Consolidate: Combine high-interest debts into one lower-interest loan (requires good credit).

8. Get professional help when you need it

Counselors are professionally trained to assess your situation and evaluate the best financial options to consider. And the best part? Most are free! For assistance contact:

9. Avoid new debt

Avoid taking on any new debts, if you can, and stick with your plan.

10. Watch for scams

Be aware of debt relief scams and the dangers of debt settlement. They falsely promise to negotiate using “unique relationships” with creditors to settle your debt obligations.

You Can Improve Your Credit Score

The first step to improving your credit score is to review your credit report. You can obtain a free copy of your report at AnnualCreditReport.com. Your credit report includes the following information:

  • Credit history – The number and types of credit accounts opened (both active and closed accounts), your history of making payments on installment loans and credit cards, the age of your accounts, and your account balances.
  • Credit inquiries – How often you have applied for credit. These “hard inquiries” stay on your credit report for up to two years.
  • Collections – Unpaid or overdue debts, such as foreclosures, bankruptcies or liens.

Once you access your report, determine if there are any errors. If you find mistakes, you have a right to dispute the information and can do so by contacting the three credit reporting bureaus: Equifax, Experian, TransUnion.

In addition to correcting any erroneous data, check what you need to improve. Typically, you will want to focus on:

  • Loan Payments – Even if you cannot pay off a loan immediately, always ensure that you make on-time minimum payments. Consider automatic payments or calendar reminders to make payments on time.
  • Credit Card Payments – Always pay at least the minimum amount due. If you can pay the full balance every month, that’s always best.
  • Avoid Collections–Call your creditors if you’re struggling to make payments – it may keep them from sending your debts to collections. Note that paying off a collection will not automatically remove it from your credit report. It will remain for seven years, so it’s important not to reach that point.
  • Keeping low credit card balances – Your credit utilization is an important factor in calculating your score. If possible, use no more than 30% of the credit limit on each of your cards.
  • Applying for new credit cards only as needed – Too many hard inquiries that result from applying for new credit cards will lower your score.
  • Maintaining your accounts – Don’t close your credit card accounts even when you stop using them. If you do, you may hurt your credit score by unintentionally lowering your overall credit limit. To make sure the credit card issuer doesn’t close your card, use it at least once every 6 months.

Talk to credit counselors if you’re in trouble

Using legitimate, non-profit credit counseling can help you manage your debt and won’t hurt your credit score. These organizations offer free or low-cost assistance and focus on long-term financial health.

Reputable nonprofit organizations include:

Frequently Asked Questions

Building good credit can happen quickly or slowly depending on what’s on your credit report. Talk to a nonprofit financial counseling agency to understand what’s keeping your score down and how long it may take to build it back up.

 

Stopping payments can severely damage credit and lead to legal action.

 

No. Errors can be disputed for free, and accurate information cannot be removed by a credit repair company.