Does Paying Off Debt Improve Your Credit Profile?
UpdatedApr 3, 2025
- Bad credit and debt problems often go hand-in-hand.
- If you are suffering a financial hardship, focus on paying off debt.
- Your credit score will improve once you start making timely payments and reduce your debt.
Debt problems and bad credit is a double whammy
Many people who have debt problems often suffer from a bad credit profile as well. It’s a double whammy and definitely something that needs to be taken care of. So, how do you approach the issue? One obvious way to address your credit profile is to pay your bills on time, and when possible, in full. If you have extra cash, use it to pay down any outstanding debt.
But not all debts have equal influence on your profile. Depending on your individual circumstances, a high priority may be to pay down debts that will be recognized by several credit profiling factors. Getting rid of credit card debt may give you faster results than paying down other debts, because it is generally a riskier type of unsecured debt. Once you pay off a card, you may see a positive impact on your overall profile.
Focus on paying off your debt before improving your credit
Your credit profile should be important to you, because it has the power to determine a wide range of things in your life. If your credit profile is not as strong as you want it to be and you are looking to make it stronger, it may seem intuitive to pay off all of your debts. However, this strategy may backfire. You should always analyze each debt and predict how making changes to it will affect your overall credit profile.
If you choose to settle your debts for less than you owe (a.k.a. use debt resolution), talk to a certified debt specialist to get more information about how this process works. The benefit of debt resolution is that it is often a cheaper and quicker option for resolving debt. It may be especially helpful for people with high debt loads ($10,000+) and are struggling to keep up with their payments.
There are multiple ways to deal with debt and credit. If you are unsure which method is best for you, give our team a call at 800-910-0065 and we’ll guide you through your options!
A look into the world of debt relief seekers
We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during November 2024. This data highlights the wide range of individuals turning to debt relief.
Credit card tradelines and debt relief
Ever wondered how many credit card accounts people have before seeking debt relief?
In November 2024, people seeking debt relief had some interesting trends in their credit card tradelines:
The average number of open tradelines was 14.
The average number of total tradelines was 24.
The average number of credit card tradelines was 7.
The average balance of credit card tradelines was $15,142.
Having many credit card accounts can complicate financial management. Especially when balances are high. If you’re feeling overwhelmed by the number of credit cards and the debt on them, know that you’re not alone. Seeking help can simplify your finances and put you on the path to recovery.
Personal loan balances – average debt by selected states
Personal loans are one type of installment loans. Generally you borrow at a fixed rate with a fixed monthly payment.
In November 2024, 44% of the debt relief seekers had a personal loan. The average personal loan was $10,718, and the average monthly payment was $362.
Here's a quick look at the top five states by average personal loan balance.
| State | % with personal loan | Avg personal loan balance | Average personal loan original amount | Avg personal loan monthly payment |
|---|---|---|---|---|
| Massachusetts | 42% | $14,653 | $21,431 | $474 |
| Connecticut | 44% | $13,546 | $21,163 | $475 |
| New York | 37% | $13,499 | $20,464 | $447 |
| New Hampshire | 49% | $13,206 | $18,625 | $410 |
| Minnesota | 44% | $12,944 | $18,836 | $470 |
Personal loans are an important financial tool. You can use them for debt consolidation. You can also use them to make large purchases, do home improvements, or for other purposes.
Manage Your Finances Better
Understanding your debt situation is crucial. It could be high credit use, many tradelines, or a low FICO score. The right debt relief can help you manage your money. Begin your journey to financial stability by taking the first step.
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