Trapped by debt? Free yourself in 7 steps
byTerry Savage

When you've paid off the smaller balances, attack the larger ones. Here's a trick that can save you years of interest charges. Simply double the minimum monthly payment -- and don't charge another penny. That should get you out of debt in less than three years.You can also use the debt evaluation tool at MSN Money. It will help you evaluate your situation and prioritize your payments.

Step No. 3: Eliminate credit cards and don't roll over balances.

When you pay off a card, notify the company that you want to close the account. Don't just stick the card back in your wallet where it will tempt you again.

And don't roll balances from card to card. This is a tempting way to make yourself believe that you're doing something about your debt problem, if only by lowering the interest rate you're paying. Switching from card to card has drawbacks. Every time you get a new card, you're generating an outstanding open credit line that will appear on your credit report. Other lenders may be unwilling to let you keep rolling balances. And when those tempting introductory rates expire, you could be stuck with huge balances on high rate cards.

Step No. 4: Get a copy of your credit report and credit score -- and study both carefully.

Your credit report is simply a compilation of your bill-paying history. Don't hide from the truth. There may be some errors on your credit report that you'll want to correct by contacting merchants. And if you do make progress toward paying down your balances, you'll want to make sure they're correctly reported.

You're entitled to a free copy of your credit report if you've been turned down for a loan or a credit card. And there are many Web sites that offer a report for under $10 -- or even for free, if you sign up for a credit monitoring service that you might not need.

Your credit score is a different, more complex evaluation of your creditworthiness. Your credit score doesn't just report your payment history; it uses a formula that assigns a weigh to factors such as bill repayment habits, percent of available credit used, and even your employment history. This credit score is used in almost every mortgage decision, and may be used in one form or another when pricing life or homeowner's insurance or car loans.

The most frequently used version of the credit score is the FICO score created by Fair Isaac & Co., the company that pioneered the concept of scoring. A FICO score ranges between 300 and 850. About 39% of the population scores above 750 -- and a score below that level is a warning signal.

Some aspects of your credit report are beyond your immediate control. They're calculations based on the length of time you've had the same accounts open. But other factors in your credit score that weigh heavily are your timely bill-paying habits and the percentage of your credit limit that you are using on each card.

You can get a copy of your Equifax credit report and your FICO score at myFICO.com or you can aspclick here on MSN Money. The cost is $12.95 -- and it includes online access so you can track any changes in your credit report.

And by 2005 you should be able to get credit reports for free. The Fair and Accurate Credit Transactions Act, signed into law by Congress in Dec. 2003, gives every American the right to a free credit report every year from each of the three major credit bureaus: Equifax, Experian and TransUnion. But it will take a while for the government to write the exact regulations for the freebies and more months for the companies to comply.

Step No. 5: Make a spending plan.

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