GETTING OUT OF DEBT

Collect key information about each account - Who do you owe? How much do you owe? What is the interest rate? How close are you to your credit limit?

Prioritize your payments - Make payments on every account but focus on eliminating the highest-cost debt first…an 18% loan before a 15% loan. Pay the small balances in full if you can. This will quickly shorten the list and it will feel good to cross them off.

Pay more than the minimum - Most minimum payments are set to just keep up with the interest charges and will not reduce the total debt owed. Increasing the monthly payment will dramatically accelerate the payoff. Example: If you make a minimum $100 monthly on a $5000 balance at 18%, it will take more than 46 years to pay it off and cost $13,931 in interest. Pay $200 a month, and you wipe it out in less than three years, paying $1314 in interest.

Find extra cash to accelerate payments - For two months (just 60 days), write down everything you spend. Divide it into two categories: essentials (housing, food, transportation, utilities and loan payments); and nonessentials (new clothing, eating out, travel, expensive gifts). Stop spending on nonessentials and stop using credit cards until your debt is paid off. It's very hard, but the payoff is sweet. When your debt is gone, the extra cash is all yours.

Negotiate with lenders - Call your creditors and ask for better terms. Some lenders will waive penalties, cut rates and adjust billing cycles for their customers.

Avoid debt-consolidation loans - It's tempting to take out a home equity loan to pay off credit accounts. If you don't change your spending habits, you will likely wind up even deeper in debt…and this time, your home could be on the line.

Retire each card as it's paid off - Telephone the issuer for the mailing address to cancel your account. Then write a letter closing the account and tell the issuer to state on your credit report that the account was "closed by the consumer." Don't keep any you don't use as some issuers charge inactivity fees!

STAYING OUT OF DEBT

Pay your bills on time - Many card issuers now charge substantial late fees up to $39 and raise your interest rate after one or two late payments… of any bills, not just theirs. It's the "universal default penalty." If your pay a utility bill late, your credit-card rates could soar.

Pay the full balance each month - Even a one dollar open balance at the end of a billing cycle triggers interest on all new charges in the next cycle.

Keep all balances well below your credit limit - This will avoid inadvertently pushing you over your limit, triggering a monthly penalty.

Get your annual credit check-up - A recent survey found that 80% of all credit reports contain mistakes; 25% of them serious enough to result in denial of credit. Free annual credit reports are available from all three major credit bureaus. Review yours and have any mistakes corrected.

To order your free credit report visit: www.annualcreditreport.com; call 1.877.322.8228; or send your request in writing to: Annual Credit Reporting Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.