One of the reasons people want to pay off their debt is to improve credit score. There are many ways to do this. Though you will not automatically increase your credit score by paying of debt, by doing so, you may be able to receive lower interest rates and other benefits. If you have made late payments in the past, those will remain on your credit reports even after you have paid them off. So, they may continue to affect your score for a while longer.

When the credit bureaus calculate your scores, a longer credit history can be a benefit. Once you pay a loan in full and the account is closed, your history will be shortened, and this may cause your scores to go down. However, as you pay off your debt, you ultimately use less of your available credit, and your debt to income ratio improves, which ultimately increases your scores.

Since credit score is impacted by so many things, the best way to stay on top of it is to contact a credit counselor for assistance. Her are some other ways you can work to improve your credit score:

Ways that You Can Improve Credit Score

You have many ways that you can pay off debt, and some are more well-known than others:

The Debt Avalanche

With the debt avalanche method, you will:

  • Make a list of all of your debts with the one with the highest interest rate listed first.
  • Every month, you will continue to make your monthly minimum payments.
  • Any extra money that you have after you have done this will go toward your debt with the highest interest rate.
  • Continue to do this until the debt with the highest interest rate has been paid in full.

Because this method attacks debts with the highest interest rates first, you will end up paying less in interest over the long term. However, it can be difficult to stick with this method because it can take a long time to pay your highest debts in full.

The Debt Snowball

With the debt snowball, you will:

  • Make a list of your balances with the lowest balance listed first.
  • Like with the avalanche, you will make all of your minimum payments and add more money to your smallest debt until it has been paid in full.
  • Then, you can concentrate on the next smallest debt.
  • The snowball will eventually grow large enough to make larger payments on your largest debts.

Because you can see results early with this method, it will be easier for you to remain motivated to continue with it.

The Snowflake Method

The snowflake method is something that you can do with the debt avalanche or the debt snowball. With this method, you will:

  • Use any extra money that you receive throughout the month to pay your debts. For example, you may receive a $25 rebate, but instead of spending that money, you will immediately apply it to your debt.
  • Do this every time you get any extra money, and you will see that your balances are going down.

For this method to work, you must put the money in your accounts immediately. If you were to save the money and deposit it at the end of the month, you might decide to do something else with it.

The Present Situation

The strategies above will help you pay the debts that you already have, but you also have to concern yourself with the present. The best method for increasing your credit score is paying all of your bills on time.

Late payments count for 35 percent of your score. If you pay everything on time, this portion of your score will be high. You can make sure that you never miss a due date by setting up automatic payments.

Will Checking Your Credit Report Too Frequently Hurt Your Credit Score?

Hard checks on your credit reports also affect your reports negatively. Sometimes, people apply for several credit cards so that they can increase their amount of available credit. If you do this all at one time, your score will suffer because hard checks remain on your reports for 365 days. You shouldn’t have more than two hard checks on your reports in one year.

How Does Available Credit Affect Credit Score?

Another thing to pay attention to is the amount of credit that you are using at a given time. It is best to keep your credit utilization below 30 percent. For example, if you have a $10,000 credit limit, you should never spend more than $3,000.

If you have cards with low credit limits, it is easier to max these cards out before you max out your cards with higher limits. When creditors see that you have maxed out credit cards, they are unlikely to approve you for loans or other credit. To increase your credit score, pay off your credit accounts that have the lowest limits first.

Maintaining Your Credit Score

Once you have paid off all of our debts and increased your credit scores, you will want to make sure that they remain high. The first thing you must do is learn about personal finances. The best way to do this is to work with a reliable and trustworthy counselor. If you are ready to take control of your finances, pay down your debt, and improve your credit score, contact us today.


Christian Debt Counselors (888) 906-3328
200 W. Palmetto Park Road Suite 200 Boca Raton FL 33432