The 3 Universal Truths of Getting Out of Debt

For many people, debt has, perhaps unwittingly, become just another part of life. In fact, a 2015 study from Pew Charitable Trusts found 80% of Americans are carrying debt. And not all of what they owe is tied to “good debt”, like a mortgage. At the time of that study, 39% of Americans were reporting unpaid credit card balances.

But just because (almost) everyone is in the red doesn’t mean you should be. There are, after all, some universal truths when it comes to getting debt-free. Here are the major ones.

1. It Will Save You Money

OK, so, chances are, you know already that your debt is costing you, given almost all financing involves some type of interest. But what you may not realize is exactly how much your outstanding balances are adding to your lifetime debt load. The average person can expect to pay $279,002 in interest on credit purchases over the course of his or her life, but you can get a better idea of how much your current balances are costing you by using Credit.com’s Lifetime Cost of Debt Calculator.

2. It Will Help Your Credit Score

Debt plays a critical role when it comes to your credit scores. In fact, among major credit scoring models, the amount of debt you’re currently carrying accounts for 30% of your score. Experts generally recommend keeping your credit utilization — essentially the amount of money you currently owe your creditors — below at least 30% and ideally 10% of total available credit limit(s). So, if your balances are much bigger than that, there’s a good chance your score is worse off for it. (You can see how your debt may be affecting your credit scores by viewing your free credit report summary, updated every 14 days, on Credit.com.)

Paying down outstanding debts also could help fix your credit by improving your credit utilization rate — and decreasing the odds missing of a payment, winding up with an account in collections, or, even, filing for bankruptcy — all big no-nos when it comes to maintaining your credit.

3. It Can Be Done

People facing a mountain of debt may feel like their situation is hopeless, but there are some steps you can take to get burgeoning balances under control. For instance, you can prioritize debt payments either by putting the most money towards your lowest balance (which can be a good motivator) or the credit line with the highest interest rate (which will save you on interest) while making on-time minimum payments on other loans.

You could also consider a debt-consolidation loan or balance transfer credit card. The latter lets you move high interest credit card debt to another piece of plastic that charges low-to-no interest for a set period of time. (You can learn more about the best balance transfer credit cards in America here.)

Beyond that, it’s about going back to basics: Take a look at your budget to see if there are items you can cut out or scale back on so that you can put more money toward your debts. And consider keeping any credit cards on ice, figuratively or perhaps even literally, while you pay down existing balances.