How To Consolidate Credit Card Debt With Bad Credit

If you have credit card debt and bad credit, you’re not alone. Credit card debt challenges the finances of many Americans, with the average household holding about $10,000 in credit card debt.¹ While your options for credit card debt management may be more limited when you have bad credit, consolidating debt is worth it and can alleviate financial pressure. 

Read on to learn how to consolidate credit card debt, your options for debt consolidation, and how to avoid some of the major pitfalls of debt consolidation with bad credit.

Steps To Consolidate Credit Card Debt With Bad Credit

Consolidating credit card debt can help you save on interest costs and improve your credit score. The benefits of debt consolidation — even with bad credit — include lower interest payments, simplified repayment, credit score improvement, and less financial stress.

Follow these steps to get started with credit card debt consolidation, even if you have bad credit:

• Stop Using Your Credit Cards: You can’t pay off debt if you keep adding to it.
• Calculate Your Credit Card Debt: Add up your revolving credit card debt so you know exactly how much you need to pay off.
• Check Credit Card Interest Rates: Know the interest rates you’re paying on your credit cards, which is helpful when comparing your debt consolidation options.
• Check Your Credit Score: Find out your credit score so you know where you stand and can find debt consolidation options that work with your credit.
• Assess Your Budget: Analyze your income and cash flow to determine how much debt you can afford to repay each month while avoiding making new charges on your credit cards.
• Consider Your Debt Consolidation Options: You may be able to get a balance transfer credit card or debt consolidation loan, though you might need a cosigner.
• Pay Down Credit Card Balances: Whether you use a balance transfer card, debt consolidation loan, or accelerate payments on your credit cards, get started with paying down balances.
• Follow Through With Debt Repayment: Stick to a regular schedule of paying your credit card balances each month so you owe less over time.

Developing a realistic budget and repayment plan is key because making a credit card debt consolidation plan won’t do much if you can’t stick to it. Ensure that you can afford to make monthly debt consolidation payments and establish a manageable timeline for debt consolidation.

Identifying and addressing the root causes of credit card debt is also essential. If you’re overspending, find problem areas and develop strategies for improving financial discipline. 

How Bad Credit Affects Debt Consolidation

Debt consolidation can be challenging, particularly when you have bad credit. You may have bad credit because you’ve struggled to make payments on your credit cards. Your options for debt consolidation may be more limited when you have bad credit, and you may have more high-interest credit card debt to deal with than someone with good credit. Still, you can manage credit card debt consolidation with bad credit.

What Is Bad Credit?

Bad credit is a FICO score of 669 or lower or a VantageScore of 600 or lower. At this credit score range, your credit score is below average, indicating you’re a more risky borrower than someone with good credit. 

The lower your credit score, the higher your risk. If your credit score falls into the fair credit range of FICO 580 to 669 or the fair VantageScore range of 500 to 600, you may be able to get a loan, but you should expect higher rates and fees than someone with good credit. 

Getting approved for loans is more challenging, if not impossible, if your score is in the poor credit score range of 300 to 579 on FICO or 300 to 499 on VantageScore.

Can You Get a Debt Consolidation Loan With Bad Credit?

Consolidating credit card debt often means getting a balance transfer credit card or debt consolidation loan. Either of these products can help you pay down and, ideally, pay off high-interest credit card debt. You can use them to remove the balance from your credit card that accrues interest each month and instead move it to a card or loan with lower interest charges — or no interest at all. 

But if you have bad credit, you may struggle to get approved for a balance transfer card or debt consolidation loan. If you’re approved for a balance transfer card, your credit limit may be too low to transfer much of the credit card debt you need to pay off. And debt consolidation loans may have high interest rates that could be as high or higher than what you’re paying on your credit cards.

Debt Consolidation Options for Bad Credit

Debt consolidation is more challenging if you have bad credit, but you are not stuck. You can pursue a balance transfer credit card or debt consolidation loan or work with your credit card issuers to pay down your credit card balances. Also, consider getting help from a professional credit counselor. Let’s look at some of your options.

Balance Transfer Credit Cards for Bad Credit

If you can get one, a balance transfer credit card can save you a lot of money on interest as you pay down credit card debt. With a balance transfer card, you’ll move your balance from a high-interest credit card to one that has a 0% introductory rate. 

Interest Savings With Balance Transfers

The no-interest period on a balance transfer card usually lasts 12 months or more, in which you can make payments that count entirely to your principal balance with no interest payments to slow you down. Ideally, you should calculate your total balance transferred and divide it by the number of months in the 0% introductory period to figure out how much you need to pay each month before interest charges apply. 

For example, if you transfer $1,000 in credit card debt to a balance transfer card with a 12-month 0% balance transfer offer, you should pay about $84 each month for a zero balance when the 0% offer expires. That way, you won’t have to pay any interest on the remaining balance — because there’s no balance left.

Hot Tip:

See the balance transfer cards Upgraded Points recommends in our guide to the best personal credit cards for 0% balance transfers.

What To Do if You Can’t Pay It Off

If you cannot pay off the balance before the introductory period expires, start shopping for a new balance transfer card. That way, you can move the balance to a new card with 0% and continue paying it down with no interest.

While this approach can be effective, remember that most balance transfer cards charge a balance transfer fee of 3% to 5%. That’s much lower than you’re probably paying in interest, but it’s good to avoid paying that fee more than once on your balance. Do your best to pay off your balance entirely, or as much as you can, within the introductory period so you don’t need to move it to another card and pay another balance transfer fee.

Getting Approved for a Balance Transfer Credit Card

Understand that it’s possible you won’t be approved for a balance transfer card with bad credit. Many of these cards require good to excellent credit. Before you apply for a balance transfer card, it can be helpful to check for preapproved offers. 

Preapproved credit offers use a soft credit inquiry to check your credit and determine how likely you’ll be approved for the card if you apply. These can be helpful in finding out whether a card is a good option for you or not before you apply and trigger a hard credit inquiry that can temporarily ding your credit score.

If you’re approved for a balance transfer card, pay close attention to your credit limit, as this is the limit on how much of your credit card debt you can transfer to the new card. You may find your credit limit too low to transfer all of your high-interest credit card debt. But it can still be helpful to transfer some, if not all, of your credit card debt to a card with 0% interest so you can get a break on interest as you pay down the balance.

Debt Consolidation Loans for Bad Credit

Debt consolidation loans are among the best options for consolidating credit card debt. But with bad credit, you may struggle to get approved for a debt consolidation loan or find that loan offers have high interest rates and fees. Still, you may be able to get a debt consolidation loan that can help you pay off high-interest credit card debt.

You’ll have to do the math to determine whether a debt consolidation loan can help you pay off credit card debt. Look for a debt consolidation loan with a lower interest rate than what you pay on your credit cards. 

Preapproved Debt Consolidation Offers

As with balance transfer credit cards, it helps to look for preapproved offers. That way, you can be reasonably confident that you’ll be approved for a loan before you apply and trigger a hard credit inquiry. With a preapproved offer, you should get an idea of the loan amount you may be approved for, the terms, the interest rate, and how many months you’ll take to pay off the loan. 

You can use preapproved offers to compare your loan options. You may find that you can’t get approved for a debt consolidation loan with bad credit, or your debt consolidation loan offers may have high interest rates. If the loan offers you get have about the same interest rate as your credit cards, it’s probably not worth getting a debt consolidation loan.

Using a Cosigner

Though debt consolidation loan options for bad credit may seem bleak, you could get help from a cosigner. A cosigner is someone who has good credit and can sign on as a responsible person on your loan. 

Although the loan is primarily your responsibility, the cosigner promises to repay the loan if you can’t. It’s a big ask, but if you have a family member or friend willing to help, using a cosigner can help you get approved for a debt consolidation loan with a low interest rate. Just be sure you can keep up with the payments so you don’t blow it with your loan and cosigner.

Consider Secured Loans

A secured personal loan may give you better chances of approval and a lower interest rate. Secured loans require collateral, such as a vehicle, home, or other asset the lender can seize if you default. 

While a secured loan can be a good option if you struggle to get approved for an unsecured loan, be careful. Always research the lender to be sure you’re working with a reputable company. And look hard at your budget and ability to repay the loan. If you can’t keep up with payments, you could lose the collateral, leaving you without a car or home.

Accelerate Debt Repayment

While balance transfer cards and debt consolidation loans are among the best ways to pay off credit card debt, they may be out of reach if you have bad credit. But if you pay down your credit card balances, you could improve your credit score and lower your credit card balances before you get a new card or loan to pay off your debt.

When you improve your credit score and pay down credit card balances, it’s easier to pay off credit card debt. For one, you’ll have less debt to pay down, making your balance more manageable. And with a higher credit score, you may have access to better credit cards or loans at better rates. 

A great way to work on your credit while lowering credit card balances is to focus on debt repayment with your current cards — not moving balances to a new account, but paying as much as you can to get balances down.

Paying Down Balances Helps Your Credit

Making payments regularly for as much as you can afford can help your credit score in 2 ways: payment history and amounts owed. 

These 2 factors have the most impact on your credit score. Payment history, or how often you pay your bills on time, accounts for 35% of your FICO credit score and 41% of your VantageScore. Amounts owed accounts for 30% of your FICO score and 20% of your VantageScore. 

If you’re currently only making minimum monthly payments, that’s a good way to keep afloat, but you won’t make much of a dent in your credit card balances — especially if you continue to make charges on your credit cards.

Debt Repayment Methods

Consider your budget and how much you can pay toward your monthly credit card balances. Then, use either the debt avalanche or debt snowball method to prioritize which credit card balances to pay off first. 

• Using the debt avalanche method, you’ll make minimum payments on all your credit cards except the card with the highest interest rate. On that card, you’ll pay more than the minimum payment — as much as you can — so you’ll pay less interest as you pay down your credit card debt. Once you’ve paid that card off, move to the card with the next-highest interest rate.
• With the debt snowball method, you’ll again make minimum payments on all of your credit cards, except this time, you’ll focus on the card with the lowest balance to make the highest payment you can afford. Once you’ve paid off the balance on that card, you’ll move to the card with the next smallest balance. You’ll pay more interest with the debt snowball method, but it can help keep you motivated as you pay off accounts. 

With either the debt avalanche or snowball method, you’ll make monthly payments to chip away at your credit card debt, which is good news for your credit score.

Spend a few months making on-time payments and reducing your credit card balances. You should see an improvement in your credit score, which can help you get approved for a balance transfer card or debt consolidation loan that can offer interest savings and more of an impact on consolidating and paying off credit card debt.

Negotiate With Credit Card Issuers

Your credit card issuer might give you a break on interest — if you ask for it. Negotiating credit card interest rates can save you money as you pay down debt. With a lower interest rate, you’ll accrue less in interest charges month to month, so you’ll have less to pay and more of your payment can go toward paying down your balance instead of interest.

Asking for Better Rates

Contact your credit card issuer and explain that you want to keep your account but need to pay down the balance. Ask for a lower interest rate and see what they say. Let the issuer make the first offer — you don’t have to say what rate you want. You can suggest a lower rate if you’re not happy with the offer.

The credit card company may offer a temporarily lower interest rate or other benefits such as a waived annual fee. A temporarily lower rate can be helpful and offer good motivation to pay down your balance while the lower interest rate still applies.

Be sure to explain any financial hardships you’re experiencing, such as a layoff or medical bills. Credit card companies typically have hardship programs that can help you make payments when you’re going through tough times.

Hot Tip:

Learn more about how to negotiate interest rates on credit cards.

Get Professional Help

Credit counseling is a great option if you want guidance and support as you pay off credit card debt. A certified credit counselor can help you assess your debt, work on your budget, and create a plan for managing your payments while breaking the cycle of credit card debt.

Credit counseling may include enrolling in a debt management plan or a recommendation to pursue bankruptcy. With a debt management plan, the credit counselor negotiates with your creditors on your behalf to try to lower your interest rates and monthly payments. You’ll pay the credit counselor each month, and then your funds are distributed to your creditors.

Enrolling in a debt management plan with a certified credit counselor can help you get out of debt while improving your credit and alleviating financial stress. However, be sure you’re working with a nonprofit credit counseling agency certified by the National Foundation for Credit Counseling. Debt settlement companies — which seek debt forgiveness that can damage your credit score — often look like credit counselors, but they aren’t the same thing.

Avoid Bad Credit Debt Consolidation Mistakes

Consolidating credit card debt with bad credit is worthwhile and can alleviate financial pressure as you improve your credit. But be careful not to run into pitfalls that can derail your progress:

• Making new charges on your credit cards
• Not making a repayment plan you can consistently manage
• Falling for scams or predatory lenders

You can lower the risk of encountering these setbacks by making a comprehensive plan to pay off your credit card debt. Assess your budget and how much you can reasonably afford to pay each month while still keeping up with your other financial responsibilities.

Plan room in your budget to contribute to an emergency fund, which can help you avoid needing to make credit card charges for unexpected financial setbacks such as car repairs or medical bills.

And before you work with a credit counselor or take out a new credit card or loan, carefully research the financial provider for signs of scams. Check reviews and be on the alert for unrealistic promises.

Final Thoughts

Managing credit card debt with a bad credit score can present challenges, but digging yourself out of debt is possible. Consider your options, including negotiating with creditors and seeking debt consolidation loans, to improve your financial well-being and credit health while reducing or eliminating credit card debt.

Read our guide to find out more information on how to consolidate credit card debt without hurting your credit.