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The secret to improving your credit score in 6 months

You could greatly improve your financial outlook in half a year by paying more than the minimum balance on debts.

By Apr 24, 2014 12:11PM
This post comes from Gerri Detweiler at partner site on MSN MoneyLike flossing your teeth or regular exercise, paying more than the minimum payment on your debt is one of those habits we know is good for us, but is easy to let slide. Let’s face it: it’s hard to stay motivated when you are trying to chip away at a large balance  and there are always other things you can spend your money on.

But what if paying more than the minimum means that you can not only see improvement in the amount you owe, but also know you are helping your credit scores as well? Perhaps that double dose of incentive will be enough to keep you on track!

Office worker marking calendar with red pen © Image Source, Image Source, Getty ImagesWhen it comes to your credit scores, paying just the minimum due on time is sufficient -- at least when it comes to the payment history portion of your credit scores. But the debt you carry is the second most important factor used to calculate credit scores, and here paying the minimum might not cut it. If any of your credit card balances total more than 20 percent to 25 percent of your total credit limit on that account, then your score is likely suffering, and continuing to pay little amounts each month won’t help your score anytime soon.

The good news is that if you can find a way to pay extra, this can be one of the easiest areas of your credit score to "fix."

Here’s an example from someone we’ll call “Peggy” who is carrying $2,562 in credit card debt. Her credit score is 713, which just slightly under the national average of 714 for the scoring model used here.

But she could be doing better. Credit scores are influenced by five major factors -- age of accounts, inquiries and credit mix, in addition to payment history and debt usage. So while she is scoring well for most of those factors, her debt is bringing down her credit scores because she’s using 43 percent of her available credit limits.

Reducing her debt will not only save Peggy money in interest but can also boost her credit scores over time.

How much?

Peggy may be able to bring her score up to just shy of 750 in six months by paying down her balances to 10 percent of her available credit. That would place her solidly in the "excellent" credit category. To do that, she will need to pay an extra $326 a month for the next six months.

What if Peggy can’t afford to pay an extra $326 a month toward her debt? Paying extra toward her monthly payments can still help. If she could add $175 a month to her payments, for example, she may still be able to raise her credit score from 713 to 736 in six months. That’s excellent progress.

You can find out how your debt is impacting your credit scores, and learn how making more than the minimum payment can help you save money and affect your credit by setting up your own free account at From there, you can also create a personalized action plan to get where you want to be.

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