Best Options for Getting Out of Debt and Building Your Credit (2024)

Your credit score is crucial to your financial success. The higher your score, the more options you may have. And using credit cards the right way can help you build your credit -- via on-time payments, low credit utilization, and even just keeping your cards open longer (and keeping them in good standing).

But before you start building your credit, you need to have the right resources in place.

If you have existing high-interest debt -- whether it’s credit card debt, various loans, medical, or a combination of debts -- and your credit score is above 580, you may be able to slash your interest rate with a personal loan to help pay off your debt faster.

Personal loan for credit of 580+ to help pay off credit card debt

• Upstart Personal Loans

Credit cards for fair credit

• Capital One Platinum Credit Card
• Capital One QuicksilverOne Cash Rewards Credit Card

Credit card for building credit

• Discover it® Secured Credit Card

If you have credit card debt, but are not able to qualify for a balance transfer credit card, a personal loan could be a good tool to get a lower interest rate to pay off your debt, faster. Here’s why:

• You can consolidate debt by using one personal loan to pay off multiple credit cards.
• Personal loans typically have lower interest rates than credit cards, so you can save money on interest.
• Personal loans have fixed repayment schedules (credit cards don’t), so you can get a definite debt-free date.
• You can choose a fixed-rate personal loan, which locks your interest rate in place, while most credit cards charge interest at a variable rate.

Want to get started with a personal loan to help work towards building your credit? Here’s one of our top picks:

Upstart Personal Loans

Apply for an Upstart Personal Loan if you…

… Have a credit score of 580 or above and want to reduce high interest debt

… Want to have a choice of a three-year or five-year loan repayment term

… Think you might want to pay off your loan early without being penalized

Whether you're consolidating debt or making a big purchase, Upstart Personal Loans have got you covered. Upstart's personal loans have some big advantages, including fast funding, flexible loan amounts, and credit score requirements are more flexible than other lenders. Upstart's unique underwriting process takes things like education and career history into account, as well as other factors unrelated to credit score.

Click here to start paying down your debt with Upstart >>

Apply for the Capital One Platinum Credit Card if you…

… Want to be able to pay by check, online or at a local branch, all with no fee to do so

… Want to help strengthen your credit for the future with responsible card use

… Don’t want to pay an annual fee

The Capital One Platinum Credit Card is a solid choice if you have average credit and need a credit card. And if you use it properly, it can be a useful stepping stone to boost your credit score and help you qualify for a wider range of cards. If you don't have a long credit history or your history has some negative marks on it, and you’re ready to build your credit score.

Apply for the Capital One QuicksilverOne Cash Rewards Credit Card if you…

… Want to earn unlimited 1.5% cash back on purchases

… Want the chance to get access to a higher credit line

… Want to help strengthen your credit for the future with responsible card use

The Capital One QuicksilverOne Cash Rewards Credit Card fills the gap for people with limited credit histories who want to earn credit card rewards. This card offers unlimited 1.5% cash back on purchases. What’s more, when you pay off your balances each month to avoid interest charges you may get access to a higher credit line which will help you reap the most value with this card. One thing to keep in mind with this card is that even though you get the benefit of cash back rewards, it does have an annual fee of $39. So, you’ll have to make sure that you can earn that or more in rewards to make it worth the fee.

Apply for the Discover it® Secured Credit Card if you…

… Want a secured card that earns cash back with no annual fee

… Want the chance to earn up to 2% cash back at gas stations and restaurants ($1,000 quarterly spending cap)

… Want to have Discover match all the cash back you earn in the first year for new cardholders

The Discover it® Secured Credit Card has everything you need without paying unnecessary costs. There's free FICO® Score monitoring and no annual fee. This is also one of the only secured credit cards with a rewards program and offering cash back on purchases. Discover will also automatically match all the cash back you’ve earned at the end of your first year. This sign-up bonus is only available during the first year and for new cardholders, but it can be particularly lucrative since the match is unlimited.

The best way to raise your credit score when you have bad credit is by understanding the factors that contribute to your score. Here are the five factors used to calculate your FICO® Score and how you can get high marks in each one:

• Payment history (35%): On-time payments are the key to excellent credit. While you can't undo previous late payments on your credit file, you can avoid late payments in the future. That's the number one habit you need to raise your credit score.
• Credit utilization (30%): Your credit utilization is the sum of your credit balances divided by your combined credit limit. For example, if you have one credit card with a balance of $200 and a limit of $500, then your credit utilization is 40%. The lower you can keep this number, the better. A good goal is to always have your credit utilization below 30%. If yours is higher, then you should focus on paying off debt.
• Length of credit history (15%): Creditors will obviously consider a borrower who has had a credit card for 20 years to be less risky than one who has only been using credit for three months. The best way to improve in this area is to open a no-annual-fee card and keep it open forever.
• Credit mix (10%): It gives you a slight credit score advantage if you have both revolving credit, such as credit cards, and an installment loan on your credit file, instead of just one of the two. But since this has only a small impact on your credit score, you shouldn't take out a loan solely to boost your credit. You can attain an excellent credit score even if you only use credit cards.
• New credit inquiries (10%): When a company looks at your credit report to make a credit decision, this inquiry is reported on your credit report for two years. Credit inquiries only affect your FICO® Score for one year, though. Don't avoid opening a new account just because of the small impact to your credit score, but don't open a bunch of accounts in quick succession, either.