Paying off a significant amount of credit card debt can feel overwhelming. But the situation isn’t hopeless. Continually paying off your debt will save you money and a lot of hassle over time. Because your credit card balance directly affects your credit score, it’s important to stay on top of your debt.

How the Balance on Your Credit Card(s) Affects Your Credit Score

Refraining from paying all or most of your credit each month can significantly harm your credit score. It’s okay to have a small amount carry over into the next month, but be careful about how much. In order to keep your credit score at a good number, make sure to keep your utilization ratio at or below 30%. This is the amount you spend versus your total credit limit.

For example, if you have a $500 credit limit, don’t keep a balance higher than $150 each month. Or if you have multiple credit cards, add up the limits on each card and calculate 30% of that number. Your credit utilization ratio deals takes into account all the credit cards you currently have and their balances. Lenders and credit card issuers rely on credit utilization to predict risk and future behavior.

Think of your credit card(s) as a 30-day loan you pay off in full each month. If you have poor to fair credit, this will build your credit score over time. Eventually, if you need to carry costs over month to month, your overall bill will be lower. You’ll be saving you the money that you earned.

How to Pay Off Credit Debt

Some people worry that if they completely pay off their credit cards quickly, their score will be harmed rather than improved. There isn’t a straightforward answer to this question. It’s hard to say, because there are so many variables that affect your credit score.

According to credit experts, when it comes to the Vantage score credit scoring model, you get the maximum value for having your utilization at zero. FICO scoring is unlikely to be affected or lowered due to paying off a credit card, but it is possible. If you have significant debt, paying a large sum or the full amount will definitely help.

To get started, determine how much you can pay each month. Then use an online credit card payoff calculator to get an estimate on how long it’ll take to pay off the full amount. To use the calculator, enter this information:

• Credit card balance: the amount that you owe, found on your credit card statement.
• APR: the annual percentage rate your credit card company asks for.
• Monthly credit card payments: how much you can feasibly pay each month.

The calculator will show you the month and year you’ll be debt-free by, and how much the total amount paid will be after interest.

Why Should You Care About Your Credit Score?

A good credit score can only help you progress both in life and towards your goals. If you want to save money over time, pay off your credit card debt to create good credit. Your credit report is viewed for loans, purchasing a house and a car. A bad score causes high interest rates, meaning that you night have to settle for a car or home that you don’t love.

Do the following toimprove your financial health:

1. Pay your bills on time.
2. Keep track of your credit balances and check your utilization rate often.
3. Practice making payments before taking on new debt. Find out how muchmonthly payments would be for a new loan and then practice by transferring that amount into a savings accountfor a few months. Try using a savings accounton Credit.com.
4. Avoid maxing out credit accounts.
5. Monitor your credit reports. Credit.com sends you a free credit report every 14 days.

When you pay off your credit card debt, you’ll see major improvements to your financial health. But don’t just pay it off. Incorporate good credit habits as well. They’ll keep your credit score in good standing and will let it continue to rise over time.