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How to Rebuild Your Credit Score While Paying Off Debt

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A low credit score can make it difficult to secure loans, rent an apartment, or even get better interest rates. If you’re in debt, improving your credit score may seem like an uphill battle. However, with the right approach, you can rebuild your credit while paying off debt. Here’s how.

Understand Your Credit Report

    The first step in improving your credit score is knowing where you stand. Request a free credit report from agencies like Experian, Equifax, or TransUnion. Check for errors, outdated information, or fraudulent activity, and dispute any inaccuracies to prevent them from dragging down your score.

    Make On-Time Payments a Priority

      Your payment history accounts for 35% of your credit score, making timely payments essential. Set up automatic payments or reminders to ensure you never miss a due date. Even paying the minimum amount on time can positively impact your score.

      Reduce Your Credit Utilization Ratio

        Credit utilization—how much credit you use compared to your total limit—affects 30% of your credit score. Aim to keep your credit utilization below 30%. For example, if your credit card limit is $5,000, try to keep the balance below $1,500. Paying off debt helps improve this ratio over time.

        Pay Off High-Interest Debt First

          The avalanche method (paying off high-interest debt first) saves you money on interest, helping you clear debt faster. Alternatively, the snowball method (starting with the smallest balances) can give you psychological wins, keeping you motivated. Either way, paying off balances improves your credit health.

          Avoid Closing Old Credit Accounts

            Length of credit history makes up 15% of your credit score. Even if you’ve paid off a credit card, keeping the account open can maintain your credit history and help with your utilization ratio. Just ensure you aren’t paying unnecessary fees for unused accounts.

            Consider a Secured Credit Card or Credit Builder Loan

              If your credit score is too low for traditional credit, a secured credit card (which requires a deposit) or a credit builder loan can help establish positive payment history. These tools are designed to rebuild credit responsibly.

              Diversify Your Credit Mix

                Having a mix of credit types—such as credit cards, installment loans, and retail accounts—can improve your score. If you only have one type of credit, consider responsibly adding another to show lenders you can handle different types of debt.

                Be Patient and Consistent

                  Credit improvement doesn’t happen overnight. Stay consistent with payments, reduce debt over time, and make smart financial choices. Gradual, steady progress will lead to a stronger financial future.

                  Final Thoughts

                  Rebuilding your credit while paying off debt is possible with discipline and strategic planning. By making on-time payments, keeping balances low, and using credit responsibly, you’ll see your credit score rise over time.

                  Also read: Mitigating Financial Risks: A Comprehensive Guide for Investors

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