1. PERSONAL FINANCE

How to Improve Your Financial Health

How to Improve Your Financial Health
 Updated 
Jul 5, 2025
Key Takeaways:
  • You can improve your financial health by learning the basics about finance.
  • Understanding credit scores, budgeting and savings is critical.
  • If your debts are unaffordable, consider debt relief for a fresh start.

Whether you’ve been at it for a while, or you’re just starting to learn about personal finance, managing your money can be taxing. How important is your credit score? How is it calculated? What can you do to enhance your financial well-being? Read on for a money management to-do list to help you improve your financial health.

Learn How Credit Scores Work

Your credit profile is one indicator of your financial health. Most people know that a higher credit score means that they will qualify for loans, credit cards, and mortgages more easily and at lower rates. But you might not know how credit scores are calculated.

Credit scores are used to determine a borrower’s likelihood to pay back a lender, and the most widely used one is the FICO Score. All three consumer credit bureaus—Experian, Equifax, and TransUnion—use this data to determine a score. So, whenever you hear “FICO score,” “credit score,” and “credit rating,” they all refer to the same thing.

Credit scores can range from 300 to 850, based on credit history and habits. Here is the breakdown of how credit scores are calculated:

FactorPositive ImpactsNegative ImpactsContribution
Payment HistoryConsistently paying bills on timeDelinquencies or missing payments35%
Credit UtilizationHaving a debt-to-available-credit ratio below 30%Having a high debt-to-available-credit ratio above 30%30%
Length of Credit HistoryKeeping accounts in good standing for a long timeOpening several accounts all at once15%
Credit MixUsing different types of credit, like credit cards, loans, and secured debtHaving little or no credit variety10%
New Credit ApplicationsSeeking only one new type of credit at a timeApplying for many different types of credit in a short amount of time10%

Every week, you can request a copy of your credit report from all three bureaus at annualcreditreport.com. After accessing your free credit reports, you can review the information on the reports, make sure it’s correct, and dispute any false information.

If you do see inaccuracies on any of your credit reports such as a wrong address, missed payment, or incorrect outstanding balance, contact the credit bureau online, by phone, or by mail and ask them to review the mistake. Under the Fair Credit Reporting Act, credit bureaus must investigate any disputed items and remove them if they are incorrect.

Spending just a few minutes reviewing your credit reports could protect you from identity theft and keep you on track to improve your financial health.

Make a Budget

Evaluating your financial situation is the best way to make sure you’re practicing good habits and protecting your credit score. And happily, you don’t need an expert to review your personal finances to get started. All you have to do is create a budget.

First, make a list of all your monthly expenditures, such as housing, transportation, food, utilities, insurance, childcare, and other regular costs. Then, calculate your monthly income after taxes and subtract that total from your expense total. If you have money left over after all your expenses are deducted, you’re on the right track with your personal finances. You can then decide where that extra money goes—for example, to emergency savings, retirement, or to pay off your debts more quickly.

On the other hand, if you find that you’re overspending, making less than your monthly expenses, or relying on credit cards to fill the gap between your income and expenses, you’ll need to make some adjustments. Figure out what you can trim from your expenses, devise ways to make extra income, and explore debt resolution strategies.

Pay More Than the Minimum on Your Debts

If you owe money on credit cards, you have the option to pay only a small fraction of what you owe every month. This is also known as “revolving your debt." Making minimum payments might seem like a perfectly normal habit, but the truth is, it could seriously harm your financial well-being in the long run. This is because if you only pay the minimum on your debt and keep using your available credit, your credit utilization will rise, damaging your credit score.

Additionally, if your debt gets too high, your minimum payments could be hard to keep up with, leading to missed payments that cause even more financial stress. Credit card interest is expensive—as of this writing, the average rate on a credit card is more than 21%.

Paying as much over the minimum as possible could help you avoid these problems, get out of debt faster, and start saving more money—all crucial to improving your financial health.

Start Your Emergency Fund

Having money in savings for an emergency can help you avoid adding to your debt or damaging your credit score if you have an unplanned bill. Saving even 10% of your paycheck each month could save you from a huge financial headache, should the unexpected occur.

However, it’s a lot harder to save money quickly if you’re paying off unsecured debt like credit cards because the amount you owe could go up every month. That’s why it’s so important to get out of debt as quickly as possible. The faster you’re out of debt, the faster you can build up your savings and put yourself in good shape for the future.

Give Your Financial Health a Boost

If you’re struggling with debt or worried about falling behind on payments, it might be time to take action beyond simple budgeting strategies. Freedom Debt Relief is here to help you understand your options for dealing with your debt, including our debt settlement program. Our Certified Debt Consultants can help you find a solution that will put you on the path to improve your financial health. Find out if you qualify.

A look into the world of debt relief seekers

We looked at a sample of data from Freedom Debt Relief of people seeking the best debt relief company for them during June 2025. This data highlights the wide range of individuals turning to debt relief.

FICO scores and enrolled debt

Curious about the credit scores of those in debt relief? In June 2025, the average FICO score for people enrolling in a debt settlement program was 594, with an average enrolled debt of $26,445. For different age groups, the FICO scores varied. For instance, those aged 51-65 had an average FICO score of 591 and an enrolled debt of $28,619. The 18-25 age group had an average FICO score of 556 and an enrolled debt of $15,107. No matter your age or debt level, it's reassuring to know you're not alone. Taking the step to seek help can lead you towards a brighter financial future.

Credit card debt - average debt by selected states.

According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average credit card debt for those with a balance was $6,021. The percentage of families with credit card debt was 45%. (Note: It used 2022 data).

Unsurprisingly, the level of credit card debt among those seeking debt relief was much higher. According to June 2025 data, 88% of the debt relief seekers had a credit card balance. The average credit card balance was $16,425.

Here's a quick look at the top five states based on average credit card balance.

StateAverage credit card balanceAverage # of open credit card tradelinesAverage credit limitAverage Credit Utilization
Ohio$15,6837$24,10284%
District of Columbia$17,3969$28,79182%
Alaska$20,4969$27,26180%
Oklahoma$15,0358$25,73178%
Indiana$14,0398$26,15678%

The statistics are based on all debt relief seekers with a credit card balance over $0.

Are you starting to navigate your finances? Or planning for your retirement? These insights can help you make informed choices. They can help you work toward financial stability and security.

Manage Your Finances Better

Understanding your debt situation is crucial. It could be high credit use, many tradelines, or a low FICO score. The right debt relief can help you manage your money. Begin your journey to financial stability by taking the first step.

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Author Information

Ashley Maready

Written by

Ashley Maready

Ashley is an ex-museum professional turned content writer and editor. When she changed careers, she was finally able to focus on turning her financial situation around. She went from deeply in debt to homeowner in two years. Ashley has a passion for teaching others about better living through better money management.