Tips to Paying Down Your Debt and Improving Your Credit Score

How much of your available credit you’re using makes up 30% of a typical credit score.  Thus, to improve your credit score, you should keep track of much you charge on each card and always pay down your debt. The less balances you carry, the better it is for your score.

Tip 1: If you have a large balance on one card and the other accounts carry zero balances, transfer some of your debt from that card to the unused cards to improve your credit score.

Doing this can help your score because it is better to have small balances on a few cards than one big balance on a single card. To have a good credit score, you should only use a portion of the available credit limit on each credit card account. However, this will only work in the short run. In order to improve your score in the long term, you actually have to pay down your debt, not just move it from one card to another.

Tip 2: If your goal is to improve your credit score, prioritize and pay down the debts that are closest to the accounts’ credit limits first.

Once the closest has been paid down to below 50% of its limit, you can start paying down the second closest. Although many people argue against this approach and will advise you to pay off your highest-rate debt first because it makes a lot of financial sense, it isn’t the fastest way to improve your credit score.

Tip 3: Avoid consolidating your debts. Although many people want to transfer their balances to a single card to take advantage of a low rate, it is typically better to have small balances spread across all your accounts rather than having a large balance sitting on only one account.

Finding Money to Pay Down Your Debt

Here are a few tips on how to pay off your debt:

1)      Sell your stuff –Sell items you don’t need by organizing your own garage sale, taking them to consignment shops, or auctioning them on eBay.

2)      Trim your expenses – Eat out less often, shop using a grocery list, and find free entertaining things to do instead of going out and spending money. Tracking your spending can also give you ideas on how you can save.

3)      Boost your income – Pick up a part-time job. See if you can find extra work that will boost your income to help you pay down your debt.

Read more tips on how to pay down your debt