5 Tips to Improve Your Credit Score While Managing Debt

Aug 8, 2022 4:12:27 PM

Managing debt is tough, and often, it’s a long-term journey. The problem is that before your debt is totally paid off, you may need to apply for a mortgage, buy a car, or take out another loan. In all of these cases, having a higher credit score will improve your access to quality financial products with better interest rates.

How to improve your credit score while also managing debt? Here are five tips to help:

Pay Off Collections Debt

If a bill isn’t paid on time, such as a hospital bill or credit card bill, the company may opt to sell your debt to a collection agency. This information is reported to a credit bureau and will have a significant impact on your credit score – so if you’re looking to improve your credit score fast, it’s almost always a good idea to direct any available funds to paying off whatever money you owe to a debt collection agency. It’s the quickest way to improve your credit score, and it gets the collection agency off your back.

Consider Your Credit Utilization Ratio

Your credit utilization ratio measures the credit you have available versus the credit you are using. When your credit score is calculated, credit utilization ratio plays a big role – the lower, the better. Therefore, to improve your credit score, you’ll need to pay off debt which most heavily affects your credit utilization role. Generally, this means paying off outstanding credit card bills before focusing on other debt such as student loans or auto loans.

Talk to a Professional

Every financial situation is different, so it’s always a good idea to speak with a professional about how to improve your credit score while managing debt. They can take a look at the ins and outs of your unique financial situation to offer their expert advice on what action to take, how, and when. As a benefit of Credit Union membership, HUECU members have access to the GreenPath Financial Wellness Program, including certified financial counselors who can assist in creating a debt management plan.

Increase Your Credit Card Limit

While it might sound counter-intuitive, applying for more credit on an existing card could improve your credit score. If the credit limit increase is approved, this will lower your credit utilization ratio, because you will now be using a smaller percentage of your total credit available. However: this approach is only beneficial to your credit score if you don’t eat away at your increased credit limit with even more spending. You might opt to carry cash and leave the card at home, if you find it tough to avoid spending.

Report Rent Payments

All three credit bureaus in the United States accept rent payment information. If you can prove that payments are made regularly and on time, your credit score may increase by around 20 to 100 points. However, it’s not possible for tenants to report this – rent payment information must be shared by your landlord, via a rent-reporting service. Engaging assistance from a service can cost around $100 per year, but if raising your credit score is a significant need, the pricetag could be worth it.

Tags: Debt Management, Credit Score