Did you ever see the Shawshank Redemption? Do you remember how you felt when you realized that the hero had tunneled his way out of prison with his rock hammer and only a poster to cover up his work?

Wow. What kind of tenacity did that take? Of course, he didn’t have much else to do, really.

We’ve all tuned into the motivational purrings of Dave Ramsey. Get rid of debt. Use the “roll down” technique. It’s simple. A moron could do it.

Except, it isn’t magic. For many people, the roll down technique doesn’t work. Many of us need more empirical evidence that what we are doing, the energy we are expending, the discipline that we are sustaining is really working. After all, we’ve all been fooled before.

When you add the distraction of the multiple plates we juggle in our lives, stress seems to only grow day after day. Further, when someone puts so much of his or her time, attention, and focus into “eliminating debt” it seems for many that they acutally attract more debt.

The “roll down” is a common technique whereby you stack your debts in order of highest interest rate to lowest. Then, you determine how much current savings you can contribute to eliminating debt and how much extra per month you can dedicate to paying additionally toward your goal.

As you progress and eliminate one debt you add the old payment to your continuing efforts to create a snowball effect of growing larger and larger as you continue.

And that’s great! We all understand how it works. And sitting within the few minutes that it takes to understand the process, we are easily inspired to go make it work.

Then the car breaks down.

Then the baby gets sick.

Then your church needs you to head up a committee.

Then your boss asks you to take over a project at work that someone else fumbled.

Then your partner’s mother gets gravely ill and you are driving 150 miles a day back and forth between your home and another city.

And so on and so on…until the juggling seems to be all you know.

The roll down can be wonderful for some people. For many, however, the goal of being “debt free” can take on the illusion of an elephant that just won’t look YOU in the eye.

Another approach involves smaller, measurable goals. Called the spin down method, it can create a sense of what’s possible rather than what’s impossible. After all, we have to overcome a mountain of debt. We can’t do that in three large steps. We may have to whittle it down to three hundred small steps.

The spin down method maximizes your credit scores. Often, when we are considering getting rid of our debt its because we’ve recently sat across the desk from a financial professional who has reviewed our credit score and financial circumstances.

The spin down evaluates each account’s percentage of obligation. If the credit line is $1000 and you owe $800, the percentage of obligation is 80 percent.

Credit scores and how they are calculated are not transparent. There’s nothing in print that will tell you exactly how those scores are created. But we do know some basics.

Nearly 30% of the score is based upon your percentage of obligation. Once you climb above 50% percentage of obligation your credit score is being negatively impacted.

So, let’s compare. Let’s look at someone with three accounts:

Creditor Amount Owed Line of Credit % of Obligation

  • Citybully $14,622 $15,000 97.48 19%
  • MasterCredit $2,011 $ 5,000 40.22 16.9%
  • MacEs $928 $1,500 61.80 23.0%

Now, the roll down method would put MacEs first, Citybully second, and MasterCredit third. I’ll save you the excel spread sheet and we’ll just assume that the debtor in this example can spend $1000 a month toward eliminating debt. The first goal would, MacEs, would be eliminated in 10 months. Then, Citybully would need 13 months to be put to rest. MasterCredit would be knocked out in two months. Two years a one months before the user has achieved the goal.

On this journey, however, the credit scores are rising a blip after month three. Then, the creditor has to pay off MacEs and then about seven more months (for a total of 14 months) before another lift in credit score occurs.

Using the spin down method looks at the issue differently. The debts are stacked in order of percentage of obligation. Citybully is first, then MacEs, then MasterCredit. The objective is to first aim for a 50% percentage of obligation point on each account. That means that in seven months the debtor will experience a lift in credit score. After seven months, Citibully will be paid down to less than $7,500. Next, attention turns to MacEs. After two months, MacEs is paid down to $750 or less. The time spent in this case is nine months before seeing the desired effect of a lift in credit scores.

In the spin down concept, we now have two accounts at approximately 50% levels and a third at 40 percent. Set a new goal to pay the accounts down to 30 percent and repeat the process. In four more months subsequent to achieving the 50% level, the debtor achieves the 30% level and experiences another lift in credit scores. The desired result of increasing credit scores as a result of eliminating debt using the spin down method takes one year instead of two years when compared to the roll down method.

Now, the debtor is left with the following picture:

Creditor Amount Owed Line of Credit % of Obligation

  • Citybully $4500 $15000 30 19%
  • MasterCredit $1500 $5000 30 16.9%
  • MacEs $ 450 $1500 30 23%

At this level of accomplishment would be an awesome time to apply the roll down method and snuff out the remaining debt in six or seven months.

If the roll down method or spin down method are best for you depends upon your goal. To maximize credit scores for the purpose of qualifying for a home loan, a car loan, or student lending products, use the spin down to achieve the optimal credits scores at the soonest point.