Having a lot of debt is a huge blow to your credit score. You can often raise your credit score by paying down debt, but it requires time and dedication. These three tips can help you get started.
1. Consolidate Debt
If you have a lot of credit cards, you probably pay a significant amount of interest each month. The more interest you pay, the less money you have to pay down the principal amount on your card. It may be helpful to consolidate debt by using a balance transfer. This practice involves transferring the balances on all of your credit cards to one line of credit so that you are only responsible for making a single monthly payment. This often lowers the amount of interest you pay each month.
2. Make Budget Changes
If you want to get out of debt quickly, you must pay more than the minimum payment each month. This means that you must make significant changes in your spending habits. If you are barely able to make ends meet when you make minimum credit card payments, you must look for ways to cut costs. Shop sales at grocery stores for food, and look for clothes at thrift stores. Shop around to see if you qualify for better rates on your car insurance or cable bill. Making a bunch of small changes can have a significant impact on your budget so you have more money left each month to pay on debt.
3. Break Debt Into Manageable Chunks
If you have a lot of debt, you may think that you will never get out of it. The challenge can seem daunting, but it doesn’t have to be. Focus on paying off one credit card at a time. Choose the credit line with the lowest balance to pay off first. When you have paid that card down, you can add that minimum payment to the one for your next card. This is an easy way to increase the amount you pay on credit cards each month.
Paying down debt should be your top priority if you want to raise your credit score. It may seem like an insurmountable challenge if you have a lot of debt, but you are goal can be accomplished with a lot of dedication and sacrifice. Use these three tips to get started on taking control of your finances and enriching your future with a better credit score.