What debt should I pay off first to raise my credit score?

Generally, paying off debt is a good way to improve your credit score for a mortgage loan.

But your credit score weaves together a variety of personal financial data points. Pulling one thread by paying off a debt might not improve your credit score. In fact, it could lower your score, at least temporarily.

So, which debt should you tackle first?

How different debts and account statuses affect your credit score

Should you start with revolving credit? Or with installment credit? Accounts with higher balances? Or debts with higher interest rates?

There's no one-size-fits-all answer. In fact, the answer may be different for every borrower. Talking to a loan officer is the only way to get truly personalized answers to these kinds of questions.

It also helps to know how credit scoring models work.

Each type of debt carries different weight in your credit score calculation, creating strategic opportunities for improvement.

Revolving vs installment accounts

Revolving accounts (credit cards, retail store cards, lines of credit) work differently than installment loans (mortgages, auto loans, student loans) in your credit profile.

• Revolving accounts show your ability to control ongoing credit decisions. Can you avoid running up a balance you can't afford to repay? Can you keep balances low in relation to your credit limit? 
• Installment accounts show your ability to make steady payments over a set period. You borrowed $25,000 for a car, you make $400 monthly payments, and the debt decreases gradually. There's less decision-making required, but you do need persistence. 

Payment history comes first for both installment credit and revolving loans. Borrowers should never risk missing a payment on an installment loan in order to lower the balance on a credit card. (More on that later.)

But lowering revolving account balances (and keeping them open) can improve a credit score more than getting ahead of schedule on an installment loan.

Using a HELOC for debt consolidation can shift high-interest revolving debt into a potentially lower-interest credit line, often improving both your interest costs and credit score.

...in as little as 3 minutes – no credit impact

Past due balances vs current accounts

Payment history is the single biggest factor in the FICO scoring model most lenders use. A single 30-day late payment can damage a good credit score more than carrying high balances on current accounts. Late payments signal risk to lenders. They stay on your credit report for seven years and can drop scores by 50 to 100 points immediately.

If you've already logged missed payments in your credit history, focus on making on-time payments from now on. Current accounts in good standing can build positive credit history that partially compensates for past negative history. 

Once again, don't focus too much on one debt. Keeping multiple accounts current can help increase a credit score more than paying off one single debt. 

Credit utilization ratio explained

Credit utilization ratio is second in importance only to payment history in the FICO model. This number measures how much of a credit line you're using.

Consider these scenarios:

• Scenario A: $3,000 balance on a $10,000 limit card (30% utilization)
• Scenario B: $1,500 balance on a $2,000 limit card (75% utilization) Scenario B hurts your score more than Scenario A, despite the lower balance.

Ideally, mortgage borrowers should keep credit utilization ratio below 30 percent. To do this, pay down balances or ask creditors to increase your credit limit.

For example, if the Scenario B borrower above increased their $2,000 limit to $4,000 while also lowering the balance to from $1,500 to $1,000, the credit utilization ratio would instantly fall to 25 percent which can help borrowers qualify for mortgages and lower interest rates on HELOCs.

Other factors: age of credit, inquiries, and mix

Payment history covers 35 percent of a FICO score. Credit utilization ratio accounts for another 30 percent.

That leaves 35 percent more, which includes:

• Length of credit history (15%): Older accounts boost your score, which explains why closing your oldest credit card often backfires. Keep old accounts open with small occasional purchases.
• New credit inquiries (10%): Applying for too much new credit can hurt your score. Fortunately, applications bunched together within a few weeks usually count as one application. 
• Credit mix (10%): Having different types of credit, including credit cards, installment loans, and [lines of credit](https://better.com/content/does-heloc-affect-credit-score), shows lenders you can handle various payment structures.

Which debts should be paid off first?

Your credit score can go up faster when you target the right accounts in the right order.

1. Start with high credit utilization cards

Target cards above 30% utilization first. A card that's nearly maxed out damages your score more than three cards with moderate balances. For example, paying down a card from 90% to 50% utilization could boost your score by 20 to 30 points within a month.

2. Next, pay down high-interest debts

After handling high-utilization cards, focus on your most expensive debt, measured by interest rate or APR. While interest rates don't directly affect credit scores, reducing expensive debt can free up money and gain more traction with lowering debt.

3. Then, clear small balances across multiple cards

Once you've addressed high-utilization and high-interest accounts, eliminate smaller balances completely. Having fewer accounts with balances improves your overall credit profile. Three cards with zero balances look better to scoring models than three cards with small balances.

Be sure to keep these revolving accounts open after payoff. That way you'll still get credit for your hard work.

Bonus tip: Avoid paying off old collections first

Here's a counterintuitive strategy: don't rush to pay old collections. Paying off aged collections can actually refresh the negative item and temporarily lower your score. Instead, focus on keeping current accounts in good standing to prevent new negative marks.

Best strategies to pay off debt and improve credit

Now it's time to put all this knowledge about credit scoring to good use. Here are some popular strategies that put all the pieces together in powerful ways:

Snowball method

This strategy targets smallest balances first, regardless of their interest rates. This creates quick wins that build momentum. You'll see account balances disappear from your credit report faster, which can boost your score by reducing the number of accounts with balances.

Avalanche method

This method targets highest interest rates first. The money saved one high interest credit card each month can then be applied to the next debt, and so on. As time passes you build more and more momentum. 

Which is better?

Avalanche or snowball? The snowball method makes slow and steady progress. Borrowers can see steady results throughout the process.

The avalanche method takes a while to show results. In fact, months may go by without seeing results. But the strategy picks up speed and can make a big impact later. 

Other debt payoff strategies to improve a credit score

Avalanche and snowball aren't the only ways to improve a credit score. Some borrowers like to try:

Balance transfers

Transferring balances, also known as debt consolidation, can slash interest rates and help reduce debt, but the immediate impact on your credit score can be mixed.

Benefits include lowering interest rates and creating room in the monthly budget. 

However, many borrowers use their newly freed up credit limits to spend too much, creating worse credit score trouble later.

Also, watch out for transfer fees (3-5% of the balance) and expiration dates for those low promotional interest rates. 

If you're a homeowner already, a HELOC is a great way to pay off credit card debt at a low interest rate that won't expire. 

...in as little as 3 minutes – no credit impact

Double your minimum payments

Minimum payments barely touch your principal balance on revolving credit. Here's why doubling payments makes a difference:

A $5,000 balance at 18% APR with $125 minimum payments takes 62 months to pay off
Double that payment to $250, and you're debt-free in 24 months
You'll save over $2,000 in interest
Of course, putting that $2,000 toward other debt makes all the sacrifice worthwhile. 

Stop the debt cycle

Paying off debt while adding new charges defeats the purpose. Here's how to break the cycle:

• Remove temptation: Take cards out of your wallet and delete saved payment info from websites.
• Track everything: Use apps or spreadsheets to monitor spending in real-time.
• Build an emergency fund: Start with $1,000 to avoid reaching for credit when unexpected expenses hit.

The goal is simple: make debt repayment a one-way street. Every dollar you pay down should stay paid down.

What debt should I pay off first FAQs

Common questions about debt repayment priorities and credit score improvement strategies.

What is the 50/30/20 rule?

The 50/30/20 rule divides your income into three buckets: 50% for essentials like housing and utilities, 30% for discretionary spending, and 20% for savings and debt payments. This framework helps you balance debt reduction with other financial goals.

What should I pay off first to boost my credit score?

Start with credit cards that exceed 30 percent of their credit limits—these hurt your utilization ratio the most. Next, tackle high-interest debts to free up more money for other payments. Finally, eliminate small balances completely to reduce the number of accounts carrying debt. 

What's the typical credit score in the U.S.?

The average FICO score sits around 716, placing most Americans in the "good" credit range. About a fifth of Americans have scores above 800, while about 10 percent fall below 550. Midwestern states generally show higher average scores than Southern states, though individual circumstances matter more than geography when building your credit.

What's the most effective strategy for paying off multiple debts?

After addressing high-utilization credit cards, target high-interest debts, followed by smaller balances across multiple cards. This strategy helps maximize credit score improvement while minimizing interest costs.

How does paying off debt affect my credit score?

Paying off debt typically improves your credit score, especially when reducing credit card balances. You could see a 10 to 30 point increase within 45 days of lowering your credit utilization ratio. 

Should I use a HELOC for debt consolidation?

Using a HELOC (home equity line of credit) for debt consolidation can be beneficial, especially for high-interest credit card debt. It can lower your interest rates, potentially improve your credit mix, and help reduce your credit utilization ratio. However, carefully consider the terms and your ability to repay before choosing this option.

How mortgage borrowing and debt payoff work together

Your score typically improves after paying off debt, though the timeline and impact depend on which debts you tackle. Credit data has to travel through the funnel of the credit bureaus, so be patient. The hard work you're doing to pay down debt in a strategic way will eventually pay off. 

Along with making on-time payments, the biggest wins come from reducing your credit utilization ratio. 

For current homeowners with equity, a home equity loan or line of credit for debt consolidation can expedite the process.

For new home buyers, getting a preapproval is a great way to see where you stand. Better's preapproval requires only a soft credit check which won't affect your credit score.

...in as little as 3 minutes – no credit impact