Okay, I know, it's cruel to run an entry like this during the holidays. Telling people to get rid of debt just when there is all that pressure to spend like crazy. But I'm trying to save you a hangover--a spending hangover. You can thank me in January. So, starting now, we're going to get your spending utilization down and improve your bad credit.Credit utilization is the amount of credit you are using, divided by your total credit limits. So if you have 4 cards with a total limit of $10,000, and you are using $9,000 of it, your utilization is 90%. Guess what it should be for a good credit score? 30%! That's $6,000 of debt you need to unload before you can turn bad credit into good credit.

Featured Credit Card

Okay, you say--I'll stop using my cards, make my monthly payments, and this time next year I'll have good credit and no debt. Not so fast. If you make the minimum payment, you will be in the same boat this time next year. Because credit card companies WANT to keep you in debt and comfortable with being in debt, that suggested or minimum payment isn't enough to cause you much pain when you write that check--and it isn't doing much to pay off your balance either. If your rate is 15% and you make the typical 2% payment on that $9,000 balance, which is $180 a month,this time next year you will still owe $8,132! And that's only if you incur no fees or late charges and your company doesn't raise your rate.

What Can You Do?

Well, you have a couple of options. If you have home equity, you may be able to consolidate your debt at a lower interest rate. If you had a 6% rate, you could wipe out that debt in 3 years by paying $282 a month! And the interest may be tax deductable. If you have good credit, you may be able to get a personal loan, or you may be able to consolidate your debts by transferring them to lower-interest cards--then pay them down like crazy while the introductory rates are in force. In just six months of zero percent financing, you could pay that $282 a month and knock almost $2,000 of your balance! You can't play that game too long, so it's best to throw as much cash as possible while your rates are down.

The Payoff

It's ironic--once you don't use much credit, everyone wants to lend to you. And they charge a lot less, too. You could find yourself paying a lot less for mortgage interest, car insurance, and other goodies. Start today, and next year's holidays really will be merrier.