One of the best ways you can repair your credit is whittling down your debt. This will lower your credit utilization ratio, thus resulting in your credit score improving. You can go about this by making your credit card payments on time and paying a little extra each time. It may take some time to improve your score this way, but lenders will see that you are responsible and you will be safely taking care of your debt.
Consumers often get impatient with this method, but quick fixes to pay off your debt may do more harm than good. Here are a few risky payoff methods to avoid:
Just paying the minimum
Maintaining a good payment schedule for your credit card bills is important, but just paying the minimum could take even longer. For example, BankRate said if you make the minimum payments for a debt of $5,000 with a 15 percent interest rate, it could take you 22 years to pay off that debt.
Even if you are on a tight budget, you should do your best to pay more than the minimum. This doesn't have to be an extra $1,000 each month, but a little extra will help this repayment go by in a flash.
Using your savings
Bankrupting your savings in order to deal with your current credit card debt can have disastrous results for your future financial picture. Your savings are there for a reason: To help you out in a bad financial situation or an important one, such as applying for a mortgage. By using your savings as a quick fix, you will have trouble dealing with other important financial needs.
Applying home equity to debt
Building up home equity can be a great way to assist you in paying off your mortgage more quickly through refinancing, but you should avoid using it to pay off your credit cards. It is entirely possible to use this investment to take care of your debt, but you never know how the housing market will shape out, and if you use all your equity to take care of credit cards, you could be in a tricky predicament in the future.