Increase Your Credit Score While Paying Off Your Debts

By | February 24, 2014

Towering-DebtI’ve got all kinds of debt–credit card debt, student loans, auto loans…

That being said, I’m learning that there are some debts that are better than others.

I recently wrangled up all my credit cards, and between them all, I had roughly $10,000 worth of credit card debt. I thought that I’d look into getting a P2P loan for myself, to make my debt easier to handle. (I used Prosper, and they were great!) The purpose of this would be so that I could consolidate my credit card debt, thus allowing me to:

  1. Worry about one simple payment
  2. Have a lower interest rate
  3. Force myself to pay off the debt quickly.

Often, people see low minimum payments as good. They tell themselves, “Oh, I can afford to pay back this new, $1000 television at $22.50 a month.” Not realizing that by dragging it out, they are spending almost twice for the television. Your $1,000 television, at the national average interest rate of 15%, would take 106 months to pay it off–that’s almost nine years! Moreover, you would pay $729.14 in interest. Your $1,000 television ended up costing your $1,729.14–almost double.

The following calculator, from, shows how long it will take to pay off your debt, and the additional cost you incur paying only the monthly minimums.



As you see with four payments, totaling $88.66, you’ve really only paid off $39.40.

The second tricky thing about credit cards is that you never just use them once. You continue to purchase items. Your minimums get higher and higher, and every item you purchase ends up doubling in cost. That $10 pizza you bought on credit last night really cost you $17.

But back to my list.

I now have one, simple, monthly payment. I’ve got an interest rate that was lower than my credit cards’. And last–but certainly not least–my loan must be paid off in 36 month. By forcing myself to pay off my debt in 36 months, opposed to 335 months, I am not only getting rid of my debt sooner, but will save me thousands of dollars.


You know how I said that there are good and bad debts? Once my credit card debt was squared away into a nice, neat, little loan, my credit jumped 64 points. I signed up with Credit Karma a while back to monitor my credit score, and when I logged in yesterday, this is what I saw. (Credit Karma is great, and free!) This loan must be paid off within 36 months, and since it isn’t an open line of credit, I cannot keep adding to it. Thank you Prosper,, and Credit Karma.


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