By the time you are finished reading this article, you’ll quickly discover that the key to improving your credit score lies in your ability to reduce your debt. You see, if you find yourself with more debt than you can reasonably handle, the simplest solution is to reduce the amount of debt you are facing.

While this is likely a lot easier said than done, the bottom line is that you may not have enough money to pay your bills. Surprisingly enough, there is a solution. In fact, you may not be aware that there are steps you can begin taking RIGHT NOW that can reduce your load.

The first thing you should do is begin prioritizing your debts. Generally speaking you should attempt to pay off the smallest debts first. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.

Here are the basic steps to take:

• List all debts in ascending order from the smallest balance to the largest.

• Commit to pay the minimum payment on every debt.

• Determine how much extra can be applied towards the smallest debt.

• Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off. Be sure to let the lender know that extra payments are to go directly toward principal reduction.

• Once a debt is paid in full, add the minimum payment plus extra money from the first debt to the minimum payment on the second smallest debt, and apply the new sum to repaying the second smallest debt.

• Repeat until all debts are paid in full.

Known as Debt Snowball, popularized by finance guru Dave Ramsey, this process will empower you to get out of debt, increase your credit score and, ultimately, achieve financial freedom. The key is to do what is necessary to focus your attention and knock those bills off one debt at a time.

For more information on debt reduction, check out Dave Ramsey’s Total Money Makeover.

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