Tackling debt while trying to boost your credit score can feel like juggling two big tasks at once. You’re not only focused on reducing those credit card balances or loan amounts, but you’re also trying to raise that all-important number that affects everything from your ability to rent an apartment to qualifying for a mortgage. The good news is, these two goals often go hand in hand. Paying off debt can actually help improve your credit score — if you go about it the right way. So, let’s dig into how you can boost your credit score while paying off debt without feeling overwhelmed.
1. Understand What Impacts Your Credit Score
Before jumping into the action steps, it’s essential to understand the main factors that influence your credit score. Your FICO score, which is the most commonly used credit score in the U.S., is determined by these five categories:
- Payment history (35%) – Your record of paying bills on time.
- Credit utilization (30%) – How much of your available credit you’re using.
- Length of credit history (15%) – How long your accounts have been open.
- New credit (10%) – How often you apply for new credit.
- Credit mix (10%) – A variety of credit types (like credit cards, loans, mortgages, etc.).
Focusing on the big two—payment history and credit utilization—will have the greatest impact on your score while you’re reducing debt.
2. Make Payments On Time, Every Time
This one is a no-brainer, but it’s the biggest piece of the puzzle. Your payment history makes up the largest chunk of your credit score. Late payments can tank your score, and staying current is key to improving it.
If you’re in a tight spot financially and feel like you might miss a payment, there are ways to avoid trouble. Set up automatic payments for at least the minimum amount due or create reminders on your phone for upcoming payments. Missing just one payment can drop your score by 100 points or more, so it’s crucial to make on-time payments every single month.
If you’ve already missed a few payments, all hope is not lost. As you get back on track and build a streak of on-time payments, your score will start to climb again. The further those missed payments get in your rearview mirror, the less they’ll hurt your score.
3. Focus on Reducing Credit Utilization
While paying off debt, your credit utilization ratio is the next most important factor to focus on. This ratio measures how much of your total available credit you’re using. The ideal number to aim for is under 30%, but lower is even better.
Let’s say you have a credit card with a $10,000 limit and a $6,000 balance. That means your utilization rate is 60%, which is considered high. The goal would be to get that balance under $3,000 so you’re below the 30% threshold.
Here’s a smart strategy: Pay down balances on cards with the highest utilization first. Start with the card where you’re using the most credit in relation to the limit. This will give your credit score the biggest boost because reducing your utilization shows lenders that you’re managing credit responsibly.
Alternatively, some people prefer the “debt snowball” method, where they pay off the smallest balances first. This can provide some quick wins, which may keep you motivated. Either method works — the key is to be consistent with payments and watch your utilization drop.
4. Don’t Close Old Credit Accounts
When you finally pay off a credit card, it’s tempting to close the account to avoid temptation. But here’s why that might hurt your credit score: closing accounts can lower your total available credit, which will raise your utilization ratio.
For example, if you have two credit cards, one with a $10,000 limit and another with a $5,000 limit, that gives you a total of $15,000 in available credit. If you pay off and close the $5,000 card, your total available credit drops to $10,000. This automatically increases your utilization ratio if your balances don’t also drop.
Additionally, keeping old accounts open adds to your length of credit history, which is another factor that contributes to your credit score. The longer your accounts have been open, the better it reflects on your ability to manage credit responsibly over time.
5. Pay More Than the Minimum
It can be tempting to just make minimum payments on your debt, especially when you’re trying to juggle other bills. But only paying the minimum will stretch out your debt for years and keep your credit score lower than it could be. To get the most improvement in your credit score while paying off debt, it’s important to pay down balances quickly.
Paying more than the minimum reduces both the total interest you’ll pay and your outstanding balance, which helps lower your utilization ratio faster. Even if you can only afford an extra $20 or $50 a month, it will make a difference in both your debt and your credit score over time.
6. Consolidate Debt for Simplicity (But Be Cautious)
If you have multiple credit card balances and feel overwhelmed, consolidating your debt might be a good option. Debt consolidation allows you to combine your credit card balances into one loan with a single monthly payment. Sometimes, these loans come with a lower interest rate, which can save you money and help you pay off debt faster.
However, before you jump into this, make sure it’s the right move. Sometimes consolidating debt can result in a hard inquiry on your credit report, which temporarily drops your score. Plus, you want to avoid the temptation to rack up new credit card debt once those balances are zeroed out.
If you decide to consolidate, look for a personal loan with favorable terms, or consider a balance transfer credit card that offers 0% interest for an introductory period. This can help you pay down your debt more quickly without accumulating additional interest.
7. Avoid Applying for New Credit Too Often
While you’re focused on paying off debt and improving your credit score, avoid the urge to apply for new credit unless it’s absolutely necessary. Each time you apply for credit, a hard inquiry is added to your report, which can temporarily lower your score.
Hard inquiries only affect your score for about a year, but they stay on your credit report for two years. Lenders see multiple inquiries as a sign of financial distress, which can make you look like a riskier borrower.
If you’re trying to improve your credit score for a specific goal, like qualifying for a mortgage or car loan, try to avoid applying for new credit cards or loans for at least six months before applying for your big purchase. This will give your credit score the best chance to rise.
8. Use Credit-Building Tools
If your credit score is in rough shape and you’re having trouble boosting it, there are specific tools designed to help people build credit. One popular option is a secured credit card. With a secured card, you make a security deposit upfront, which acts as your credit limit. This helps you establish or rebuild credit while keeping your risk low.
Another option is to become an authorized user on someone else’s credit card. If you have a family member with good credit who is willing to add you to their account, their positive payment history can help boost your score. You don’t even need to use the card—they just need to keep paying their bill on time.
Some companies offer credit builder loans, which are designed to help people improve their credit. With these loans, the lender holds the loan amount in a savings account while you make payments. Once the loan is paid off, you receive the money, and your positive payment history is reported to the credit bureaus.
9. Check Your Credit Report Regularly
If you’re working on improving your credit score, it’s important to keep an eye on your progress by regularly checking your credit report. Errors on your report, like incorrect late payments or accounts that don’t belong to you, can drag your score down. Luckily, under federal law, you’re entitled to a free credit report once a year from each of the three major credit bureaus: Experian, Equifax, and TransUnion.
Look through your report carefully for any mistakes, and if you find any, be sure to dispute them with the credit bureau. Even small errors can have a significant impact on your score.
By checking your report regularly, you’ll also be able to spot signs of identity theft or fraud early, which can help prevent any long-term damage to your credit.
10. Be Patient and Persistent
Improving your credit score while paying off debt doesn’t happen overnight. It takes time, consistency, and discipline. But if you stick with these strategies — making payments on time, lowering your credit utilization, avoiding new credit, and monitoring your progress — your score will improve. And as you continue to pay down your debt, you’ll find yourself in a stronger financial position overall.
So, take a deep breath, create a plan, and start making small, smart choices that add up over time. Boosting your credit score while paying off debt is possible, and it’s one of the best ways to set yourself up for long-term financial success.