How to Pay Off Debt and Improve Your Credit Score Faster

Your credit score impacts your ability to obtain a loan —but that’s not nearly all it affects. If you’re looking to start a business with a loan, get a job, or rent a home, be prepared for your credit history to be examined. Here’s where the importance of paying off debt comes in.

Paying down your debt is directly correlated with improving your score because it tells lenders that not only are you responsible with credit, but that you have less financial overhead.

Below you’ll see that credit scores —and average credit-card debt plus student-loan debt— rise in proportion to increases in age. The graph below shows average scores and how debt correlates to them.

Average credit score and debt by age range

Age RangeAverage Credit ScoreAverage Credit Card DebtAverage Student Loan DebtAverage Mortgage Deb
18 - 20635$1,750$12,425$15,650
21 - 34638$2,500$35,000$75,000
35 - 49658$3,100$21,500$93,700
50 - 69703$2,100$9,500$125,000
Source: We surveyed 2,500 people in the United States on 9/2/2018.

As you can see from the chart above, different types of debt peak at different stages in life. Average student loan debt is highest for those just out of college and entering the workforce. Credit card debt is highest for those between the ages of 35-49. Mortgage debt peaks for those 50-69, at a stage where they may be having just bought a smaller home after the children become adults, or buying a retirement property. Different stages of life bring about different needs.


Debt correlates to your credit score in the sense that credit utilization accounts for approximately 30 percent of it. Credit utilization is the amount of debt you are carrying compared to the amount of credit you have.

For example, if you’re carrying a credit card with a $1000 limit and you have $300 in charges on that card, you’ve used 30 percent of that credit. While those with the highest credit scores have credit utilization below 10%, it is best to keep credit utilization under 30%.

Comparing Different Credit Score Formulas (Credit Bureaus)

Credit Factors, Credit Score WeightExperianTransUnionEquifax
Payment History35%40%35%
Credit Utilization30%20%30%
Credit Age15%21%15%
Different Types of Credit10%11%10%
Number of Inquiries10%5%10%

Source: Data found October 10, 2018.,

There are three credit bureaus that all have slightly different methods in creating credit score. FICO, the long standing creator of credit scores uses the following breakdown. While the others are slightly different, they all take into account similar factors, just with varying weights. It is important to understand what each factor means and how they interconnect to help you achieve your goal of an improved credit score.

FICO scoring model calculation (weight) factors

Credit FactorsCredit Score Weight
Payment History35%
Credit Utilization30%
Credit Age15%
Different Types of Credit10%
Number of Inquiries10%

Make Payments on time, every month

Creditors report your activity to credit bureaus, which means that if you make a late payment, that will appear on your credit report. While it doesn’t seem like one late payment would make that much of a difference, it can, and does.

Late Payment Delay & Credit Score Drop

Late Payment (Days)Average Credit Score Drop (TransUnion)Average Credit Score Recovery (TransUnion) in 6 Months
30 Days25 Points85 Points
60 Days45 Points65 Points
90 Days65 Points40 Points
150 Days100 Points35 Points
Charge Off150 Points20 Points
Source: We tracked a group of 500 members targeting those who have missed payments on their loans for different amounts of time and how much their credit score dropped during those time frames.

As you can see from the chart above, being late just 30 days can result in a 25 point drop to your credit score. The longer you are late, the lower your credit score will drop. All is not lost however, because once you get back on a good schedule of making payments, your credit score can rebound, sometimes more than the initial drop.

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Why is Paying Off Your Debt and Improving Your Credit Score Important?

Paying off debt is crucial. If you’re looking to jump-start your financial security while at the same time having more money for things you enjoy, then getting your debt down is essential. Debt reduction doesn’t simply improve your credit score — it can improves your quality of life by reducing the amount of stress and paperwork you have to deal with on a regular basis.

As you’ll see from the graph below, improving your credit utilization is a great way to get your credit score heading in the right direction

Credit score improvement by lower credit utilization

Credit RankingLow Credit Utilization 10%<Moderate Credit Utilization 30%<High Credit Utilization 31%<
Excellent (800+)+1%+1%-7%
Very Good (750+)+1.8%+2.5%-6.5%
Good (700+)+3%+3.25%-5%
Fair (650+)+4.5%+6%-4.25%
Poor (600+)+4.5%+7%-2.5%
Bad (550<)+10%+12%-2%
Source: Credit Sesame surveyed 600 Americans on how credit utilization impacts their credit scores. Groups were divided by Credit Rank (Bad, Poor, Fair, Good, Very Good, and Excellent) and then subdivided by Low Credit Utilization, Moderate Credit Utilization, and High Credit Utilization. The study took place October 2015 until November of 2016.

Keep reading as we offer a variety of strategies to not only pay off your debt, but to do it faster and more efficiently. In addition, we’ll look at some data on how these strategies have worked for others.

Ways to Pay Off Your Debt and Improve Your Credit Score Faster

So you understand the factors that go into your credit score, and then benefits of paying off your debt and improving your score… but how do you actually do it? And, as importantly, how do you do it in the least amount of time possible?

In order to pay off your debt and improve your credit score, consider taking the following steps:

1. Make multiple payments each month
Believe it or not, even just splitting up the minimum payment into two separate payments throughout the course of the month can help pay off your debt faster. By splitting the minimum payment, thus ensuring you have paid the entire minimum due by the due date, you will actually be paying less interest over time.

This strategy is especially helpful for debt with compound interest, since payments are applied to the interest first — in other words, the more interest and balance you pay off with a partial payment, the less interest you will end up paying over the course of the month.

2. Ensure that your extra payments are being applied to the principle first
The minimum payment is required to first cover the interest, but you may specify that any additional payment you make be made to the principle first. This strategy makes sense because the lower the principle, the lower the interest that accrues — adding up to significant savings in the long run. Be sure to check with your financial institution for their specific requirements — some lenders will allow you to do this online, others require you to call in and verbally ask that your payment be applied to the principle.

3. Consider refinancing or consolidating
Consolidating or refinancing your debt is another strategy for lowering the amount of interest that you are paying. The less interest you have to pay, the more you can pay off the principle — making the same monthly payment stretch even further. This will allow you to pay off your debt faster, and also see an improvement in your credit score.

These real-life stories can help you understand your own situation and how to better manage it as time goes on.

Name: Jenny A.
Member Since: 2017

1. Explain what kind of debt you had.

  • My husband and I took out a loan and used our credit cards to pay for our daughter’s college education, and to make some upgrades to our home – we redid the downstairs bathroom and kitchen. I know this probably isn’t the smartest way to use credit cards, but we didn’t have anything saved. My daughter also applied for some student loans and managed to get a few grants, but those did not cover the cost of tuition, which was close to $45K a year. In total we were probably in debt $120K, with half of that being credit card debt.

2. How much of your debt did you pay off and how did you do it?

  • We first created a plan for how we would cut spending, increase income and even had our daughter get a part-time job in school and full-time in the summer to help pay for school. Well, I’m happy to say that it worked. We’re not completely out of the woods yet, but we paid off almost half. We stuck to a budget and dumped all of our extra side income into the debt, pouring in over $2K a month, sometimes more, to pay it down as fast as possible. We used the debt snowball method so smaller balance cards first to highest.

3.What did you notice about your credit, after your debt went down?

  • We noticed that our score went up a few points each month, as the total amount of debt went down, which was great. We wanted to increase it even higher, so we made sure to pay down all of the cards on time and never missed a single payment. After we paid off a few of the cards, I wanted to close them for good, but my husband said not to because it can affect your credit score so we kept them open, but they are in a drawer now.

Name: Peter H.
Member Since 2018

1. Explain what kind of debt you had.

  • I have a lot of credit card debt. I got a divorce and my ex-husband was irresponsible with credit. We had shared bills, including credit cards, that he didn’t pay on time after we separated. He also maxed out a few of the cards and just stopped paying them all together. We had three credit cards and the total debt was $9K.

2. How much of your debt did you pay off and how did you do it?

  • I created a budget and cut spending way back. I tried using the envelope system to increase the amount of money I was putting into credit cards each month. I used cash for almost everything. After six months, I was able to get my debt to a reasonable amount, and as a result, my credit got better because I was able to lower my debt. I paid off two credit cards and I only have one left. I realized I can’t count on my ex to help with this, so I created a plan and stuck to it.

3. What did you notice about your credit, after your debt went down?

  • When your debt is lower, your score improves. I noticed a jump of about 15 to 20 points over the last six months. I’d like to get it to at least 720. I’m paying all my bills on time, and also asked my landlord at my new apartment to report my on-time rent payments to the credit bureaus.

Other Ideas to Improve Your Credit Score Faster

While paying off your debt, or at least paying the debt way down, will always be the best strategy for improving your credit score, there are other tactics you can try that should also lead to an increase in your credit score:

– Ask for an increase in your credit limit
While asking for an increase in your credit limit doesn’t reduce the amount of debt you have, it does make your credit utilization look more attractive. You should aim to be using 30% or less of your total available credit at any given time.

– Always make your payment on time
By most accounts, your payment history is almost always the biggest factor in calculating your credit score. Even if you’ve missed some payments in the past, making all of you payments on time moving forward can help you see an increase in your credit score in as little as 2 months.
-Become an authorized user
-Check your credit score for inaccuracies

Average improvement over time for various credit improving methods

Credit Starting Point30 Days60 Days90 Days120 Days
Removing a collections account7%9.2%13.5%18%
Improving Debt Ratio7%8.6%10.2%12.8%
Increasing Credit Limit3%4.2%5.5%7.8%
Becoming an Authorized User3.5%4.1%5.2%7.1%
Source: Survey of 2000 members and non-members 5/5/2018.

Benefits of Learning How to Pay Off Debt and Improve Your Credit Score

The benefits of improving your credit score are seemingly endless — not only can it save you money on nearly every purchase, it can also help you enjoy lower insurance premiums, buy a new car, rent a great apartment, land your dream job, and more.

Interest Rate Ranges for Different Credit Score Ranks

Type of LoanPoor CreditFair CreditGood CreditVery Good CreditExceptional
30 Year Fixed Mortgage Interest Rate6.352%5.588%5.158%4.767%4.545%
Car Loan Interest Rate15.24%14.06%7.02%4.95%3.60%
Credit Card Interest Rate24.9%17.6%14.9%12.2%13.9%
Source: Credit Sesame asked 400 members about their interest rates during a three week period beginning in January 18, 2018.

As the saying goes, “knowledge is power” — and this applies to your credit health, as well. By understanding the best ways to pay off your debt and getting a game plan in place, you will be well on your way to improving your credit score and enjoying all of the benefits that come along with it.

Conclusion & Summary

Paying down your debt is a major part of gaining financial responsibility and improving your credit score. We’ve outlined a few helpful approaches, but you will need to figure out your own path to a better credit history depending on your individual situation. Don’t fret — with time, patience, and commitment, you will improve your credit score.

You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved.
Published February 2, 2017 Updated: January 23, 2019
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TESSA ELPS•  January 15, 2018 Edit
Good ibformation
Joanie Wells•  January 26, 2018 Edit
Thank you and all the tips I need your service