Short answer - To boost your credit, pay off debts with high credit utilisation first—usually credit cards near their limits. Focus on accounts that are maxed out or have the highest interest rates, and always pay at least the minimum on all others to avoid late payments.

Which Debts Should I Pay Off First to Improve My Credit?

Managing debt, whether it's credit card bills, personal loans, or EMIs, is very crucial. The way you handle your repayments can directly influence your credit standing. If you’ve been wondering what debt to pay off first to raise your credit score, this blog is for you.

Understanding how different debts impact your credit report and the steps you can take to move toward a good credit score.

Why Your Credit Score Matters?

Before diving into which debts to tackle first, it’s important to understand why your credit score is so significant. It’s a three-digit number that reflects your creditworthiness. Lenders use it to assess how likely you are to repay borrowed money on time.

Whether you're applying for a new loan, a credit card, or even renting a house, a good credit score can help you secure better terms, lower interest rates, and greater approval chances.

If you're planning to work on your finances, a credit score check is the first step. It shows you where you stand and highlights any problem areas that need attention.

Key factors affecting credit score

Knowing the factors affecting credit score will help you understand how your repayment decisions impact it:

• Payment history: Your record of timely repayments is the most important factor.
• Credit utilisation ratio: How much of your available credit you're using.
• Credit mix: A balance of credit types (credit cards, loans, etc.) is viewed positively.
• Length of credit history: Older accounts add value.
• Recent credit activity: Too many new applications can lower your score.

With this in mind, let’s explore the types of debt and which ones you should prioritise.

Which debts should you pay off first?

1. High-interest credit card balances

If you're asking, does paying off a credit card increase credit score? The answer is yes, especially if your balances are high. Credit cards typically carry higher interest rates than other types of debt. Paying them off first helps reduce your credit utilisation ratio, which is a key contributor to your score.

When your credit card balances exceed 30% of your credit limit, it can lower your credit score. Reducing these balances quickly improves your credit profile and saves you money on interest.

2. Debts with missed or overdue payments

Late payments negatively impact your credit report and stay there for several years. If you have debts with overdue EMIs or missed instalments, make them a priority. Bringing accounts up to date not only prevents further damage but also signals to lenders that you’re committed to improving your credit behaviour.

Regular repayments also help rebuild your payment history, which is the most significant factor affecting your credit score.

3. Small balances on multiple credit cards

If you have small unpaid amounts spread across several cards, clearing them can be a quick win. These small balances still count towards your overall credit utilisation. Paying them off reduces clutter on your report and simplifies your finances.

It also helps you avoid accidentally missing payments on forgotten small amounts, which can hurt your score just as much as large unpaid dues.

4. Loans nearing default

If a personal loan or any EMI-based loan is nearing its due date or close to being flagged as a default, take immediate action. Once an account is marked as “written off” or “non-performing,” it causes significant long-term damage to your credit score.

Before such loans hit the default stage, contact the lender and try to settle or restructure them. While this may not erase the past, it can prevent further harm.

What about low-interest long-term loans?

Loans, such as home loans or education loans, often have lower interest rates and longer repayment terms. These are not usually the ones to rush through unless they’re becoming unmanageable. In fact, making regular payments on such loans helps build a good credit history over time.

So, if you're asking how to improve credit score, focus more on revolving credit (like credit cards) and overdue accounts rather than these structured loans—unless you're struggling to keep up with payments.

How to stay consistent with repayments

Now that you know what debt to pay off first to raise your credit score, it’s equally important to stay consistent. Here's how you can stay on track:

• Create a repayment plan: List all your debts, including their interest rates and due dates. This helps you decide which to pay off first.
• Follow the debt avalanche method: Prioritise paying off the highest-interest debts first while making minimum payments on others.
• Use the debt snowball method if you need motivation: Pay off the smallest debts first to build momentum and confidence.

Conclusion

Improving your credit doesn’t happen overnight, but choosing the right debts to pay off can significantly speed up the process. A regular credit score check helps you track your progress and stay on the right path. Remember, building a good credit score is about consistency, smart prioritisation, and informed decision-making. Use your credit report as a roadmap, and with each cleared debt, you move closer to stronger financial health.

.