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3 Ways to Improve Your Credit When You Can’t Cut Your Debt

Oct. 23, 2014
Credit Score
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Paying off credit card debt is a smart move. Not only will it save you big bucks in finance charges, killing your balance should also give your FICO score a boost. Since 30% of your score is heavily influenced by your credit utilization ratio, bringing down the amount you owe will be a boon.

But paying off debt means devoting extra cash to your card every month. If you’re not in a position to do this right now, you can still take steps to improve your score. Here are a few ideas:

1. Start paying your bills on time

Paying your bills on time is the first and most important thing you should be doing to improve your credit score. Thirty-five percent of your score is determined by your track record with making your monthly payments in a timely fashion. Getting into the habit of doing so will help you make progress with boosting your score, even if your credit card debt is still kicking around.

One reason that some folks fail to pay on time is that they don’t have a good system for figuring out where the money for bills is coming from. If this sounds familiar, your first step is setting up a budget. You should know exactly how much cash you have coming in each month and how much is going out. Putting together a written earning and spending plan will help you avoid a scramble when a bill’s due date pops up.

If you have a problem paying on time because you’re forgetful, lean on technology for help. Set up calendar reminders for all your due dates, or opt in to text or email alerts from the banks and utility companies you make payments to each month.

The bottom line: Make meeting your monthly obligations on time your No. 1 priority, no matter how you have to do it.

2. Carefully review your credit reports

If you’re unhappy with the state of your credit score, it’s a good idea to review your credit reports before you start panicking about how to fix it. As it turns out, there’s a strong possibility that a credit reporting error could be the cause of a subpar score.

According to a 2013 study by the Federal Trade Commission, 20% of consumers had a mistake on at least one of their three credit reports. Since your credit reports are used to produce your credit scores, correcting these errors is essential. Otherwise, you might end up with a lower score than you deserve.

Your best course of action is to carefully review your three credit reports (you’ll get one from each major credit bureau) at least once per year by visiting If you spot a mistake on any of them, start the process for contesting it. This will include sending a written dispute to the credit bureau or bureaus reporting the error and providing documentation to support your claim.

It might be a little bit of a hassle, but you could end up with an improved credit score by following the proper protocol.

3. Stop applying for new credit, at least for now

If your credit cards are maxed out and you’re struggling with cash flow, you might be tempted to apply for a couple of new cards to fill the shortfall. But this isn’t a good idea because it could do damage to your credit score.

Here’s why: Ten percent of your credit score is determined by new credit inquires. Applying for too much credit over the span of just a few months signals that you’re in financial trouble and could cause your score to dip. This is especially dangerous if you don’t have the ability to make up for the loss of points in other ways.

To be on the safe side, hold off on applying for new credit while you’re trying to get your debt situation straightened out. At the very least, you’ll keep your score steady, but there’s also the possibility it could improve as your most recent application fades into the past. Plus, you’re avoiding the possibility of getting into even more debt with a new card.

No matter which way you slice it, pumping the brakes on new credit applications is a good idea until you get your credit card balance under control.

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