Kudos to you for focusing on paying down your debt. Regardless of what you do from here on out from a credit score perspective, you are already doing the best of all things – paying down your debt.
However, you can make some small mistakes in the process that will hurt the improvement of your credit score. Hopefully, with some advice, you can avoid them.
Don’t Cancel Cards
When you pay off a credit card, it’s very tempting to cancel the card and cut it up into tiny little pieces. Please don’t. Canceling a card will almost always hurt your credit score because of credit utilization. Credit utilization is a calculation of how much of your existing credit limit you are using. When you cancel a card, you are reducing your total credit limit. This will raise your utilization and lower your credit score.
If you really want to be rid of the card, you can try to consolidate that limit into another card from that issuer. So if you have two AMEX or two Citi cards, ask to have the limit consolidated into one card (preferably the older one).
Pay Down Cards Evenly
If you have two cards charging the same interest rate, try to pay them down evenly. One metric, albeit a minor one, in the credit score has to do with the percentage of debt on individual cards. If you have a card at 90% utilization, that looks really bad and scores poorly (it’s FICO risk code #11). It’s unclear if it’s better to have two cards at 50% or one card at 75% and one at 25%, but I imagine the 50/50 split looks better.
So if it mathematically makes sense for you to pay down cards evenly, try to. If it doesn’t make sense, don’t worry about it.
Review Your Report & Score
The first thing you should do, and you should do this every 12 months, is review your credit report. The Fair Credit Reporting Act requires the three credit reporting bureaus to provide you a copy of your credit report every 12 months. You can go to AnnualCreditReport.com to request your copy. Review it for errors or inaccuracies and dispute anything you find.
Second, and this is optional, you’ll want to know where you currently stand. You can use a free service like Credit Karma to get a TransUnion credit score or you can sign up for a free credit score trial service to get your FICO credit score.
Finally, remember that the goal is to pay down debt, not get a good credit score. As long as you don’t lose focus on that goal, you should do well regardless because paying down debt will always improve your score.