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How To Improve Your Credit Score Even If You Have Lots Of Debt

Updated on September 26, 2012

Your credit score is one of the most important numbers that is associated with you. Every time you want to finance a purchase, apply for a credit card or get a loan the lending agency is going to look to your credit score. That's why it is important to have a good credit score.

The problem is that so many little thing affect your credit score that it is hard to keep it constant.

If you carry lots of debt chances are you will have a lower credit score than what you would probably like. It may take some effort on your part but you can improve your credit score even with the debt.

Ideally, the amount of debt you're carrying should not exceed 30% of your debt limit. If you go over this limit then your credit score will reflect it negatively. If you find yourself over the ideal 30% then you need to consider some debt options:

  1. Pay off your debt. If you have the money then pay off the debt. There is no use paying the high interest rates that credit cards and lending agencies charge if you don't have to.
  2. Pay off your credit cards more frequently. If you tend to max out your credit card every month but pay the total off on time then that is good. However, in keeping with the 30% rule you may want to pay your card off as soon as you approach that limit.
  3. Consolidate you debt. If you find that you are paying interest on your credit card debt then consider consolidating all your credit card debt into one loan. A loan from the bank will be at a lower interest rate than what the credit card companies charge and it will free up your credit cards.
  4. Pay your bills on time. Being late with the bill payments shows up as a big red mark on your credit score. Always pay on time and in full. Not only does it save you interest and late fees but its positive for your credit rating.

These are just four ways you can improve your credit score while carrying a large amount of debt. Ultimately, you will have to deal with the bigger problem - the debt.

Analyze your spending habits and determine where the debt is coming from. If you are spending frivolously on items not necessary to your survival (ok - maybe that's a bit extreme) you might want to consider cutting back - at least until you get your debt under control. If the debt stems from having more living expenses than income then you may need to consider getting a different job (or adding one). Your monthly income must exceed you monthly expenses if you ever want to get ahead.

Debt is always lurking so stay aware. When you notice yourself slipping in that direction take steps to get out. Not only will it improve your credit score (making it easier for you to acquire more debt - hmmm) but you will sleep easier.


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    • Liz-reviews profile image

      Eunice Elizabeth 5 years ago from Vancouver, BC

      Very informative Hub. It's amazing how many people think that missing a payment here and there doesn't matter... how wrong. Well done on bringing people back to things that matter to them.

      Voted up