Having too much debt is a very good way to hurt your credit score. The result is that it will cost you a lot more in interest each month and end up costing you thousands of dollars more than you would otherwise pay if you had used cash. Here are some tips to enable you to pay off your debt and repair your credit score at the same time – or at least keep it good if it already is.

Check Credit Report for Errors and Repair It

If you have not checked your credit report recently for errors, you really do need to start here. It is not at all uncommon for errors to be put onto a credit report, and a mistake that you may not even be aware of can have a strong negative effect on your ability to get decent interest rates on anything.

Any problems that you might have had with identity theft could also be very detrimental to your credit score. Fixing it now – especially if there is a definite error – could enable you to get better rates on everything from credit cards to loans and even on your auto insurance. Corrections take about six weeks to show up on your credit report.

Remember to look at a copy of your free credit report from each of the three major credit bureaus – EquiFax, Experian, and TransUnion. More creditors are reporting to all three of these agencies than before, and each one of your reports may have slightly different information on them. Besides, you never know which one of them a potential lender will check with when looking at your records.

Contact Creditors for Reduced Interest Rates

Once your credit report is taken care of, you want to talk to your creditors. This is only necessary, however, if you cannot meet your current bills, or if you simply want to try to reduce your interest rates. Often times, they are willing to put your account on hold for a short time and reduce your payments, especially if there is a brighter future in which you think you will be able to make the payments.

Do Not Open or Close Other Credit Cards – Except One

Having too much debt or too much credit does affect your credit score. There is a ratio the creditors like to see, and it is generally about 20% of debt to the amount of credit you have, according to Experian.

Experian also mentions on their Website that opening or closing a credit card could lower your credit score. Many people sometimes learn about the debt to credit ratio and then try to either open new credit cards, or close existing ones, in order to attempt to change their ratio, and then discover that it actually made their credit score lower.

Remember that potential lenders can see that the older cards were closed and they will probably guess that it was to hide a low credit score – which unfortunately, is even lower now. Another factor in your credit score is how long you have had and maintained open credit. If you close your oldest credit cards, this will reduce the length of your credit history – and probably hurt your credit score.

The only new credit that you may want to open is a new balance transfer credit card. This will enable you to possibly get 0 percent interest (or low interest) on the balances that are transferred. This is the only new credit you should get, and it will help to reduce the overall debt you have because of less interest.

Pay Your Debts on Time without Fail

The largest factor in raising your credit score is simply making your payments on time. According to FICO, it counts as 35% of the calculation of your credit score. This is the lender’s biggest concern and it is certainly one you do not want to overlook.

When you are working on a particular bill to eliminate it, you do not want to forget to pay the minimums on all your bills, and especially pay them on time. Although one late payment may not be reported on your credit report, several late payments most likely will appear there.

Do Not Use Credit Repair Services

Many credit repair services are just a scam to get your money. The truth is that about all they can do is to challenge information on your credit report to try and get it either corrected or removed. While being challenged, the information may disappear for a short time, but if it is true, then you can be sure that it will be back.

Experian says that there is no quick way to repair your credit. It has to be earned. You do this primarily by efficient handling of your finances and paying down your debt. Your credit score is constantly changing as you continue to make payments and change your debt or credit levels.

If you have business credit that needs good credit scores, then it is necessary to keep some balances on your credit cards. It is different with a business. By keeping some charges on your card and continuing to show that you can make payments on time, you establish a history of financial credibility, and this will let a lender know that your business is still in good financial condition.

Do It Yourself and Save Money

Debt settlement services, or a debt consolidation loan, are apt to add to your overall debt. Even if the company is able to reduce your bills, the added charges that they add on to it, may mean that there is little, if any savings.

The truth is that all of these things you can do yourself. Simply start with the smallest bill and pay it off. Then take that money and put it all toward the next bill, and keep on doing this until all your bills are paid. Being debt free and having an excellent credit score is a tremendous experience that you can enjoy – once it happens.