Courtney Hall | March 2, 2012

Continue working on financial profile after paying off debt

Paying off credit card debt and loans after a long financial struggle can bring a sense of relief and pride to borrowers. But some may find that even though they have eliminated burdensome balances, their credit standing is not where it used to be. Being financially healthy involves more than simply being debt free and having money in savings. It also involves having a healthy credit report and score, and there are several ways consumers can regain their positive credit standing.

First, consumers must know where they went wrong. Payment history makes up the largest percentage of an individual's credit score, so if they were frequently late paying their monthly balance or defaulted on their bills, this likely caused credit damage. While this information will remain on a consumer's credit report for seven years, the severity will subside over time if individuals continue to manage their credit wisely. For this reason, it's important to make at least the minimum payment on all credit accounts and pay all bills on time. Adults who have difficulties remembering their obligations can set up payment reminders and notifications, or enroll in automatic debit programs.

In addition to paying all bills on time, adults should also focus on avoiding behaviors that may be adding further damage to their credit. For example, having large balances can drag down an individual's credit standing, even if they pay the amount in full each billing cycle. Most experts recommend using no more than 30 percent of their available credit to avoid dings to their credit score. In addition, adults who struggled with debt may be tempted to close their accounts. But this move can also backfire and have a negative impact on their score. Instead, put credit cards away to avoid using them or make small charges every month and pay the balance in full immediately.

Lastly, adults who have overcome debt should focus on correcting behaviors that contributed to their high balances in the first place, according to Bankrate.com. Simple moves, such as working with a credit counselor or financial advisor to set a realistic budget and adopting money management tools, can help individuals discipline their spending and stay debt free. After adopting more responsible credit behaviors, consumers may begin to see their credit score rise in a short period of time.

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