Reduce Your Debt and Repair Your Credit

Not surprisingly, one of the easiest ways to repair your credit is to pay off your debt. Of course, credit is obtained by most of us because we can’t afford to pay the full balance of a purchase at the time the purchase is made. Thus, credit was invented. However, there are still ways to improve your credit score while keeping credit balances above zero. Repairing your credit by reducing your total debt to credit ratio will make a great difference in your FICO score.

Your debt to credit ratio makes up 30% of your entire FICO score, and is second only to whether you make your minimum payment on time each month. This is an important detail to remember. There is no magic ratio to aim for; however, just remember that lower will always be bette

r. Consolidation loans are one way you can decrease your debt. If you move $5,000 worth of debt into a new loan with a limit of $10,000, you’ve increased your total credit available by $10,000. Be careful with this tactic, however, as it can be very tempting to go ahead and start charging on your zero-balance accounts. You’ll then be in even more debt, and your debt to credit ratio will increase.

The surest way to decrease your ratio is to pay more than the minimum on your accounts each month. Aim for double the amount of the interest charged, and you’ll see your balance drop. At the same time, make a resolution to curtail charging and only use cash for purchases until you’ve reached a ratio you’re happy with, say 25%. This means if you have $10,000 of credit available to you, monitor your charges so that your total balances never reach more than $2,500. Reducing your debt this way is an easy way to repair your credit and improve your FICO sco

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