Step 3 - Pay Down My Debt

5 Proven Ways To Raise Your Credit Score By Paying Down Debt

 A recent survey by the National Foundation for Credit Counseling indicated that consumers are more likely to admit their true weight than their credit score. 30 percent people said that they were embarrassed to admit their credit scores; as opposed to 12 percent for their weight. If you have a credit score of about 570, there’s no wonder you want to hide it.

However, while crash diets can be unhealthy for your health, a crash course to improve your credit score could actually be just what you need to get your finances back on track. In our The 7 Baby Steps to Fix Bad Credit, we guide you through your credit score bliss. This particular blog focuses on the third step: how you can raise your credit score. Here are some steps:

1.Pay Off Past Due Accounts

A major bulk – approximately 35 percent – comes from your payment history. This means the regularly that you pay your bills and settle your accounts on time, the better your score will be. So, you should begin by regulating your payments: all kinds of utility bills, including your mortgage payments, and student loans. It’s pretty simple. Ask your bank to manage an automatic bill payment system, so that you do not have to keep track of the payments. These bills and accounts are settled on your behalf from your bank account directly. You could also set reminders for the payment of these bills so that you can attend to it yourself.

Just remember, accounts that are 90 days late will have an especially worse impact on your score than those that are about 30 or 60 days overdue.

2.Reduce the Amount of Debt You Owe

This step is easier than you think. The only reason why you’ve been so overwhelmed with debt is because you have been accumulating this for so long. Had you developed a plan for gradual repayment, it would have been a lot simpler, and much more manageable. Lucky for you, it’s still not too late.

The very first thing you need to do us to make a list of the credit cards that are on your name. Then you should go online and check the outstanding balance on each of them, along with the interest rates that your bank is charging you. Calculate the aggregate debt. Now you need to come up with a payment plan – one that is realistic, yet challenging. Focus on the higher interest debts, first. That’s where you’re losing more money. And slowly pay off the debts on each of the accounts.

3.Set A Limit On Your Credit Card Usage

Reducing your debt and setting a limit on your debt usage pretty much go hand in hand. It’s like damage control and maintenance simultaneously. It is recommended that if you’re using multiple credit cards, that you maintain an optimal debt-to-credit ratio of 35 percent. You don’t want to be coming across as the kind of debtor who is maxing out their plastic cards each time.

4.Raise Your Credit Limit

Ask your creditor to increase your credit card limits. This needs to be done with extra care though. Because once you accomplish this, you need to be responsible with the usage of these cards. The purpose of increasing the limit is to reduce your debt-to-credit ratio. It, by no means, gives you the freedom to increase your expenses!

5.Control Your Overall Expenses

To increase your credit score means you will have to make lifestyle changes. You need to control your overall expenses. Simple things matter. If you’re been eating out too often, consider cooking at home. Create a budget sheet, and keep track of your expense accounts. These proactive measures with help you control your expenses and thus, reduce the need for debt, which is one of the major reasons for your poor credit score.

According to Money Magazine, 78% of Americans will have a major negative financial event in any given 10-year period. We at want to help you build your credit score so that you can be in a better financial position tomorrow when you want to take additional loans that will improve your lifestyle.