7 Steps Out of Debt

Last week in Part 1, we focused on the internal discipline it takes to stay the course—building the mindset, motivation, and daily habits that support long-term success on your debt-free journey. We talked about enduring slow progress, celebrating small wins, adjusting when life throws surprises, and holding on to your “why.”

Now in Part 2, we’ll address the external challenges—the practical, often intimidating roadblocks many people face when trying to get out of debt. This includes how to handle debt collectors with wisdom and confidence, what your credit score really means and how to protect it, whether to keep or close old credit cards, how to spot the traps behind credit card rewards, and how to avoid overborrowing when it comes to student loans.

If you’ve ever felt overwhelmed by conflicting financial advice, unsure how to deal with creditors, or afraid you might make a mistake that sets you back, this week’s letter will help you cut through the confusion. With clarity and practical steps, you’ll learn how to move forward with confidence—no matter what obstacles you’re facing.

💡 This Week’s Focus: Discernment and Discipline

Now that you’ve committed to the journey, it’s important to guard your progress. Distractions don’t always show up as emergencies—often, they appear as shortcuts, pressure, or even appealing “opportunities” that can quietly set you back.

Some of the most common detours include:
• Letting fear or shame dictate how you respond to debt collectors
• Chasing credit card rewards while trying to pay off credit card debt
• Borrowing more than necessary for school without a plan to repay it

This week is about wisdom.

Wisdom says, “Pause. Pray. Plan.”
Not every offer is a blessing, and not every door should be walked through.
God calls us to walk in clarity—not confusion. Financial peace doesn’t come from hustle or hype. It comes from applying His principles and handling every step of this process with grace, courage, and truth.

Let’s move forward with discernment so you can stay focused on what matters most: freedom, faithfulness, and a future built on purpose—not pressure.

📖 Verse of the Week
Proverbs 4:25–27 (ESV):
"Let your eyes look directly forward, and your gaze be straight before you.
Ponder the path of your feet; then all your ways will be sure.
Do not swerve to the right or to the left; turn your foot away from evil."

Stay focused. Stay steady. You’re walking the right path.

What About Debt Collectors?

Don’t avoid them. Ignoring a debt collector won’t make the debt disappear—it usually makes it worse. Take control of the situation instead of letting fear or guilt drive your choices.

Start by doing your homework:
• Review your budget and know what you can realistically offer without compromising essentials
• Prepare for the conversation—write out your talking points and stay calm and confident
• When ready, initiate the call—many collectors are willing to work with you when you show initiative

Tips for Navigating the Conversation:
• Request a debt validation letter before paying anything. This confirms the collector’s authority and protects you from scams
• Never give banking information over the phone—use methods you control like bank bill pay or a money order
• Avoid autopay—it removes your flexibility. Instead, set reminders and make each payment manually
• Document everything—track names, dates, payment terms, and get all agreements in writing
• Know your rights under the Fair Debt Collection Practices Act (FDCPA). Collectors can’t:
 ○ Call before 8 a.m. or after 9 p.m.
 ○ Contact you at work if you ask them not to
 ○ Harass, threaten, or mislead you

Facing these conversations with wisdom helps you protect your peace and stick to your plan.

Understanding Your Credit Score

One of the first questions people ask when starting to pay off debt is,
“What will this do to my credit score?”

Here’s the truth:
Your credit score is not your identity.

Yes, your score matters for loans, insurance, and sometimes even jobs—but it’s not the ultimate measure of financial health. Focus on building solid habits. The score will follow.

What Is a Credit Score?
A credit score (300–850) reflects how likely you are to repay borrowed money. It’s based on:
• Payment history (most important)
• Amounts owed (credit utilization)
• Length of credit history
• Types of credit
• Recent credit inquiries

Will Paying Off Debt Lower My Score?
It might—temporarily. Paying off a loan or closing a credit card can shorten your credit history or raise your utilization percentage.

But don’t panic:
• On-time payments build your score
• Lower balances improve credit utilization
• Avoiding new debt shows responsibility
Even if your score dips for a while, it will recover as your habits improve.

How to Build or Rebuild Your Credit:
• Pay every bill on time—one missed payment can cause damage
• Keep balances low—under 30% of your credit limit
• Avoid opening new credit while paying off debt
• Don’t close old cards unless absolutely necessary
Older accounts help by lengthening your credit history. But note: some companies will close inactive cards.
👉 To keep them active: use the card every few months for a small purchase, and pay it off right away.

Check Your Credit Reports

Mistakes on your report can hurt your score—and they’re more common than you might think.

Here’s how to stay on top of it:

1. Visit AnnualCreditReport.com to access your free reports from Experian, Equifax, and TransUnion

2. Review each report carefully—look for errors or fraudulent activity

3. Dispute any errors with documentation

4. Set a reminder to check one report every four months to stay protected year-round

You’re not just fixing a number—you’re building a legacy of trust and stewardship.

Credit Card Points Aren’t Worth the Debt

We’ve all heard it:
• “But I get points!”
• “I pay it off every month.”
• “It’s free money!”

Let’s be honest—if credit cards played a role in your debt, they shouldn’t be part of your plan to get out. Period.

Reward programs exist to encourage spending.
Even if you earn 2% back, carrying a balance at 18% interest means you’re losing money.

Even if you pay it off in full, the temptation to spend more “for the points” is real.

Real rewards look like this:
• No more monthly payments draining your income
• Peace of mind
• Freedom to make decisions without debt
• A savings account that actually grows

Focus on the reward that matters most: freedom.

A Word on Student Loans

For many, student loans are the largest and most confusing form of debt.

What Are They?
Student loans are borrowed funds for education expenses—and they must be repaid, with interest. There are federal and private options, each with different terms.

Don’t over-borrow.
Only borrow what’s absolutely necessary for tuition and required expenses—not lifestyle extras.

What to Do Instead:
• Apply for scholarships and grants—they don’t need to be repaid
• Choose affordable schools—in-state or community colleges can be wise choices
• Work and save—part-time income helps you borrow less
• Understand repayment—explore income-driven plans, forgiveness programs, and the pros/cons of refinancing

Education is a good investment—when approached with wisdom.

🎯 Weekly Challenge

Set aside 30 minutes to take this week’s next step:
• Request and review your credit report from one of the three bureaus
• Say a prayer over your journey—especially in any area where fear or confusion may still be holding you back

💬 Reflection Questions
• What’s one belief about credit or debt that I need to replace with truth?
• Am I letting fear (of collectors, of my score, of judgment) stop me from taking wise steps?
• What’s one small, concrete action I can take this week to feel more confident and in control?

📢 What’s Coming Next

Next week, we’ll shift into the next phase: creating savings, margin, and momentum.
Freedom from debt is just the beginning—you’re building a future that reflects purpose, wisdom, and peace.

You’re not just finishing something—you’re stepping into something better.
Keep going. You’re doing this.

🔁 New here or missed a few? You can read all the previous newsletters right here: financebyfaith.beehiiv.com

Blessings and financial peace to you!