Your credit score is one of your most important financial assets. But if you owe a lot of debt – especially credit card bills – chances are those obligations are hurting your credit rating.

Even worse: if your debt spirals out of control, you could be forced to file for bankruptcy protection, a move that could ding your credit rating for up to a decade.

So what can you do to manage credit and debt wisely – while avoiding bankruptcy court?

Here are four tips to achieve financially stability and maintain tip-top credit too.

Tip #1: Use Cash More Often Than Credit

There’s nothing wrong with having credit cards – and using them when appropriate. But far too many people rely on plastic to pay for nearly everything, from lifestyle costs like travel and eating out, to necessities such as utilities or cell phone service. And then these consumers can’t pay their credit card balances in full each month. That’s why, collectively, Americans owe about $1 trillion in credit card debt, according to data from the Federal Reserve Bank. To avoid over-extending yourself with credit, get into the habit of using cash more frequently. Set limits on your monthly spending in various categories, like food or shopping, and then try your best to only pay for those items with cash. Doing this keeps your credit card balances low, and also boosts your credit rating. After all, the amount of debt you carry accounts for 30% of your FICO credit score. The less credit card debt you have, the higher your credit score.

Tip #2: Be Careful Of The Type of Credit You Accept

Just because a retail store, an auto dealer or a bank or credit union offers you a credit card, loan or other financing, doesn’t mean you have to accept that offer. Always shop around for best loan rates and terms. And avoid so-called sub-prime credit deals, which stick you with exorbitant interest rates or high fees. Any money you pay toward interest payments (or other added costs) becomes money that isn’t paying off your debt. So high-cost loans, including things like payday loans, just keep you trapped in a cycle of debt.

Tip #3: Avoid Co-Signing for Others

One financial trap that many of us have succumbed to is co-signing on a credit card or loan for a family member or close friend. Naturally, you might want to help someone close to you or a person you love. However, recognize that co-signing carries series economic and credit risk to you. In a nutshell, if the person you co-sign for doesn’t pay the obligation as agreed, you could be on the hook to repay that debt. Additionally, the creditor can come after either one or both of you in the event of a default – something that would affect your credit rating. So it’s best to say “No” if someone asks you to co-sign for them. One upside to gently, but firmly saying “No” is that you will likely preserve the relationship too. After all, if the loan goes sour, you and your relative could have a major falling out.

Tip #4: Understand Your Financial Options

If you find that you’re already overwhelmed by debts and you’re contemplating bankruptcy protection, first consider all possible alternatives. Bankruptcy really should be a last-ditch option. So before you pull the trigger on a bankruptcy filing, you can try the following:

  • adjusting your budget to get your expenses in line with your income
  • negotiating with your creditors directly
  • enrolling in a debt management plan at a credit counseling firm
  • enlisting the services of a debt settlement company

In other words, don’t make a rash decision about bankruptcy before first doing something that will have far less long-term impact on your finances and your credit rating.

If you find, however, that bankruptcy really is the best option for you – and indeed, a Chapter 7 bankruptcy, which wipes out most consumer debt could be a fresh start – you should use the opportunity to eliminate your debts and then assess what went wrong, and how you won’t wind up in the same financial predicament in the future. Even with bankruptcy: take heart in knowing that it isn’t a financial death sentence. If you manage your credit well in the wake of a bankruptcy, you can start to rebuild your credit rating in just a year or so.

Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, television and radio personality, and the author of 12 books, including the New York Times bestseller Zero Debt: The Ultimate Guide to Financial Freedom. Lynnette is a former financial news journalist, who now teaches individuals nationwide how to better manage their finances. She has appeared on hundreds of TV programs, including Oprah, The Talk, Dr. Phil, Dr. Oz, The Steve Harvey Show, Good Morning America, The Today Show and more. She is the CEO and co-founder of, a free financial education site. In 2017, Lynnette launched a video-based learning platform called Money Coach University.

To Learn more about Lynnette, go to Ask the Money Coach.