John Rasor

Want a Better Credit Score Report? Pay Down Your Debts

Plugging the holes in your spending and making sacrifices is how you save money. Budgeting is the first step in getting a hold of your debts.

Getting a better credits score report, sure; that sounds easy. If you had extra money you wouldn't have those debts, right?

But stop and think about it. If you really want a secure financial future, it's in your best interest to cut spending and get those debts paid down. Remember, the better your FICO score, the less interest you'll pay on everything from credit cards, to cars, to a house.

It really is worth a bit of sacrifice in the short run to enjoy more financial freedom in the long run.

You should also be looking at ways to add a few extra dollars to your income each week - and to add those dollars to the minimum payments you're probably paying today.

Let's start with spending less. Begin by listing your monthly obligations - can you change your cell phone service to a cheaper plan? How about your cable or satellite TV programming? Can you turn down the heat in the house or remember to turn off lights when they aren't in use? Those tactics won't save you much, but every dollar you can put on your outstanding debt is like two dollars by the time you pay interest on it for years.

Next - plug the holes in your spending. Really keep track of every dollar that leaves your pocket this week. Do you stop for an espresso on the way to work? Do you go out to lunch - or worse, eat dinner out regularly? Do you splurge on magazines you barely read, candy bars that do nothing but make you chubby, and buy a scratch ticket in hopes of making a big win?

Each night, write down what you spent out of your pocket or your checkbook during the day. Did you really need it, or just want it? Most of us who leave the house during the day can cut at least $2 to $5 per day in "nickel and dime" spending when we look at our own habits.

I know, that isn't much. But in the course of a month, assuming you go out 5 days a week, that's $40 to $100 per month, and that adds up. Even an extra $10 per month paid on a credit card account will make a difference over time. In fact, if you're paying 18% interest on a credit card, paying an extra $10 per month will save you over $110 per year in interest.

You'll enjoy watching your credit scores go up as your debts go down.

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