How Can You Improve Your Credit Score?
A higher credit score provides you with more options and better interest rates for financial opportunities such as the following:
Getting a job
Renting an apartment
Lowering your insurance premiums
Receiving a car loan
Securing a mortgage
Gaining a home equity line of credit
Developing effective credit habits is an investment in your life. The following actions can help improve your credit score over time.
Pay Your Bills on Time
A history of consistent, timely payments strongly impacts your credit score. Always make at least the minimum payment, preferably the entire balance, before the monthly due date.
Diversify Your Debt
Your credit mix impacts your credit score. Creditors prefer a pattern of handling various types of credit responsibly, including installment loans, such as car loans, and revolving credit, such as credit cards and lines of credit.
Maintain Low Credit Balances
Your available credit balance significantly affects your credit score:
Keep your balances as far below your credit limit as possible while actively using your credit.
Aim to use no more than 30% of your available credit. For instance, if your credit limit is $2,900, try to keep your balance below $870.
Consider setting up balance alerts so you are notified when your balance reaches a specific amount or percentage of your credit limit.
Pay Your Credit Cards Multiple Times Monthly
Make small payments on your credit card monthly:
Micro-payments can help keep your balance lower and ensure you make your minimum payment.
A lower balance helps keep your credit utilization rate low, positively impacting your credit score.
Lower balances can reduce your interest expense if you carry a balance.
Make at least the minimum payment before the due date to avoid late fees.
Request a Credit Limit Increase
Your credit card issuer might increase your credit limit if you have had your card for at least one year and have made your payments on time. If your credit limit increases, avoid charging more, which increases your credit utilization rate and lowers your credit score. Understand that requesting a credit limit increase might result in a hard inquiry on your credit report, which can lower your credit score in the short term.
Keep Your Unused Credit Accounts Open
The length of your credit history impacts your credit score. Maintain your oldest accounts and use them sparingly for a positive effect.
Limit New Credit Accounts
Recent credit activity affects your credit score. Multiple credit inquiries in a short period can lower your credit score. Apply for new credit only if you absolutely need it and can comfortably manage the payments.
Track Your Credit Score Progress
As you make changes to your credit, allow adequate time for your credit score to adjust. Credit scores update monthly, so you should track them to ensure their accuracy.
FICO® Score Rating
Exceptional (800 or better): You could qualify for the best interest rates, depending on your debt-to-income (DTI) ratio and the amount of equity you have in any collateral.
Very good (740 - 799): You might qualify for better interest rates, depending on your DTI ratio and the amount of equity you have in any collateral.
Good (670 - 739): You could qualify for credit, depending on your DTI ratio and the amount of equity you have in any collateral, but you might not get the best interest rates.
Fair (580 - 669): You might have difficulty obtaining credit and will likely pay higher interest rates.
Poor (300 - 579): You could have difficulty obtaining unsecured credit.
No score: You might not have built up enough credit to calculate a FICO score, or your credit has been inactive for some time.
*This information is for educational purposes only.
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