If you’re concerned about your credit score, you should be. This little number can affect your entire life. It can keep you from getting a mortgage or a car loan, and it can also bar you from getting the job of your dreams. This number can even keep your interest rates high, which can drastically affect your monthly payments and your overall interest paid on loans of any sort.
If you want to improve your credit score, the best way to do it is to pay off credit card debt. This type of debt is known on your credit report as revolving debt. Unlike a car loan that you get for a certain amount and pay off slowly over time, you can run up credit card debt time and again. It’s not predictable, which makes it more dangerous.
When you have a credit card, as you’re probably already aware, you have a credit limit. This is the most you can take out on your credit card at any one time. If your credit limit is $5,000, you can carry a balance of up to $5,000, and if you go any higher than that, you’ll either be denied a charge or you’ll have to pay major fees and such.
Your credit report is greatly affected by how much credit card debt you have. It’s not just the total amount of debt you have, though, but it’s your credit to debt ratio that affects your score. Basically, the lower this ratio is, the better. This means that if you have that $5,000 limit, you want to carry less than $2,500 in balance to have a good credit score. If you carry a balance that is close to your limit, your credit score will dramatically drop.
This is why the most effective way to quickly raise your credit score is to pay off credit card debt. You can do this by simply paying as much over the minimum payment as possible. If you simply focus your financial efforts on paying off this particular debt, you’ll eventually find that it’s not too difficult. It will take discipline. You might need to eat at home instead of eating our or cut out the premium cable channels. You’ll find, though, that you’ll be much more comfortable when your credit card debt is low and your credit score is as high as possible.