Q: In college, I didn't realize the value of a dollar or that of my own credit, and now I'm paying for it. I have two dilemmas: All of my creditors want to be paid back at once (a total of more than I make), and even if I had the money to pay, getting on top of my credit rating and fixing it is a full-time job. Can you point me in the right direction?

A: First, lest you think you're alone in this financial fix, rest assured: This month, I've received three inquiries on the subject of credit, its uses and misuses. So whether you're charging like the Light Brigade or you're ready to pay but can't get out from under a lousy credit rating, owing your soul to the company store is no fun at all. If you'll have problems paying off what you've purchased and have exhausted all your relatives (on second thought, you may want to avoid that route), you can:

  • Consider seeking credit counseling. You'll learn how to budget and pay off your debt. Based on your need and income, some services will interact with your creditors--you pay them and they pay off your bills. Most services charge a fee, but some services are free. Nonprofit services are available through the Neighborhood Financial Care Center at (800) 388-2227.
  • Kiss your ATM card goodbye. Easy come, easier go. It's simple to rationalize just $20, and then just $20 more--get the picture? I know you need that convenience. Well maybe if it wasn't so convenient, you wouldn't be in the mess you're in now.
  • Choose the right plastic for you. If you carry a balance, get a card that has a low interest rate. You probably won't get frequent flier miles, but since they're worth about $2 per mile, if you carry a high balance, you'd be better off buying that ticket to Katmandu than to use your credit card to earn one.
  • Use your saving to pay off your credit cards. Unless your investments can guarantee an 18 percent or better return, divide your savings to pay off your credit card bill while you're adding to your investment portfolio. That way you'll make progress on two fronts at once.
  • Check your status with a credit rating service. While Momma taught you not to care what other people think, credit rating services such as Experian (800-682-7654), Equifax (800-685-1111) or Trans Union (800-916-8800) can make or break you. To see what others think, call one of these services and order a credit report (they'll give you one free annually) and go through each entry. If there's an error, write the offender immediately and send them proof that their records need updating. Then keep on them. It takes time to amend a bad credit report, but as that old Chinese credit counselor, Confucius once said, "Perseverance furthers!"

That's what to DO. Now, here's what NOT to do:

  • Avoid debt consolidation loans. This is a very expensive route to take. If you're beyond all hope, borrow a copy of the book, How to File for Bankruptcy (Nolo Books) by Stephen Elias.
  • Just say no to the pawnbroker. You won't get much, and do you really think they'll save your family jewels for you?

For more information on managing credit, check out these resources:

1. Downsize Your Debt (Penguin Books) by Andrew Feinberg

2. Money Troubles: Legal Strategies to Cope With Your Debts (Nolo Books) by Robin Leonard

3. Invest in Yourself: Six Secrets to a Rich Life (John Wiley & Sons) by Marc Eisenson, Gerri Detweiller and Nancy Castleman

Or visit the Myvesta.org, a nonprofit, Internet-based debt counseling agency that helps families and individuals with debt, credit and financial difficulties.

Whatever you do, don't let your bills get you down. Just because you've spent too much money doesn't mean you're a bad person or that you'll never come up for air. Reducing debt has a lot to do with how you think of money. Some advisors suggest you treat your money with respect-turning all the bills the same way and neatly placing them in your wallet. I don't care if you fold them in gently or stuff them in madly-just as long as you keep them there.

Lorayne Fiorillo is a financial advisor and senior vice president at a major brokerage firm. She spent six years as the on-air financial commentator for EyeWitness News and 11 years as a market commentator for National Public Radio. She is the author of the new book, Financial Fitness in 45 Days: The Complete Guide to Shaping Up Your Personal Finances (Entrepreneur). She specializes in retirement and business planning for small businesses.


The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.