Description: You can better your credit score by paying off your high interest credit card balances. However, you should not close your card accounts.

Paying off credit card debt to repair bad credit

If you’re struggling with a bad credit score and have a lot of credit card debt, then you should pay off your credit card debts to raise your credit score. Many people are unaware that paying off credit card debts is one of the most useful techniques to boost their credit scores. You can work out your overall credit card balance and use a credit card payment calculator to find out how long it would take to pay off your entire card balance. If you enter figures like your card balance, the monthly payment that you want to make and the interest rate into a credit card payment calculator, this tool can easily tell you how much time is needed to become debt free.  

Paying off your other loans like car loans, mortgages or student loans can definitely contribute to betterment of your credit score. However, paying off revolving debts like credit card debt is a surefire way to boost your score considerably.

There are various ways to pay off your credit card debt. The success of a particular credit card debt repayment plan is dependent on the number of cards you have, the balances of each card, the minimum payments and the interest rate for the cards. How much you earn every month and how much you spend are also significant factors associated with the success of a credit card repayment plan. You can use a credit card payment calculator to simplify the repayment strategy.

Ways to pay off your credit cards 

1) Debt relief pyramid

Majority of finance professionals recommend paying off credit cards in a clear-cut way, which is known as the debt relief pyramid. The concept is you begin from the top with the lowest debt balance. First of all, note down your debt balances in ascending order -starting from the lowest balance to the highest balance. Make the minimum payment on all balances barring the one with the lowest balance. Pay each additional dollar towards the debt with the lowest balance. Lastly, when this lowest debt balance is paid off, keep on doing this procedure again and again with the second lowest debt balance. A credit card payment calculator helps you understand how making extra payments on your cards each month can make you debt free sooner.

Going by this manner, you’re repaying the lowest balances and doing it quicker than the bigger ones, which subsequently makes you feel confident. It is useful for those debtors who have very few cards and wish to see fast debt reduction. It doesn’t work well for those debtors who have many cards. More often than not, you would land up paying more interest than the following technique.

2) Debt tree

The second technique is referred to as debt tree because you begin at the roots and then go upwards. You begin paying your debts in descending order – from the highest balance down. For many borrowers, this is not the type of debt relief that they can achieve easily. Here you try to knock off the biggest balance irrespective of the interest rate it has. The higher the interest rate, the stronger your attempt should be. According to some debt relief experts, this is the most effective technique to handle your credit card debt. A credit card payment calculator can also help you calculate the interest costs on your cards.     

Raising your credit 

Lenders prefer to see a considerable difference between the amount of credit you’re utilizing and the credit limits available to you. When you pay off your credit cards, you can create this difference comfortably. Don’t close your card accounts. This would hurt your score. Instead, use your cards sensibly. Maintain your balances at less than 30% of the credit limit for every card. This would help boost the score. Moreover, the lenders wouldn’t hesitate to offer you loans at more reasonable rates.