How to Improve Your Credit: Paying Down Debt

If you have any type of debt —” car payments, a mortgage, student loans or credit cards —” you're not alone. The latest findings from the New York Federal Reserve indicate that U.S. consumer debt has reached $13.86 trillion. Auto loans make up $1.3 trillion of that amount, a $59 billion jump from last year, according to the Federal Reserve.

The amount of debt you accumulate over time impacts your credit history. While making on-time payments is a good way to improve your credit, reducing the amount of debt you owe can help as well.

How does debt affect my credit?

According to Experian, credit-scoring models consider your credit utilization rate —” the ratio of your debt to available credit —” when calculating your credit score. Paying down your debt reduces your credit utilization rate, which has a direct impact on your credit. The lower your credit utilization rate, the better your credit may be.

How can I reduce my debt and improve my credit?

If you are someone with bad credit who has a lot of debt, you may be wondering how to reduce your debt. Here are some effective ways you can reduce your debt and improve your credit:

If you are someone with bad credit who is in need of vehicle financing and help improving your credit, a dealer enrolled in the Credit Acceptance program can help you get approved for financing on your next vehicle. And with on-time car payments, you can improve your credit. Simply fill out the auto finance pre-qualification form on our website to get started.

Get Pre-qualified