There are many options to reduce high credit card debt - starting with the very long run of making better personal financial choices while eliminating unnecessary monthly charges. This process can take many years and requires discipline you might just not have inside. Faster methods include sacrificing your immediate FICO score for the sake of financial flexibility and professional support from experts that can negotiate on your behalf. 

Debt consolidation gets a bad rap from credit gurus because there are plenty of pretenders and scammers out there trying to capitalize on your misfortune. The fact of the matter is that debt consolidation really works when it is done correctly and fairly. Below we examine the different types of debt relief, with some tips on which one might be right for your situation.

Snowball payment method and Avalanche payment method

This is the process we mentioned above. The concept works like this: 

1. Plug your debts and income into a Budget Calculator

1. The debt snowball payment method works by paying only the minimum on all monthly credit card debts, with the exception of the card detailed in Step 2. Take any extra funds you can find per month and pay down that card first.
2. As available credit opens up on that credit card, you will find available funds for a rainy day, and your credit score will start to improve.
3. Once you have paid off the card with the lowest balance or highest interest rate, move on to the next card with a similar balance and begin to pay that one down.

This is NOT a fix-it-by-tomorrow scheme. This method can take months and years to complete. You will need extreme personal finance discipline to avoid spending on restaurants, premium cable, cellphone data plans, vacations, and more. If you feel like you will struggle with this type of restriction, the snowball payment method might not be for you. If you are more than a few months behind on minimum payments for your credit debt, you should read on below for other options.

Debt validation

Debt validation allows you to pay less than what you would pay if settling a debt. This is because a third party reviews the debts you owe to determine if they are legal. In validation cases, it is not uncommon to find errors made in paperwork and setup, which can be removed from the balance you owe a creditor. This instantly reduces your overall debt.

After a debt is proven to be legally uncollectible it can no longer legally remain on credit reports. The average reduced payment plan is for 36 months, which is 6 months shorter than the average 42 months on debt settlement. There are no taxes owed if a debt is proven to be invalid, and most programs, including that from Golden Financial Services, offer a money-back guarantee on their consultation services if a program can’t be lined up.

Hiring a company for debt validation can be done even after a collections agency is brought in to work with you on payment. The original creditor will write off the debt, getting reimbursed 100% of the money through a tax credit (by showing a loss).

Debt consolidation

In debt consolidation, you receive a loan from a financing company such as a bank, third party, or a home equity line of credit. In this scenario, all debt is paid off at once, and instead of making monthly payments to several different creditors, you make one monthly, often reduced payment to the issuer of the loan. 

Different from debt settlement, debt consolidation can actually help improve your credit score. This is because you are paying off numerous creditors while only then having one large loan to make a payment towards each month. If you are issued a low-interest loan, you might even be able to reduce your overall interest rates, resulting in a shorter overall payoff period.

The negatives for debt consolidation include an overall larger payoff amount due to interest and fees, it can be difficult to get approved for a loan if you are missing payments and your FICO credit score is suffering, and the duration of your loan is extended beyond the time it would take to pay off all of your debt otherwise if you were making necessary payments in a snowball method.

Debt settlement

This is the best option for those that are struggling to make minimum payments while they watch their credit score take a nosedive. The duration of the payment plan is often shorter than in consolidation (closer to 3-4 years instead of over 5 years), and your total debt is often reduced by as much as 32% (while more commonly closer to 25%).

To be clear, though, anytime you inform your creditors that you can’t make payments and they allow you to pay them less than what you owe, this will go on your credit report and reduce your score. In this scenario, you are essentially trading immediate credit score health for relief in backed payments. Settlement is designed to get you back on your feet now, with the promise to yourself to work hard on keeping out of future debt. Your credit score will recover over time, but not overnight.

Late fees and unpaid interest can lengthen the time it takes to pay off the settlement, also increasing the total amount you must pay. Make sure you are able to maintain the new monthly payment amount before agreeing to a debt settlement.