A few years ago, I found myself in a tough financial spot. My debt was piling up, and despite my best efforts, my credit score just wouldn’t budge. Every month, I felt like I was only treading water—barely making payments and wondering how I’d ever get ahead. I knew improving my credit score was essential, but I had no idea where to start.
It wasn’t until I took a hard look at my finances, set clear goals, and followed a few practical steps that things finally started to turn around. And trust me, if I can improve my credit score while paying off debt, so can you. In this post, I’ll walk you through the 10 best steps on how to improve your credit score while paying off debt, so you can break free from that financial rut and start building a stronger future.
1. Create a Budget and Stick to It
The first step I took was creating a solid budget. Like most people, I had a general idea of where my money was going each month, but I wasn’t paying attention to the small details. I decided to write down every single expense, no matter how small. I realized I was spending way more than I thought on dining out and online subscriptions.
After seeing the numbers laid out, I created a realistic budget that prioritized my debt payments. I set aside specific amounts for necessities—rent, groceries, utilities—and allocated a fixed amount toward my debt repayment. But the game-changer was sticking to the budget, which required discipline. I used budgeting apps to track my expenses, and every time I was tempted to overspend, I’d remind myself of my goal to improve my credit score.
This step taught me financial literacy and helped me manage my income better. Not only did it ensure I was paying my bills on time, but it also freed up money to throw more at my debt, which, in turn, positively impacted my credit score.
Eliminating Dining Out to Free Up $300 for Debt Repayment
I noticed that I was spending an average of $400 per month eating out with friends, coworkers, and family. After creating a budget using a spreadsheet, I identified this as an area where I could cut back. I challenged myself to cook all my meals at home for one month and used the savings to pay off an extra $300 toward my highest-interest credit card debt. This helped me make faster progress in paying down my balance while staying within my budget.
2. Manage Your Payment History
After setting up a budget, I knew I had to focus on paying all my bills on time—this was non-negotiable. Since payment history makes up 35% of your credit score, it’s one of the most important factors. I had a couple of late payments on my credit history, which were dragging my score down.
To fix this, I set up automatic payments for all my bills—credit cards, utilities, even my rent. This was a lifesaver because it eliminated the risk of missing a due date. Additionally, I made it a point to pay more than the minimum on my credit card balances each month. Even if it was just an extra $50, it made a difference.
Over time, consistently paying on time boosted my score. I also reached out to my creditors and requested that they remove any past late payments from my credit report. It doesn’t always work, but in my case, a few creditors were willing to make adjustments. That little effort paid off when I saw my credit score slowly rise.
Setting Calendar Alerts to Avoid Missing Payments
I had a habit of paying my credit card bills late, which caused multiple late fees and negatively impacted my credit score. To fix this, I set up recurring calendar alerts on my phone for the due dates of all my bills. Whenever I got an alert, I immediately logged into my banking app and made the payment. This simple system eliminated late payments, and after six months of on-time payments, my credit score improved by 50 points.
3. Lower Your Credit Utilization Ratio
One of the biggest eye-openers for me was understanding the impact of my credit utilization ratio. I was using more than 50% of my available credit, which I later found out was hurting my score. The sweet spot for your utilization is under 30%, so I had some serious work to do.
I started by paying down my credit card balances strategically. I used the Debt Snowball method, paying off the smallest balances first while making minimum payments on the larger ones. Each time I paid off a card, it reduced my overall credit utilization and gave my score a boost.
I also called my credit card companies and asked for a credit limit increase. This was a simple step that immediately improved my utilization ratio because my available credit increased while my balances stayed the same. It’s important not to use this extra credit but to keep your balances low.
Within a few months, my credit utilization dropped below 30%, and my score improved significantly.
Paying Down My Balance to Reduce Utilization to 20%
I had a credit card with a $6,000 limit, and I was carrying a $3,500 balance, which put my utilization at nearly 60%. I knew I had to get it below 30% to see a credit score improvement. I committed to putting any bonuses, tax refunds, or extra income toward this balance. When I received a $1,500 tax refund, I immediately paid down the credit card, reducing the balance to $2,000. This lowered my credit utilization ratio to about 20%, and my credit score increased within two months.
4. Choose a Debt Repayment Strategy
When I first started paying off my debt, it felt overwhelming. I had several credit cards, a personal loan, and some medical debt. After doing some research, I found two popular debt repayment strategies: the Debt Snowball and the Debt Avalanche methods.
I chose the Debt Snowball method because I needed those small wins to keep myself motivated. I started by paying off the card with the smallest balance first while making the minimum payments on everything else. Once that card was paid off, I moved to the next one. Seeing those zero balances gave me the encouragement I needed to keep going.
The key to sticking with a debt repayment strategy is discipline. I stopped using my credit cards entirely and focused on the bigger picture—becoming debt-free while improving my credit score. This approach not only helped me reduce my overall debt but also contributed to boosting my credit score as my balances started shrinking.
Using the Avalanche Method to Save on Interest
I had three debts: a $2,000 credit card with a 25% interest rate, a $4,000 student loan at 5%, and a $1,200 personal loan at 12%. Rather than pay extra on all of them, I decided to use the avalanche method, where you focus on paying off the highest-interest debt first. I increased my payments on the $2,000 credit card and kept paying the minimum on the other two. This saved me more in interest over time and helped me eliminate the most expensive debt faster. Once that was gone, I rolled the extra payments into my next highest interest loan. The Best Ways to Pay Off Debt
5. Avoid Applying for New Credit Accounts
I used to think opening a new credit card or applying for a personal loan would help me manage my debt better, but I quickly realized that applying for new credit while paying off old debt is counterproductive. Each time you apply for credit, a hard inquiry is added to your credit report, which can temporarily lower your score.
So, I made a rule: no more new credit applications. I focused solely on paying down my existing debt. This was hard at times, especially when I wanted a safety net, but I realized that adding more credit would only delay my progress.
Not opening new accounts also forced me to live within my means. It took time, but resisting the temptation to apply for new credit played a significant role in improving my score over time.
Skipping the Store Credit Card Despite the Tempting Discount
During a trip to a major retail store, I was offered a store credit card that came with a 15% discount on my total purchase. At the time, I was buying furniture worth $1,000, so the discount would have saved me $150. However, I knew that adding another credit card would lower my average account age and increase my temptation to spend more, which could hurt my credit score in the long run. I declined the offer, paid in cash, and kept my focus on improving my credit score rather than adding more debt. Credit score basics
6. Consider Debt Consolidation Methods
At one point, I felt like I was juggling too many payments—credit cards, loans, and other bills. That’s when I started looking into debt consolidation methods. I found that consolidating my high-interest credit card debt into a personal loan with a lower interest rate could simplify my payments and save me money in the long run.
I decided to go for it. I applied for a debt consolidation loan, which combined all my credit card balances into one monthly payment. Not only did this make it easier to manage my payments, but it also reduced my overall interest costs.
The best part? My credit score started to improve because I was able to make consistent payments on the loan, and my credit utilization ratio improved as my credit card balances dropped to zero. Consolidation isn’t for everyone, but for me, it was a game-changer.
Using a Personal Loan to Consolidate Two High-Interest Credit Cards
I had two credit cards with balances totaling $5,000—one with a 22% interest rate and the other with 19%. The high interest rates were making it difficult to pay off the debt, so I applied for a personal loan with an 8% interest rate and used it to pay off both cards. This allowed me to combine the two payments into one, reduce my overall interest charges, and have a clearer path to paying off the loan over time. Within six months, I had already saved hundreds of dollars in interest, and my credit score saw a steady increase.
7. Monitor Your Credit Report Regularly
I used to avoid checking my credit report because I was afraid of what I might find. But once I got serious about improving my credit score, I made it a habit to monitor my credit report regularly.
I signed up for a free service that provided monthly updates on my credit score and alerted me to any changes. When I reviewed my report, I found a couple of errors—one was an old account that had been closed years ago but was still showing up as active, and another was a late payment that wasn’t mine. I immediately disputed these errors with the credit bureaus, and after a few weeks, they were removed.
Keeping an eye on your credit report is important because it helps you catch any mistakes or signs of identity theft early. In my case, correcting those errors gave my credit score a quick boost.
Discovering an Incorrect Late Payment and Getting It Removed
I made it a habit to check my credit report every few months. During one of these reviews, I noticed a late payment on a credit card that I had already closed months ago. I knew I had paid it off in full before closing it, so I immediately contacted the credit bureau and filed a dispute. I provided bank statements that proved I made the payment on time, and within 30 days, the credit bureau removed the negative mark. This correction led to a 40-point increase in my credit score.
8. Negotiate with Creditors
There were months when my budget was tight, and I knew I couldn’t make a full payment on some of my accounts. Rather than letting it slip and damaging my credit further, I decided to pick up the phone and talk to my creditors.
I was nervous at first, but most creditors were surprisingly understanding. I explained my financial situation and negotiated lower monthly payments, waived late fees, and even reduced interest rates in some cases. Some offered hardship plans that allowed me to stay current without taking a hit to my credit score.
Negotiating with creditors can be intimidating, but it’s worth the effort. It helped me stay on top of my payments during tough times, and it prevented further damage to my credit.
Successfully Negotiating a Lower Interest Rate on My Credit Card
One of my credit cards had a 26% interest rate, which was making it hard to make any progress on the balance. After reading about interest rate negotiations, I called the card issuer and explained that I had been a loyal customer for five years and had always made my minimum payments on time. I asked them if they could lower my interest rate. After some negotiation, they agreed to reduce it to 15%, which significantly lowered my monthly interest charges and helped me pay off the card faster.
9. Use Credit Responsibly Going Forward
Once I started making progress, I knew I had to be careful about how I used credit moving forward. I made it a rule to only charge what I could afford to pay off at the end of the month. This kept my credit utilization ratio low and ensured I never missed a payment.
I also kept my older accounts open, even if I wasn’t using them, because closing them would have reduced my available credit, which could have hurt my score. Over time, using credit responsibly became a habit, and it reflected positively in my credit score.
Limiting Credit Card Use to Only Groceries
After paying down a significant amount of my debt, I decided to set strict rules for how I would use my credit cards in the future. I committed to only using my credit card for groceries, which I knew was a regular and manageable expense. Each month, I paid off the balance in full to avoid carrying any debt. By keeping my usage low and paying off the balance on time, my credit score continued to improve steadily without risking more debt.
10. Optimize Your Credit Mix
Finally, I looked at my credit mix, which accounts for about 10% of your credit score. I had a few revolving accounts (credit cards), but no installment loans other than my consolidation loan. Since having a diverse mix of credit types can boost your score, I considered options like an auto loan or a secured credit card.
Instead of taking on more debt, I opted for a small personal loan to boost my credit mix. I made sure it was something I could easily pay off over time without overextending myself financially. This added diversity to my credit profile and helped improve my score slightly over the following months.
Taking Out a Small Auto Loan to Diversify My Credit Profile
For years, I had only revolving credit accounts (credit cards), which limited my credit mix. When it came time to purchase a used car, instead of paying in cash, I opted to finance part of the purchase with a small $5,000 auto loan. I knew that adding an installment loan to my credit profile could help improve my credit score. I made sure the loan was affordable and committed to paying it off within two years. This added diversity to my credit mix and contributed to a noticeable increase in my score within the first year.
Final Thoughts
Improving your credit score while paying off debt is not just a goal; it’s an essential step toward achieving financial stability and freedom. Throughout my journey, I learned that each step contributes to a larger picture of financial health. By creating a solid budget, managing your payment history, and being strategic about your debt repayment, you can set yourself on a path toward success.
Remember, the key factors in your credit score—payment history, credit utilization, and credit mix—require ongoing attention and management. Regularly monitoring your credit report allows you to catch any discrepancies early, while negotiating with creditors can help you secure better terms that make debt repayment more manageable.
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