Paying Off Debt? Here’s How to Build Credit at the Same Time

Paying off debt and building credit don’t have to live on opposite sides of your financial universe. You don’t need to finish one before starting the other. In fact, the smartest moves often involve doing both—at the same time, in a way that works for your actual life.

I’ve seen too many people wait. They tell themselves, “Once I’m debt-free, then I’ll focus on building credit.” But that delay can cost you. Not just in time, but in missed opportunities—better interest rates, higher approval odds, and the confidence that comes with having your financial foundation solid and evolving.

The good news? It’s absolutely possible to do both. You can reduce your debt load and raise your credit score simultaneously—it just takes a bit of strategy, consistency, and a mindset shift away from “either-or” thinking.

Why Debt Payoff and Credit Building Can (and Should) Coexist

Most people think of these two goals—debt payoff and credit growth—as a financial tug-of-war. But they’re actually part of the same story. One helps clear your financial path, the other builds your future options.

And here’s the kicker: many of the habits that help you pay off debt responsibly can also positively impact your credit score if you know how the credit scoring system actually works.

What goes into your FICO score (which most lenders use):

• 35% – Payment history
• 30% – Credit utilization (how much of your available credit you’re using)
• 15% – Length of credit history
• 10% – Credit mix
• 10% – New credit inquiries

Paying off your debt helps with at least three of these factors—especially payment history and utilization. And if you’re intentional, you can also leverage this progress to increase your length of credit and improve your credit mix.

So the idea isn’t to choose. It’s to integrate.

Start Where You Are, Not Where You Think You “Should” Be

I want to acknowledge something here that often gets skipped: shame.

People often carry a lot of guilt around their debt. I’ve had clients whisper their balances to me like they were confessing to a crime. Others avoid checking their credit score altogether because they assume it’s “bad” and they just don’t want to know.

Let me say this clearly: You are not your debt. You are not your credit score. You are the person steering the ship now—and what matters is what you do next.

So don’t wait for your situation to be perfect before you start building. That first step, however small, creates momentum.

How Paying Down Debt Can Actually Improve Your Credit

Let’s connect the dots between the debt you’re managing and the credit score you want.

1. Lower Balances Improve Your Utilization Ratio

Credit utilization is how much of your available credit you’re using. If you have a $5,000 credit limit and carry a $4,000 balance, you’re using 80%—and that’s not ideal.

Paying down your balances lowers your utilization, which could improve your credit score dramatically. In fact, FICO recommends keeping your utilization below 30%, and ideally under 10% for the best results.

Even if your balance doesn’t hit zero, lowering it significantly still helps. This is one of the fastest ways to improve your credit without opening new accounts.

2. On-Time Payments Boost Your Score Over Time

Payment history is the most influential factor in your credit score. Every on-time payment builds a stronger credit profile—even minimum payments count.

If you’re working a debt payoff plan and making payments consistently, you’re also building a reliable track record. And lenders love reliability.

That’s why it’s critical not to ignore minimums while throwing all your cash at one account. Structure your payoff plan to protect your payment history. Use autopay if that helps you stay consistent.

Should You Close Accounts as You Pay Them Off?

This is one of the most common questions I get. And like most things in personal finance, the answer is: it depends.

Closing a credit card reduces your overall available credit, which could increase your utilization ratio—even if you have no balance. It also removes a piece of your credit history, which may shorten your average account age.

So unless the card has an annual fee or is a temptation you’re genuinely worried about, it often makes sense to keep the account open, especially if it's been open for a while.

Strategic Ways to Build Credit While Paying Down Debt

Here’s where we get into smart layering. These aren’t hacks. These are intentional moves you can make depending on your current situation.

1. Use a Secured Credit Card—The Right Way

If your score is low or your credit history is thin, a secured credit card could be a smart option. It requires a deposit but functions like a regular card. Use it for one small recurring bill (like your Netflix subscription), set it to autopay, and watch your payment history build.

The key here is not using it for new spending you can’t afford. It’s a tool—not a trap.

2. Become an Authorized User on a Trusted Account

This one requires trust, but it can be powerful. If someone with strong credit adds you as an authorized user on their card (and they keep their balance low and payments on time), their positive history could show up on your credit report.

You don’t need to use the card yourself. Just make sure the issuer reports authorized user data to the credit bureaus.

3. Use a Credit-Builder Loan or Program

Some credit unions or fintech platforms offer small installment loans specifically designed to help build credit. You “repay” the loan to a savings account over time, and once it’s paid off, you get the money—plus the benefit of a stronger payment history.

This option may not be ideal if your cash flow is tight, but for someone who’s already paying down debt and has a bit of room, it could help diversify your credit mix and show responsibility.

What If You’re Already Behind?

If you’re behind on payments or your credit report already has some dings, here’s the approach:

1. Stabilize your current payments — Focus on getting current before trying to add anything new.
2. Communicate with lenders — Many creditors offer hardship programs or temporary interest rate reductions if you ask.
3. Check your credit report — You can access free weekly reports from all three bureaus at AnnualCreditReport.com. Review for accuracy and dispute errors.
4. Start rebuilding as you go — Even if you’ve missed payments in the past, current progress matters. Scores are weighted more heavily toward recent behavior.

How to Keep Credit-Building from Sabotaging Your Debt Payoff

Now let’s flip the lens. While building credit is important, it should never interfere with your debt payoff plan. That’s where discipline and boundaries come in.

Set Guardrails:

• No revolving balances — If you’re using credit-building cards, pay in full each month. Never carry a balance just to “show activity.” That’s a myth.
• Track your monthly debt payoff percentage — You can track how much total debt you’ve reduced each month as a motivator (and to ensure progress doesn’t stall).
• Pause new credit applications unless strategic — Too many hard inquiries in a short time can ding your score and make managing debt feel more overwhelming.

Think of credit-building as a muscle. Use it intentionally, but don’t overtrain it. Your energy should still go toward eliminating what’s weighing you down.

4 Smart Moves to Power Both Goals at Once

1. Pick One Card to Keep at 5–10% Usage

Choose a low-balance credit card (or secured card), use it for one small monthly expense, and set it to autopay. You’re showing usage without creating more debt.

2. Automate Minimums, Focus on Strategic Payoff

Automate minimum payments across all accounts to protect your payment history. Then target your highest-impact debt with any extra funds.

3. Review and Update Your Credit Report

Mark your calendar for a monthly 15-minute check-in. Look for errors, missed payments, or updates. Use a clean report as your tracking sheet for progress.

4. Pair Your Payoff Plan With a “Score Tracker”

Use a free, legitimate credit monitoring tool (like Credit Karma or your bank’s app) to monitor your credit score monthly. Celebrate progress—even a 5-point gain matters.

You’re Not Behind—You’re Building Something Strong

The truth is, paying off debt and building credit at the same time isn’t about being perfect—it’s about being purposeful.

You don’t need to max out your credit score in six months. You don’t need to pay off five figures overnight. What you need is a system that lets you keep moving in the right direction. One that reduces your financial stress and opens doors down the road.

That’s what smart personal finance is about. Not shame. Not shortcuts. Just strategy, alignment, and action.

Because every payment, every decision, every smart shift—it all adds up. You’re not just reducing debt. You’re building something new. Something stable. Something that works for you.