How to improve your credit score

We think that credit checks are essential to your financial well being. This is why offering you this free service is a fundamental part of our business. Our patent pending analyses have a look at your credit history and financial obligation circumstance to advise you on just how much you can minimize loans, charge card financial obligation, and your home mortgage. Knowing your credit report will assist you comprehend your financial standing and provide you the ability to understand what next steps to take to more improve it.

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Credit ratings can alter once a week for some and not at all for months (or even longer) for others. It normally takes specific modifications to your credit information for your score to move, and when these modifications happen, it might take some time for your credit report to show your brand-new status. Due to this fact, you may wish to think about tracking your credit rating over longer amount of times. While the reality that your credit report hasn’t relocated a couple of months might appear concerning, it will likely appear less so in the context of a sixty-point enhancement over a whole year.

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When you open a brand-new credit line, a couple of immediate changes are typically made to your credit report. A lot of instantly, a brand-new difficult inquiry will probably be added to your report, and your typical age of credit history might drop. Due to these aspects, opening a new account is likely to drop your credit report in the brief term. However, as you begin to diligently settle your costs, the additional on-time payments, the greater number of total accounts and your now-growing age of credit history will likely outweigh the preliminary downsides, and your score can benefit in the long term.

How to Improve Your Credit Score

As a Credit Karma member, I frequently check in to see how my credit is doing and make sure there’s nothing suspicious going on there.

I really like Credit Karma because it’s free, provides detailed information about changes to your credit score, you can link all your accounts to monitor your debt to savings ratio, and they even provide suggestions for financial products to apply for and why.

Another great feature I like to play around with is my spending. When I connect my bank account, I can categorize each transaction and see where all my money is going, which gives me a clear view of my spending habits.

One day when I logged in to my account, I was very excited to see that my credit score had increased almost 100 points! I had managed to raise my credit score by 92 points in just one month. I know the types of actions I’ve taken to improve it, so below I’m going to share with you the steps I took to improve my credit so hopefully, you can improve your credit, too, if that’s a goal.

How to Improve Your Credit Score Quickly

The major contributing factor to improving my credit score in just 30 days was decreasing my credit utilization ratio. I lowered my utilization by 19%!

I accomplished this in two ways: First, I was paying more than the minimum amount due on my credit cards (which I do anyway, but I put forward a little extra than usual, approximately $25 more than required). Next, I simultaneously increased my available credit by half on one of my credit card accounts by accepting a credit line increase offer on my account. I would definitely suggest everyone accept their pending credit line increase offer, if available — just be smart enough not to use it!

It’s suggested that you request a credit line increase about once every 6-12 months. Why? It helps with your credit utilization ratio, which helps your credit score. Your credit utilization ratio is the amount of debt you have divided by the total amount of credit you’ve been extended. Sign in to your credit card account online to see if a credit limit request is waiting for you, or call the number on the back of your card to learn more about your options. The suggested utilization ratio is 30% or less on each individual account and all accounts combined.

Another major contributing factor is my perfect track record of on-time payments. According to Credit Karma, I have a 100% record of consistent, on-time payments. I manage to never miss a payment by maintaining my own personal bills calendar, which tells me when all of my bills are due. I even set reminders one week early to allow room for any mistakes.

It may be more helpful to auto-schedule payments at the beginning of the month on all of your accounts that allow that option so you won’t have to worry about it for the remainder of the month. If your income is steady enough and your account never hovers around zero, I would definitely suggest setting up auto bill pay for recurring monthly payments.

What Is Considered a Good Credit Score?

According to the Fair, Isaac and Company (FICO), the creator of the three-digit score used to rate your borrowing risk, the higher the number, the better your credit score. The FICO score ranges from 300-850. says a “good” credit score is in the 670-739 score range.

Your credit score is made up of five different factors that all impact your score in a different way.

How to Improve Your Credit Score5 categories that make up your credit score

  • 35% Payment history: This is a record of your payments on all accounts for the length of the account history. Think of this as a report card for your finances.
  • 30% Amounts owed: This is what makes up your credit utilization ratio. To determine your utilization ratio, take the amount of outstanding balances on each account and divide it by your total credit limit. So a credit card with a $5,000 credit line that has $3,000 in used credit would be a 60% credit utilization ratio — not so good.
  • 15% Length of credit history: This considers the number of years you have been borrowing. The longer your credit history of positive payments and responsible account management, the better.
  • 10% Credit mix This includes all types of credit, such as installment loans, revolving accounts, student loans, mortgages, etc.
  • 10% New credit: Every time you apply for a new credit card or loan product, a hard inquiry is reported on your credit report.

I believe my credit score significantly increased because credit utilization has a really high impact on my overall credit score. Also, as mentioned above, I have a perfect payment history, which makes up the largest portion of my overall credit score.

Credit Score Considerations

Credit Karma uses TransUnion and Equifax for their credit scores. Since all scoring models are not the same, my score may have changed in different ways with the other major credit bureau, Experian. I think it’s also important to stress that you can do exactly as I did, but your score still may not change in the exact same manner. Everyone’s score is affected in different ways, even though you may be taking the exact same actions. Sound confusing? Don’t worry, it is. Here are some examples of how this can happen:

  • If Jane has a history of perfect payments but forgot to pay her bill one month, her score won’t be affected in nearly the same manner as Megan, who has a long string of late payments on her report. In fact, due to Jane’s great payment record, she may even be able to call up her credit card issuer and explain what happened to see if they will consider not reporting a late payment to the credit bureaus. Megan, on the other hand, won’t likely able to get that removed no matter how hard she tries, given her historical patterns.
  • Hard credit inquiries can affect your credit score anywhere from about 4-10 points each. If John fills out an application, but it’s his third application in 30 days, it’s more likely that his score will drop more than Jeff’s, who filled out only one application in a 30-day time period.
  • Let’s say Jason and Betsy both increased their credit line by $500. Jason’s balance was at zero, so he now has $1,000 in open credit that’s not being used. Betsy’s credit line was maxed out at $500, so the new credit line increase only gives her $500 in available credit. So, they both performed the same action but will have very different outcomes.

Credit Score is one of the most important aspects of any individual’s financial life. Ranging from 300 to 900, a credit score simply indicates the way an individual handles his or her overall debt; be it credit card bills or loan EMIs. Your credit score plays a crucial role when you want to borrow some money from a lender. A low credit score can affect your loan amount, interest rates, loan eligibility, etc. So how can you improve your credit score? Well, one of the popular methods by which you can do so is a Gold Loan.

At a time when everybody is struggling with economic and financial hardships caused by the COVID-19 pandemic, gold prices are rising with each passing day. Due to this, individuals are going for the Gold Loan as they can get a higher loan amount. Well, gold prices have gone past INR 50,000 per 10gm (Gold price changes daily basis various economic factors) recently, and the loan amount directly depends on the price of your jewellery and ornaments. Banks can provide you a loan amount upto 90% of the overall gold value. Apart from getting a higher loan amount, you can also improve your credit score with Gold Loan.

In this article, we will cover everything related to the improvement of your credit score with the Gold Loan. So, to know more about this, you should keep reading this post.

Table of Contents

What is the Role of Credit Score in a Gold Loan?

The best thing about a Gold Loan is its lenient eligibility criteria, unlike unsecured loans. Lenders do not check the credit score of an individual before approving your gold loan application. So, even an individual with a poor credit score can apply for a gold loan and improve it over time by repaying the loan amount on time. Your Gold Loan will solely depend on the gold ornaments and jewellery that you will submit as the security against the gold loan amount. The loan amount will also be decided based on the overall price of your gold.

However, a credit score can affect your Gold Loan rate of interest. Individuals with a good credit score (700 or above) can get lower rates as compared to people with a poor credit score. This is one of the reasons why so many people also opt for a Gold Loan.

Methods to Improve your Credit Score

Repayment history is one of those aspects of your credit score that holds the most weightage of 35%. To improve your credit score with a Gold Loan is to repay the loan amount on time. We are showing some of the ways with which Gold Loan repayments affect your credit score. Have a look!

Timely EMI Payments

One of the best features of a Gold Loan is its flexible repayment methods. Lenders provide several repayment methods of which Equated Monthly Installments (EMI) is one of the popular ones among customers. The other methods are Bullet Repayment Methods, Upfront Interest Payment, Interest Payment at the end of tenure.

Coming back to the EMI repayment methods, you will need to pay a fixed amount every month towards repayment of the loan. This amount will consist of a portion of a principal amount and interest amount. When you pay your EMI on or before the due date, your credit score will start to improve over time as we told you about the significance of the repayment history. Making EMI payments on time during all your tenure will increase the credit score gradually. You also need to remember that if you miss any repayment, your credit score can affect negatively. If you pay the EMI amount even one day late, it will reflect in your credit report.

Early Repayment of Gold Loan

Gold Loans are usually considered to be loans with a shorter tenure that you can choose according to your convenience. One of the efficient methods to improve your credit score via Gold Loan is to make the repayment before the pre-decided tenure. Several lenders do not ask for any prepayment charges on a Gold Loan. When you clear off your gold loan with early repayment, this will reflect in your credit report and will impact your credit score positively. So, if your finances allow you to make the early payment of the Gold loan, this is certainly one of the best ways to improve your credit score.

Gold Loan Brings a certain Credit Mix

Having a credit mix in your overall profile also helps in improving your credit score. This is also one of those aspects of your overall credit score that holds 10% of the overall weightage. Having a credit mix means having both secured and unsecured loans in your financial profile. As you know that Gold Loan is a secured loan as you pledge gold ornaments and jewellery against the gold loan amount. That’s why a Gold Loan helps individuals in bringing that certain credit mix in their profiles.

Suppose you already have a credit card (an unsecured type of credit) on your name and you need immediate funds. Then it would be better for you to opt for a gold loan instead of a personal loan, which is an unsecured loan. So, a gold loan will reflect on your credit report, and if you repay it on time, your credit score will certainly improve. Being a secured loan, gold loan interest rates are also lower, so the EMI amount will automatically be lower and you can easily repay the loan amount.

Use the Gold Loan EMI Calculator to Estimate Your EMI amount

One of the efficient methods to make sure that you pay your EMI on time is to keep this amount within your repayment capacity. So how can you do it? Well, you should have an early estimate of the EMI amount to know whether this amount is within your repayment capacity or not. This can be done using the Gold Loan EMI Calculator. It will provide you the EMI amount according to your loan amount, Gold Loan interest rate and tenure.

When you will have an early estimate of the EMI amount, you will be able to manage your finances better. When you have a certain EMI figure in your mind according to your repayment capacity, chances of paying the EMI on time are higher. Individuals who don’t use this tool often end up missing their EMI payments and thus affecting their credit scores negatively. So, always use Gold Loan EMI Calculator before opting for a gold loan.

So, these are some of the methods to improve the credit score with the Gold Loan. If you are struggling with a poor credit score and looking to improve it, keep these methods in your mind.

You can improve your FICO Scores by first fixing errors in your credit history (if errors exist) and then following these guidelines to maintain a consistent and good credit history. Repairing bad credit or building credit for the first time takes patience and discipline. There is no quick way to fix a credit score. In fact, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast.

The best advice for rebuilding credit is to manage it responsibly over time. If you haven’t done that, then you’ll need to repair your credit history before you see your credit score improve. The following steps will help you with that.

Steps to improve your FICO Score

Check your credit report for errors

Carefully review your credit report from all three credit reporting agencies for any incorrect information. Dispute inaccurate or missing information by contacting the credit reporting agency and your lender. Read more about disputing errors on your credit report.

Remember: checking your own credit report or FICO Score has no impact on your credit score.

Pay bills on time

Making payments on time to your lenders and creditors is one of the biggest contributing factors to your credit scores—making up 35% of a FICO Score calculation. Past problems like missed or late payments are not easily fixed.

Pay your bills on time: delinquent payments, even if only a few days late, and collections can have a significantly negative impact on your FICO Scores. Use payment reminders through your banks’ online portals if they offer the option. Consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account.

If you have missed payments, get current and stay current: poor credit performance won’t haunt you forever. The longer you pay your bills on time after being late, the more your FICO Scores should increase. The impact of past credit problems on your FICO Scores fades as time passes and as recent good payment patterns show up on your credit report.

Be aware that paying off a collection account will not remove it from your credit report: it will stay on your report for seven years.

If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor: this won’t rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. Seeking assistance from a credit counseling service will not hurt your FICO Scores.

Reduce the amount of debt you owe

Your credit utilization, or the balance of your debt to available credit, contributes 30% to a FICO Score’s calculation. It can be easier to clean up than payment history, but it requires financial discipline and understanding the tips below.

Keep balances low on credit cards and other revolving credit: high outstanding debt can negatively affect a credit score.

Pay off debt rather than moving it around: the most effective way to improve your credit scores in this area is by paying down your revolving (credit card) debt. In fact, owing the same amount but having fewer open accounts may lower your scores. Come up with a payment plan that puts most of your payment budget towards the highest interest cards first, while maintaining minimum payments on your other accounts.

Don’t close unused credit cards as a short-term strategy to raise your scores.

Don’t open several new credit cards you don’t need to increase your available credit: this approach could backfire and actually lower your credit scores.

Watch to see how you can manage your FICO Scores:

How to Improve Your Credit Score

Close Close Managing your FICO Scores

More tips on how to fix your FICO Score & maintain good credit:

If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly: new accounts will lower your average account age, which will have a larger impact on your scores if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

Do your rate shopping for a loan within a focused period of time: FICO Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which you make your inquiries.

Re-establish your credit history if you have had problems: opening new accounts responsibly and paying them off on time will raise your credit score in the long term.

Request and check your credit report: this won’t affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.

Apply for and open new credit accounts only as needed: don’t open accounts just to have a better credit mix—it probably won’t raise your credit score.

Have credit cards but manage them responsibly: in general, having credit cards and installment loans (and making your payments on time) will rebuild your credit scores. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.

Note that closing an account doesn’t make it go away: a closed account will still show up on your credit report and may be considered when calculating your credit score.

Ready to start improving your FICO Scores? Join the myFICO Forums where thousands are on the same journey.

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All FICO ® Score products made available on include a FICO ® Score 8, and may include additional FICO ® Score versions. Your lender or insurer may use a different FICO ® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Scores and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history or credit rating. FTC’s website on credit.

Monitor your payment history

Your payment history is the most important factor for your credit score.

To improve your payment history:

  • always make your payments on time
  • make at least the minimum payment if you can’t pay the full amount that you owe
  • contact the lender right away if you think you’ll have trouble paying a bill
  • don’t skip a payment even if a bill is in dispute

Use credit wisely

Don’t go over your credit limit. If you have a credit card with a $5,000 limit, try not to go over that limit. Borrowing more than the authorized limit on a credit card can lower your credit score.

Try to use less than 35% of your available credit. It’s better to have a higher credit limit and use less of it each month.

  • a credit card with a $5,000 limit and an average borrowing amount of $1,000 equals a credit usage rate of 20%
  • a credit card with a $1,000 limit and an average borrowing amount of $500 equals a credit usage rate of 50%

If you use a lot of your available credit, lenders see you as a greater risk. This is true even if you pay your balance in full by the due date.

To figure out the best way to use your available credit, calculate your credit usage rate. You can do this by adding up the credit limits for all your credit products.

  • credit cards
  • lines of credit
  • loans

For example, if you have a credit card with a $5,000 limit and a line of credit with a $10,000 limit, your available credit is $15,000.

Once you know how much credit you have available, calculate how much you are using. Try to use less than 35% of your available credit.

For example, if your available credit is $15,000, try not to borrow more than $5,250 at a time, which is 35% of $15,000.

Increase the length of your credit history

The longer you have a credit account open and in use, the better it is for your score. Your credit score may be lower if you have credit accounts that are relatively new.

If you transfer an older account to a new account, the new account is considered new credit.

For example, some credit card offers come with a low introductory interest rate for balance transfers. This means you can transfer your current balance to this new product. The new product is considered new credit.

Consider keeping an older account open even if you don’t need it. Use it from time to time to keep it active. Make sure there is no fee if the account is open but you don’t use it. Check your credit agreement to find out if there is a fee.

Limit your number of credit applications or credit checks

It’s normal and expected that you’ll apply for credit from time to time. When lenders and others ask a credit bureau for your credit report, it’s recorded as an inquiry. Inquiries are also known as credit checks.

If there are too many credit checks in your credit report, lenders may think that you’re:

  • urgently seeking credit
  • trying to live beyond your means

How to control the number of credit checks

To control the number of credit checks in your report:

  • limit the number of times you apply for credit
  • get your quotes from different lenders within a two-week period when shopping around for a car or a mortgage. Your inquiries will be combined and treated as a single inquiry for your credit score.
  • apply for credit only when you really need it

“Hard hits” versus “soft hits”

“Hard hits” are credit checks that appear in your credit report and count toward your credit score. Anyone who views your credit report will see these inquiries.

Examples of hard hits include:

  • an application for a credit card
  • some rental applications
  • some employment applications

“Soft hits” are credit checks that appear in your credit report but only you can see them. These credit checks don’t affect your credit score in any way.

Examples of soft hits include:

  • requesting your own credit report
  • businesses asking for your credit report to update their records about an existing account you have with them

Use different types of credit

Your score may be lower if you only have one type of credit product, such as a credit card.

It’s better to have a mix of different types of credit, such as:

  • a credit card
  • a car loan
  • a line of credit

A mix of credit products may improve your credit score. Make sure you can pay back any money you borrow. Otherwise, you could end up hurting your score by taking on too much debt.

Follow our seven steps to improve your credit score and rating, and increase your chances of being accepted for credit.

Coronavirus (COVID-19) credit score update

Credit reference agencies have promised credit scores will not be affected where people take mortgage payment holidays during the coronavirus outbreak.

You can find more of the latest updates and advice related to the COVID-19 outbreak over on our dedicated Which? coronavirus information hub.

If you’ve been turned down for credit or are concerned that your credit history could stop you getting a credit card or loan, don’t despair. There are steps you can take to improve your creditworthiness.

There’s no single, universal credit rating or score that a lender will use when assessing your application. The scores you may have seen advertised by credit reference agencies, such as Experian, are simply indicators of your creditworthiness, based on the information contained in your credit report.

Each lender has its own system for deciding whether or not to lend to you – meaning you could be rejected by one, but accepted by another.

Check your credit report and correct mistakes

Remember to check your credit report at least once a year to make sure that the information it contains is correct.

If you notice any mistakes, it’s important to get them rectified as soon as possible to ensure they don’t have any adverse effect on future credit applications.

You can do this by contacting the company that provided the incorrect information or the credit reference agency itself, which will investigate on your behalf.

Register to vote

If you’re not on the electoral roll, you could find it very difficult to get credit.

That’s because lenders use this to confirm that you live at the address given in your application.

You can also register to vote online at any time through the Register to vote website.

Make your rental payments count

Private tenants who pay their rent on time can now use these payments to improve their credit score, thanks to a free scheme called the Rental Exchange.

The tenant pays rent to a third party called Credit Ladder, which in turn passes it onto the landlord or letting agent, and then lets Experian know whether the payment has been made on time.

The data will be visible to lenders by the end of 2017, but you can start getting your payments recorded on your file now.

Think before applying for new credit

Making an application for credit will leave a ‘footprint’ on your credit file, which will be visible to other lenders.

If you’ve recently been turned down for credit, it’s unwise to apply for another credit card or loan immediately, as multiple applications over a short period of time may suggest to lenders that you are in financial difficulty.

This could ultimately make them reluctant to let you borrow.

It’s worth asking lenders to perform a ‘quotation search’ rather than a credit search when you are looking to get new credit.

This should give you an idea of whether your application would be accepted, as well as what interest rate you’d be charged, but won’t be visible to other lenders on your credit report.

Quotation searches are most frequently used for mortgage applications, particularly if you’re shopping around for the best deal.

Applying for credit immediately after moving house or changing your job might affect your success rate.

Lenders like to see evidence of stability, so not having been in the same job or at the same address for long could count against you.

Keep your credit usage low

Lenders will look not only at your outstanding balances, but at how much credit you have available.

If you have low available credit, prospective lenders may see this as a sign that you’re not successfully managing your finances.

Aim to keep your balance comfortably below 50% of your agreed limit

End financial associations with ex-partners

Living with or being married to someone who has a bad credit rating won’t affect yours – but taking out a joint financial product with them will.

Opening a joint current account, for example, will create a ‘financial association’ between you and the other account holder.

Lenders may look at their credit report as well as yours when assessing your application, as their circumstances could affect your ability to make repayments.

If you have ever jointly held a financial product with someone you no longer have a relationship with, ask all three credit reference agencies to break this link so that your ex-partner’s financial situation doesn’t have any impact on credit applications you make in the future.

Build a good credit history

Showing that you can repay on time and stay within the credit limit you’ve been given will help convince lenders you are a responsible borrower.

If you’ve never borrowed money before, you’ll find it difficult to get access to loans and credit cards – especially those with the cheapest rates.

One solution is to take out a credit card specifically designed to help you build – or rebuild – your credit history.

Because these ‘credit builder’ cards are aimed at higher risk customers, APRs tend to be very high, so you should never use them to borrow.

Instead, pay your balance off in full and on time every month to avoid incurring any interest, and to build up a record of successfully managing credit.

Coronavirus: will deferring my payments affect my credit score?

On 31 March, the credit reference agencies Experian, Equifax and TransUnion confirmed that homeowners will have their credit scores protected when they take out a mortgage payment holiday.

The agencies have collectively introduced a special measure called an ’emergency payment freeze’. This will mean credit scores will be maintained at their current level for the duration of the payment holiday.

This formal announcement follows guidance from the trade body UK Finance earlier in March, which stated mortgage providers must ‘make every effort’ to ensure payment holidays don’t damage credit files.

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Last Updated: May 4, 2020 References Approved

This article was co-authored by Michael R. Lewis. Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. He has over 40 years of experience in business and finance, including as a Vice President for Blue Cross Blue Shield of Texas. He has a BBA in Industrial Management from the University of Texas at Austin.

There are 10 references cited in this article, which can be found at the bottom of the page.

wikiHow marks an article as reader-approved once it receives enough positive feedback. In this case, several readers have written to tell us that this article was helpful to them, earning it our reader-approved status.

This article has been viewed 293,386 times.

Credit reports are used by banks, credit card issuers and automobile dealerships to help them determine whether or not you are a good risk and if you are likely to repay any loan taken out. Also, many potential employers and landlords check your credit score to find out about your past credit history. There are some very simple steps you can take to raise your credit rating, as well as many things you can do to avoid having your credit score decline in the future.

Note: This article applies to the United States. While some of the information here is relevant for other jurisdictions, check with your relevant local sources to verify first.

Are you looking for tips on how to improve your credit score in the hopes of financing a car? The finance center at Power Mazda is here to help! With the following tips, Portland drivers should be able to raise their credit scores, while not only obtaining auto loans, but also receiving lower interest rates and monthly payments. You’ll be cruising the Wilsonville streets in a new Mazda for sale at Power Mazda in no time!


The following tips to increase credit scores should help potential car-buyers:

  • Check your credit report.
  • Assess your debts.
  • Create a payment plan.
  • Open a credit card.
  • Build a credit age.
  • Minimize new credit applications.

This list may seem intimidating, but details about them below should show you how to boost your credit score.

Power Mazda


Ultimately, if you don’t have an intimate knowledge of your credit score itself, how it got to where it is, and what actions affect it, it’s difficult to raise your credit score. These detailed tips should help Eugene drivers fix their credit situations.

  • Check Your Credit Reports
    • Mistakes can happen to your credit score. The first step to improving your score is checking with the three major credit bureaus—Experian, Equifax, and TransUnion—to ensure everything is accurate. The Fair Credit Reporting Act entitles you to one free copy of your credit report a year that you can access at
  • Assess Your Debts
    • List out all of your debts so you can get a handle on what exactly you owe. Your debt-to-credit ratio and number of credit cards are important to understand.
    • Your debt to credit ratio: How much available credit you have vs. how much you have actually charged. Ideally, you want to keep your credit card charges under 30% of the available balance every month.
    • Number of cards with balances: The more cards with balances, the lower your score.
  • Create a Payment Plan
    • Attack your debts with a repayment plan that includes tackling debts in collections, eliminating small balances on cards, and working to pay down larger debts.
  • Open a Credit Card
    • Your credit score could also be low because you simply have never had a loan or credit card before. Opening a card in Keizer can help establish credit, as long as you keep under the 30% balance and pay your bill on time every month.
    • If you don’t qualify for a regular credit card, consider a secured credit card. This type of card has a small limit and usually requires an initial deposit of up to a couple hundred dollars to open.
  • Build a Credit Age
    • Your credit score is built over time. If you are starting today, one way to improve or add to your history is to become a user on a family member’s account.
  • Minimize New Credit Applications
    • While we discussed a new card or loan as one of the ways to improve your credit score, you will want to be judicious in applying for new cards or loans.


Remember: if you do open new lines of credit to improve your score, make sure to make timely payments and keep your credit card balances low. Otherwise, if you need any more advice on how to get a better credit score, whether to lease or finance a new Mazda, or how to trade in a financed car, reach out to the Power Mazda finance center!

From your credit, to changing a car battery, we’re here to teach our customers about every facet of car ownership.

How to Improve your Credit Score

Building, improving, and maintaining your credit score can seem like a daunting task, especially when you’re not particularly sure what the scores consist of. Each of the three major credit reporting agency carry slightly different weights on the factors that they take into consideration, leaving you wondering what to prioritize.

Why should your credit score matter to you? Any time you apply for credit, or a loan, the creditor will look at your credit score and make a decision whether or not to extend credit to you based on your past and credit history.

No matter what your current situation is, building and maintaining a good credit score can often times be a decade or lifelong pursuit. Be smart and patient, and good things should happen. The lack of clear guidelines can be frustrating and even contradictory at times, but I’ll provide you with a list of best practices to follow.

Your FICO Credit Score Range

Before we get into ways to improve your score, let’s take a look at what a good credit score number is. Everyone has a slightly different view on these ranges, and with market changing events such as the current credit crisis, lenders may be more strict in what they consider ‘good’, or ‘excellent’, or which categories they are willing to give a loan or the best rates to. FICO scores typically range from 300 to 850. In general:

  • Excellent: over 750
  • Good: 720 or more
  • Acceptable: 660 to 720
  • Uncertain: 620 to 660
  • High Risk: Under 620

The average credit scores for Gen X and Gen Y fall in to the worst two categories, respectively.

So, how can you improve and maintain a high credit score?

1. Pay your Bills on Time

This is the biggest contributor to a healthy credit score, making up 35% of your credit score. Even one late payment can result in a significant drop in your credit score (50 to 100 points or more). If you are late on accident, pay the amount immediately and speak with your creditor about reversing any late fees.

The same rules apply to bank overdrafts and bounced checks. Although they may not go directly on your credit report, they could come back to haunt you when it’s time to take out a mortgage. Banks do share info. with each other.

I strongly recommend setting automatic payments on your bills so that you don’t forget to pay on time like I have done a number of times in the past (and each time I swear it will be the last).

2. Monitor your credit reports

You are allowed 3 free credit reports annually, by law through, which is a joint venture of the 3 major credit reporting agencies (Experian, TransUnion, and Equifax), and is mandated by the federal government. It’s the only site you should get your credit reports from (ignore the catchy jingles). If you notice any inconsistencies, incorrect information, or accounts that were not created by you, file a dispute with the credit agency immediately.

Credit reports will show you all of the accounts that you currently have open, how long they’ve been open, how much was paid each month, when accounts were closed, who requested your credit report and when, and any major problems. All good information to stay on top of.

And if you need some help staying on top of things and monitoring your credit, you should check out Credit Karma, where you can monitor your credit score and VantageScore for free!

3. Keep your credit card balances low

Your credit score can improve if you lower your balance to available credit utilization ratio. This means paying down your debts so that you are using less of the credit lines that have been extended to you. Be aware that opening new accounts to improve this ratio can actually harm your score, so don’t use that as a strategy.

4. Spread Out the Opening of New Accounts

If you open a number of new lines of credit at the same time, it can signal a potential problem to the credit reporting agencies and have an adverse effect on your score. If you have a number of life changing events that will force you to open new lines of credit, try to space them apart by at least 6 months or more.

5. Don’t Be a Nomad

Obviously, if you have to move, you have to move. However, lenders like to see stability in your residency as it can point to a more solid financial foundation. This may be most applicable to those who switch apartments in the same area after every lease is up. Any time you go to apply for a major loan, particularly a mortgage, you will be asked your recent previous residencies and how long ago they were – most often the question is ‘if you haven’t live at your current residence for more than 2 years, list your previous residence’.

6. Don’t Job Hop

If you move from job to job without improving your financial standing, it can signal a red flag for creditors. In a way, it’s not much different than an employer looking at the same history. Frequent changing of your job indicates that you may not be around for long. In the case of a creditor, it indicates you may not have a steady income for long to pay off your bills.

7. Don’t Close Old Accounts

The length of time that you have had a solid credit history for is an essential element of a healthy credit score. This means that if you have any old accounts that you were thinking of getting rid of, you may want to consider holding onto them and keeping them open.

This may be a tough one for those who like to consolidate and free themselves from a large number of accounts (like me), but it may be best for you to just hold on to and not use them.

8. Use Bankruptcy as a Last Resort

Bankruptcy can knock hundreds of points off of your credit score and should only be used as a means of survival. Bankruptcy can stay on your file for up to 10 years and all but eliminates the possibility of you taking out a mortgage.

9. Lay Low when you Know you’ll Need a Loan

Many experts point towards the fact that you should not make any major credit moves at least a year prior to taking out a significant loan or mortgage. Any addition of new accounts, closing of old accounts, or late payments could shut down your plans.

10. Have Patience and Discipline

Building a good credit score requires patience (in the form of time) and discipline. Do the right thing, don’t be hard on yourself, stay on top of things, and attack your debt, and you should be able to build and maintain a good or excellent credit score.

Related Posts:

How can I improve my credit score?

Equifax has some simple steps to help you keep your credit report healthy and improve your credit score:

  1. Pay your loans and bills on time
    Consider setting up direct debits and schedule loan repayments for your pay day.
  2. Keep track of your credit commitments
    Do your homework before applying for credit and keep track of your credit commitments. Making a number of applications within a short space of time will be recorded on your file and is not always looked upon positively by lenders, as it may be an indicator that you’re in credit stress.
  3. If you move house or update your contact details, notify lenders
    Advise lenders, phone and utility providers of your new email or physical address so they can re-direct bills to your new address. If you don’t pay these bills, a credit infringement or overdue debt could be listed on your credit report.
  4. If you are having trouble meeting repayments
    Talk to your credit provider who may assist.
  5. Keep track of your credit record
    Proactively manage your personal credit report by regularly checking your credit report. You can obtain a free credit report each year. You could also consider signing up to a monthly subscription to get your Equifax Score and monitor changes on your Equifax credit report through credit alerts.

Learn more: Credit Smart also has some tips on how to improve your credit score.

What impacts my Equifax Score?

Your Equifax Score is impacted by the information contained on your Equifax credit report. There are a number of different factors which could impact your Equifax Score.

The type of credit providers you’ve applied for credit with. There may be different levels of risk associated with approaching a bank, buy now pay later store finance provider, hire-purchase or a phone or utility company for credit.

The type of credit you’ve applied for. For example mortgages, credit cards, personal loans and store finance may carry different levels of risk.

The credit limit or size of the loan you’ve requested in your application. A smaller loan or credit card limit may carry a different level of risk to a larger loan.

The number of credit applications you have made. Each time you apply for credit and a credit provider obtains a copy of your report, an enquiry is added to your credit report. Applications for credit can include loans, credit cards and applications for phone and utilities contracts. Even buy now pay later retail finance can result in a credit enquiry.

The ‘shopping pattern’ of credit applications over time. The spread of activity over the credit report’s life to date can have an impact on your Equifax Score. Shopping around for credit and applying to a number of different credit providers within a short space of time may negatively impact your Equifax Score. This flags you as a greater risk than if you had infrequent credit applications with only a few credit providers. As well, a relatively new credit file with many enquiries may represent a different level of risk than an older file with only a few credit enquiries.

Directorship and proprietorship information. If you are a company director or a proprietor and this information is listed on your credit report it may impact your Equifax Score. If you are it’s important to check the individual and commercial sections of your credit report.

The age of your credit file. The date your credit report was created may impact your Equifax Score. E.g. a relatively new credit file may indicate a different level of risk than one that has been established for many years.

Personal details. Your Equifax Score takes into consideration personal details such as age, as well as, stability factors like length of employment and time at your current residential address to help assess credit risk.

Default information. Default information on your personal or business credit report such as overdue debts, serious credit infringements or clearouts may negatively impact your Equifax Score, while a lack of default information in your file may positively affect your score.

Court writs and default judgements. A court writ or default judgement on a credit report is an indicator of increased risk and may negatively impact your Equifax Score. On the other hand if you don’t have this information it would indicate a reduced level of risk.

Commercial address information. Information such as location and the length of time you have resided at your current business address is a measure of stability and may impact your Equifax Score.

Does ordering my credit file impact my Equifax credit score?

No. Getting your Equifax credit report will not negatively impact your Equifax Score. In fact, it may help you improve your Equifax Score by helping you identify any errors or if your identity has been compromised.

By ordering a copy of your Equifax credit report it may alert you to information on your credit report that could be impacting your Equifax Score. For example, if there is something on your credit report that is inaccurate or credit enquiries that lead you to believe your identity may have been compromised.

If there is something incorrect on your Equifax credit report, find out how to fix it here.

If, after reviewing your Equifax credit report, you think your identity has been compromised, you should contact the relevant credit provider for more information and, if necessary, seek an investigation. You can also place a ban on your credit report. Find out more here.

When you apply for a mortgage, one of the first things lenders will want to check is how you have managed any borrowing in the past.

They do this by looking at your credit score, which is essentially a number that represents your credit history. When calculating this score, many factors are considered, including whether you make monthly payments on time, how much of your available credit you are using, and what your total debts are.

The higher your credit score, the lower risk you are considered to be by lenders, which means any mortgage application you make is more likely to be accepted. Conversely, the lower your score the higher the risk lenders will consider you, which means they may be wary about offering you a mortgage.

Is your credit score lower than you expected? The good news is that there are plenty of things you can do to improve it and boost your chances of having your mortgage application accepted. Here are our top tips.

Make sure credit is registered to the right address and name

If you’ve moved home recently, make sure any credit agreements you have, such as credit cards or personal loans, are registered to your current address rather than your old one, and that they are held in the correct name.

Don’t miss credit card or loan repayments

Always make any debt repayments on time and try to pay off more than the minimum each month when possible so you can pay off what you owe more quickly. Proving that you are a responsible borrower can really help bump up your credit score.

Check you are on the electoral register

Even something as simple as not being registered to vote can really damage your credit score. If you aren’t already on the electoral roll, you can sign up at

Shut down any credit accounts you don’t use

If you’ve got lots of credit cards cluttering up your wallet that you don’t ever use, it’s time to get rid of them, as lenders will be nervous if you’ve got access to lots of credit. As well as cutting up the cards themselves, contact the card providers and let them know you want to cancel your accounts.

Make sure no-one has opened a fraudulent account in your name

Financial fraud is on the rise, so it’s a good idea to regularly check your credit history to see if there has been any suspicious activity which could have affected your credit score. If you spot anything that doesn’t look right, contact the credit provider involved. If you have been a victim of fraud, ask the credit reference agency to correct their records and notify Action Fraud on 0300 123 2040. You can find more information at

Build your credit history

It might seem odd, but if you’ve never had a credit card or personal loan, this can mean you have a low credit score simply because there isn’t any evidence to show how you would manage any borrowing. If you want to build up your credit score, one option is to consider applying for a ‘credit builder’ credit card. These typically offer very low credit limits and charge steep rates of interest, but the aim is that you repay what you owe every month therefore demonstrating you can manage debts sensibly.

Don’t make too many applications for credit at once

If you make lots of applications for credit in quick succession (and that includes things like mobile phone contracts) lenders will be worried that you appear desperate to borrow cash. Always space applications out, and if you’re rejected by one lender don’t then apply to several others, as they are likely to refuse you too. It’s also a good idea to ask lenders to do a ‘soft search’ which will tell you what sort of lending rate you can get rather than a ‘credit search’ as this is less likely to impact on your credit score.

Try to avoid joint credit

Remember that if you apply for credit in joint names and the other person has a bad credit score, this will affect you too. If you’ve separated from someone you had a joint credit agreement with, let the credit reference agencies such as Experian, Equifax and CallCredit know so they can record this on your credit history.

Please note: Whilst this guide gives an indication of how to improve your ‘credit-worthiness’, please bear in mind that when making an application to a lender, they will also risk profile your application. And, whilst your credit score may be high, you may not be what they’re looking for – at this particular time – which is why you should always speak to a mortgage broker who can consider all factors.

How to Improve Your Credit Score

If you’re wondering how to improve your credit score, you may be glad to hear that it isn’t as hard as you might think. A credit score is a numerical representation of your money-borrowing habits. It stands for the likelihood of you paying back a loan in full.

Your credit history comprises all of your debts, including loans, credit cards and mortgages. Your credit score is calculated based on this credit history. The higher the number, the more likely it is that a lender approves a loan and the better your terms will be. You can improve your score in many ways, like paying down debt and making timely payments.

Find information on loans to pay off credit card debt, how to consolidate your debt and a few key ways to raise your score by reading the sections discussed below.

Tips for Improving Your Credit Score

If you’re searching for “how to fix my credit myself,” then you’re ready to make smart financial decisions and you aren’t looking for a handout. After all, the only way to improve your credit score is to do it yourself.

Tip 1: Maintain a Low Debt-To-Credit-Limit Ratio

Many factors affect your score, like the amount of debt compared to your credit limits. Knowing how to increase credit limit options for your cards and open accounts is a good place to start. The key is to have a low debt-to-credit ratio across all your accounts.

For example, if you have a total debt allowance of $15,000 and have $4,000 in outstanding debt, your debt-to-credit ratio is about 27 percent. A good rule of thumb is to keep your debt-to-credit ratio under 30 percent.

Tip 2: Pay Bills on Time

One of the most damaging blows to your credit score is failing to make a payment by its due date. Paying even just one day late can knock your score down by dozens of points. It can be tricky trying to remember all the due dates. To make it easier on yourself, turn on automatic payments. If that isn’t an option, set reminders on your phone.

Tip 3: Use a Debt Payoff Planner

A debt payoff planner can be your best friend when you’re trying to eliminate debt. This tool is available on the app store and can even be found on many websites. Simply download the planner, enter information on your debts and create a schedule for paying your debt.

Tip 4: Keep Unused Credit Card Accounts Open

It may be surprising, but closing unused credit card accounts actually hurts your score rather than helps it. It lowers your credit utilization ratio, which lowers the score. However, if the account has annual fees, perhaps you should take the hit since you might be better off in the long-run.

Tip 5: Limit Hard Inquiries

Inquiries remain on a credit report for up to two years, which can make it harder to improve poor credit scores. It’s a good idea to limit the amount of hard inquiries that show up on your report. An inquiry is a request to check your credit.

A hard inquiry comes from a lender, like a credit card company or auto lender, when it is approving you for a loan or credit line. Too many hard inquiries can negatively affect your credit score.

A “soft” inquiry, on the other hand, does not affect your score. This occurs when you check your score yourself or your employer runs a background check.

How long does it take to improve a credit score?

If you’re asking yourself, “How long does it take to improve credit score numbers?” the answer may not be very exciting. Unfortunately, you cannot fix a bad credit score overnight. Paying off all your debt at once won’t do it, either.

Knowing how to improve your credit score is just as important as understanding the length of time it takes. Negative changes to your credit score can stay on your credit report for varying amounts of time. For example, delinquencies (unpaid credit card bills) remain on a credit report for up to seven years.

Public record items, such as a bankruptcy, can remain on a credit report for up to 10 years. Inquiries are requests by businesses to check your credit. These remain on a credit report for up to two years.

Borrowers can use handy tools to determine how much debt they will eliminate month by month. There are many debt payoff planner apps and websites that help borrowers understand their debt. They can play around with numbers and get an estimated date of completion.

The best way to improve your credit score is to continue making timely payments and limit new inquiries. Having too many inquiries at once can bring your score down by dozens (if not hundreds) of points. Pay all monthly bills on time and do not open any new accounts.

Learn About Debt Consolidation Options

A credit cards balance transfer is an option for borrowers looking to simplify their debt. Owing various amount on several cards can be confusing, especially when they all have different interest rates and due dates. Some companies offer credit cards especially designed for balance transfers.

Debt consolidation can save you big bucks in the long run. Transferring the balance of multiple credit cards into one can cut the amount of interest paid out to multiple lenders. However, it is important to read all the fine print. Some lenders charge a 3- to 5-percent fee for transfers.

Some borrowers take out loans to pay off credit card debt, which are also known as debt consolidation loans. The idea is to make smaller monthly payments with a “better” rate. However, borrowers must be aware of lengthier loan terms, which increase the total amount of interest paid over time.

Debt consolidation loans also help minimize the amount of payments made in a single month. Borrowers with six different card payments may struggle to remember all six payment dates, which could cause a late or missed payment.

How to Improve Your Credit Score

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.

  • You can improve your credit score by focusing on two factors: your payment history, and your debt balances.
  • Credit bureaus tend to not share the exact calculations they use for credit, but they’ve shared an overall idea that makes it clear that payment history and debt balances have a bigger effect on your score than anything else.
  • Visit Business Insider’s homepage for more stories.

Your credit score is calculated using a formula with a ton of inputs. But while the companies behind your score don’t make the exact calculation public, we do know the most important factors in our credit.

You may hear a lot of theories about tricks to quickly fix your credit, but there are two things you should focus on above anything else: Always pay on time, and keep your rotating account balances low. If you can do those two things and resist the urge to tinker with your credit report, much of the rest of your credit will take care of itself.

Here are the two most important strategies you can use to build an excellent credit score in the short and long term.

The factors in your credit score

While we don’t know exactly how your credit score is calculated, the big credit-scoring agencies have given us a lot of insight into the high-level factors. These are the top five inputs in your credit score:

  • 35% payment history
  • 30% current debt balances
  • 15% length of credit history
  • 10% new credit
  • 10% credit mix

If you add up the bottom three factors, you get 35% of your credit score. That means the top factor alone is worth as much as the bottom three combined.

While you should certainly not ignore your average age of credit, pursuit of new credit, and credit mix, those factors don’t deserve much attention. Unless you are planning to apply for a new mortgage or auto loan in the next six to 12 months, there are two clear places to put most of your efforts: payment history, and debt balances.

2 inputs contribute more than half of your credit score

Payment history makes up 35% of your credit score, and your current debt balances make up 30%. Combined, that’s 65% of your score. If you put your efforts here, the rest should fall into place.

Also, consider how your credit-score factors come together. If you pay your credit card on time for years, your length of credit history will increase over time. If you don’t sign up for new credit accounts while doing it, your new-credit factor won’t drag down your score.

Now that you know where to focus, let’s take a look at what you should do to get a perfect score in the payment-history and debt-balances portions of your credit score.

Never ever make a late credit or loan payment

The most important factor in your credit score is your payment history, so this deserves the most focus. Further, a late payment stays on your credit report for seven years, so it takes a long time to fix a mistake in this area.

Contrary to a popular myth, you don’t need to carry a balance to build an on-time-payment history. If you don’t have to make a payment, it’s considered similar to an on-time payment. Just make sure you use your cards at least every once in a while to avoid having them closed for inactivity.

The easiest way to avoid late payments is to set up automatic payments. I have a few old credit cards that get a small charge every month — one gets Netflix, one gets Spotify, and one gets Hulu. I generally don’t use those cards for anything else, so I have autopay set up, and I never have to worry about paying late or overdrafting.

I generally pay off my more active accounts in full a few times a month. This helps me avoid having to make one big payment at the end of the month. There is no penalty for making extra payments, only for missing a payment.

If there is any one thing you should do for your credit, it is always pay on time. No exceptions.

Keep your credit-card balances at zero

The second-biggest factor is your credit balances, which make up 30% of your score. If you have bad credit and high credit-card or credit-line balances, paying them off in full is often the fastest way to improve your score.

Paying off your credit cards may be easier said than done, but the best strategy for your balances is keeping them at $0, or paying them off in full each month. If you pay off your card in full by the due date, you never have to pay interest.

Paying on time and keeping your balances low saves you money and builds your credit. If you have credit-card balances, paying them off is the biggest win-win you can find. Sticking with a debt-avalanche plan may help you get those balances paid off for good.

Don’t obsess over the little things

I have ultra-frugal friends who obsess over things like saving $0.10 on a tube of toothpaste or a nickel on shampoo. While a penny saved may be a penny earned, focusing on big budget wins can put hundreds or thousands of dollars back in your pocket. Your credit works the same way.

A new credit inquiry typically dings your score by just a few points, where carrying a large balance on your credit cards can drag it down by dozens of points. A single late payment is a lot worse than a few inquiries. Focus on the big things, not the little things.

For your credit, the two big things are paying on time and keeping balances low. If you can do that, you’ll be on track for short-term and long-term credit success.

Need help with your credit score? Our partner Experian offers credit reporting and repair »

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.

While you may not think of it regularly, your credit score can have significant ramifications on some major life events. Your score can influence whether or not you’re approved for things like credit cards or personal loans. It can change how much you pay in interest for a mortgage or whether you get accepted into an apartment complex. It can even affect your chances of getting and staying married. As such, it’s not surprising that people with the highest credit scores typically report receiving the best rewards from credit card issuers.

If a single number can have such a meaningful impact, it’s wise to do as much as possible to improve it. At Credio, we put together a quick primer on what factors influence your credit score along with some easy ways to up your standing. Note that the percentages listed for each item come from FICO.

10 tips to improve your credit score

1. Payment history: 35%

The biggest factor influencing your score is whether or not you pay back your debts on time, whether it be from a credit card or student loan. Being 30, 60, or 90 days late on a payment can put a big dent in your credit health. However, the worst things by far are total write-offs like bankruptcies or foreclosures.

Fortunately, this is one of the simplest parts of your score to improve. But it does take time.

Tip 1: If you find yourself with what’s called a ‘derogatory mark’ (a credit score penalty for a late payment), you can still prevent things from getting worse. If you make a payment only 30 or 60 days late, it should have a minimal impact and roll off in about two years. If you’re 90 days late, however, that could stay on your credit report for up to seven years! One 90-day late payment could damage your score as much as a bankruptcy filing. So, the easiest thing to do is pay your bills on time. If that proves impossible, try your best to limit delays to 30 or 60 days.

Tip 2: It’s not always easy, but you can formally dispute a derogatory mark with one of the credit bureaus through their website, especially if there is an error in your credit report. Errors will typically be removed without too much issue, but it can be difficult to sway a credit bureau to alter a legitimate record.

2. Amount of debt: 30%

The next biggest impact on your credit score is the amount of debt you owe. While this may seem straightforward, there are some tricks that can help you boost this segment’s score.

Tip 1: Get as much credit as you can. Credit bureaus typically calculate your debt levels as a percentage of your total credit limit. So, if you have a credit card balance of $100 and your limit is $1,000, the bureau will view you as using 10% of your credit utilization. Generally, credit bureaus like to see a wide cushion between your balance and your limit — in other words, a lower percentage.

The easiest way to lower the percentage is simply by raising your credit limit. Getting another credit card (making sure to avoid annual fees) can easily double or triple your limit. You can also call your credit card provider and ask for an increase in your limit. These actions can easily and permanently boost this segment’s score without changing your spending habits.

Tip 2: It may seem counterintuitive, but you should regularly use the lines of credit that you have. While many think that using your credit card is viewed negatively, it can actually help build a history of on-time payments. Having a balance that needs to be paid off every now and then shows lenders that you’re capable and willing to pay back your debts. However, you should always pay off your credit cards in full each month to avoid any interest charges. The average American has nearly $5,000 in credit card debt, equating to hundreds of dollars per year in unnecessary interest charges.

3. Length of credit history: 15%

Two things matter when calculating this part of your score: the age of your oldest account and the average age of all your accounts. The older your credit history is, the higher your score.

Tip 1: Get credit early. Many people view credit cards negatively, but this perception can hurt you down the road. It can take up to seven years before credit bureaus start to up your score in this segment, so getting credit early is a must. Even if you decide never to use the card, it may be a good idea to get a no-fee, low limit credit card once you’re 18. The extra years that you will have on your credit history could save you thousands when you apply for a mortgage decades later. College students can take advantage of cards specifically designed for them. Others can find some great options here:

Tip 2: Don’t close old credit accounts. While you may be tempted to close a credit card you haven’t used in years, it could end up negatively impacting your score if it’s old enough to lengthen your average credit history. Closing newer accounts is likely fine, but make sure to keep your oldest accounts open.

Tip 3: Add yourself to someone’s existing credit card. While this takes a friend or family member to pull off, you can easily up your credit age by adding your name to a credit card that they’ve already had for a few years. You don’t even have to end up using that credit card at all, but being registered on the account could help improve your credit history more than any other method.

4. Credit inquiries: 10%

Credit bureaus often look at how many lines of credit you’ve applied to recently. The more times you apply for credit, the lower your score will be. Credit inquiries come in two forms: hard and soft. It’s very important to understand the difference, especially when looking to improve your score.

Tip 1: Hard inquiries occur when an institution checks your report to approve or decline you for new credit. When applying for things like credit cards or mortgages, this is fairly impossible to avoid. Still, the impact is typically small and rolls off completely after 24 months. Bureaus sometimes view applying for more sources of credit as a negative because it may indicate that you’re having cash flow troubles, but a few hard inquiries here and there shouldn’t be a problem.

Tip 2: Soft inquiries are more passive, and can sometimes occur without your knowledge. Examples include background checks for a new job or looking up your own credit score online. These typically don’t impact your score as much as hard inquiries (if at all), so don’t worry about limiting soft inquiries as much as hard inquiries.

5. Credit mix: 10%

Another relatively small portion of your score, this section looks at the types of credit you have as well as the number of accounts in your name.

Tip 1: The most popular forms of credit are credit cards, mortgages, auto loans and student debt. Although it seems to contradict common sense, you actually get more points for having a wide array of debt sources, as it can show your ability to pay back various forms of loans. The easiest way to boost your score is by building a well-rounded debt portfolio. However, this constitutes only a fraction of your score and should happen fairly naturally as you age anyway, so don’t worry too much about adding numerous accounts simply to game the system.

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Editor’s note: This post has been updated with the latest credit card information.

Now is a great opportunity to rack up rewards points, plan for future vacations and make the most of your everyday spending habits. It also brings a new chance to focus on improving your credit score, something that can earn you better loan and reward terms. Here’s where to start:

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In This Post

Monitor your credit score

Check your credit score regularly. This will show you in real time how your actions impact your credit score. Issuers that offer free, regularly-updated credit scores to cardholders include American Express (by enrolling in its free MyCreditGuide), Bank of America, Barclays, Capital One (via its CreditWise service), Chase (via Credit Journey), Citi, Discover (via its Credit Scorecard service), U.S. Bank (via the CreditView Dashboard online service) and Wells Fargo (through Wells Fargo Online).

How are credit scores calculated?

FICO scores are based on five factors: payment history, amount owed, length of credit history, new credit and credit mix. The total amount you owe and your payment history hold the most sway over your FICO score, with each accounting for more than 30% of your total score.

Related reading: How credit scores work

How to improve your score

First, check your credit report to see what might be dragging down your score. Address any errors. Then, pay your bills on time every time.

Once you pay a card off, keep the account open. While it may feel like a victory, closing down a paid-off card can actually pull your credit score down.

How do inquiries affect credit scores?

The impact of an inquiry on your credit report depends on the type of inquiry. Hard inquiries, which happen once you’ve applied for a lease, loan or credit card, can bring your credit score down slightly. For most people, one hard inquiry shaves five points off a credit score.

Multiple inquiries for things like auto, mortgage or student loans are typically treated as a single inquiry since they tend to signal a customer shopping around for the best rates and terms. Inquiries for several credit cards within a short time period can be perceived as a red flag by lenders. Soft inquiries are when you check your own credit report or a lender pre-approves you for a loan offer. These don’t negatively impact credit scores.

Review your credit report

Your credit score is only part of the picture. You’ll also want to check your credit report, especially if you’re just starting on the path of improving your credit. Correcting mistakes on your credit report is one of the easiest ways to begin improving your credit.

The government grants you free access to a credit report each year from each of the three major credit reporting buearus — Experian, Equifax and Transunion. Go to for yours. You’re also entitled to a free credit report whenever a creditor denies your application for credit.

Grade your own financial performance

Credit agencies offer a well-rounded perspective of how lenders see you, but it’s equally important to look in the mirror and change habits that may be holding you back.

How to use your credit card properly

The smartest way to use your credit card is to pay it off every month and collect your rewards. If you must carry a balance, make every single payment on time. Set your account to autopay your minimum payments. Make additional payments to pay down your debt as quickly as possible, particularly if it comes at a high interest rate.

How to Improve Your Credit Score(Image courtesy of Experian)

You’ll want to keep any balance you do carry to under 30% of the card’s limit since credit utilization — how much of your card’s available credit you’re using at any given time — factors into your credit score. Shop around for interest rates and don’t be afraid to contact your lender and ask for a decrease if you have a track record of on-time payments, especially during this period of exceptionally low interest rates.

How long does it take to improve credit?

Settle in because it’s going to take a while to fix a damaged credit report. Delinquencies — generally reported to credit bureaus after two consecutive missed payments — remain on your report for seven years. Inquiries can remain on your credit report for up to two years.

Make the most of your checking account

Your bank is your best friend when it comes to improving your credit score. You’ll want to use your checking account to set up automatic minimum payments on every account you have. Remember, payment history makes up about 35% of your credit score.

Mistakes linger on credit reports, and the best thing you can do for your credit score is avoid them. Many banks offer budgeting tools to help track spending and saving as well.

Consider requesting a credit limit increase

If you’ve got a history of on-time payments or just got a big raise, consider asking for higher credit limit. This might trigger an inquiry that’ll temporary hit your score by a few points, but in the long term, having more available credit drives down a metric called utilization and ultimately drives up credit scores.

Credit limit increases may also be easier to get than you think. A 2018 survey conducted by revealed that 85% of cardholders who asked for a credit limit increase were successful.

Earn credit for paying your bills and maintaining bank balances

If you don’t have a strong credit history, consider Experian Boost, a free service for adding utility and telecom payments to your Experian credit file to build payment history.

If you’re a saver and have a history of healthy bank balances, UltraFico may be an option for you. UltraFico is a pilot program that takes checking and savings information into account when calculating scores.

Bottom line

During a good or bad economy, you always want to ensure that your credit score remains high. Those with lower scores can be stuck with credit cards that have limited perks, more fees and higher interest rates. It also makes it harder to rent or buy a home, turn on utilities or get personal or auto loans. You can avoid this fate by following the steps outlined above.

If you want to learn even more about credit scores, check out these links:

How to Improve Your Credit Score

Having a poor credit profile can be a handbrake on any business looking to grow, limiting your access to finance or making it more expensive.

The stronger your credit profile, the more likely your business finance application will be approved, and you’ll generally have a greater choice of the type of finance available to you, explains business coach Amy Chen.

Steve Morrison, owner of The Loan Operator, says a phrase he often hears from lenders is: ‘we price relative to risk’.

“So it stands to reason the stronger your credit profile, the cheaper the money,” he says.

Understanding your credit profile

It’s best to think of your credit profile broken up into the following two categories:

Credit report – contains information about your credit history, including your current borrowings; the times you’ve applied for credit; unpaid or overdue loans; court judgements against you; and payment, bankruptcy and default history.

Credit score – this score is calculated based on your credit report. Each agency has its own formula that ranges from zero to 1000 or 1200. The higher the score, the better.

To check your credit score, you can obtain a free copy of your credit profile once a year from each of the three major Australian credit reporting agencies, Equifax, illion and Experian.

Improving a poor credit score

If you do have a poor credit score, Chen says your first step should be to look for errors in your report.

“Mistakes happen all the time. Sometimes late payments are reported by accident or your profile hasn’t been updated with any loan arrangements that you’ve agreed to with your credit provider,” Chen says.

“There have also been cases of identity theft that have been picked up by listings on a credit report.”

Chen advises you should check for errors at least once each year as recent errors are typically easier to rectify, and you likely won’t be under time pressure if you’re waiting on a finance application.

The long-term approach

Improving your credit score will take time. Indeed, payment histories stay on your credit report for two years, says Chen, while serious infringements can take up to seven years to be removed.

Rest assured though that there are steps you can take to improve your score over time, adds Chen.

“The key is being diligent with paying your bills and obligations on time and demonstrating the behaviours of a good borrower because that’s what credit providers are looking for,” she says.

7 tips to improve your credit score

Here are seven tips from Chen and Morrison for improving your credit score:

  1. Pay your bills and make your loan repayments on time. “Even a bill as little as $150 can be reported as late if it’s outstanding for more than 60 days,” Chen says.
  2. Check for mistakes. Everyone makes mistakes – including credit reporting agencies. So, make sure they don’t negatively impact your business by checking your credit report for errors.
  3. Manage your cash flow. “Planning your cash flow will alleviate stress and pressure because you’ll know what bills are coming up and have cash set aside to pay for them. Keep a buffer for unexpected expenses, and keep an eye on your debtors’ outstanding accounts,” Chen says.
  4. Transparency. “Maintaining supplier relationships not only means you’ll have a better chance of securing more favourable terms… The same applies with loan repayments – speak to your lender before you breach terms.”
  5. Maintain and comply with the debt facilities that you have. “You need to have an ongoing credit facility to maintain your credit score and be considered credit active, otherwise you may be starting from scratch again. As for all debt in your business, make sure it’s appropriately sized and on terms that are workable for you and your business,” Chen says.
  6. Don’t maintain more debt than you need: “Don’t be scared of debt, but too much can be your undoing. Not only will your credit score be negatively affected, but lenders will also see you as a higher risk if they believe you have more debt than you can handle,” she says.
  7. Close and destroy any unused credit cards: “And if you have a high credit card limit and never get near the limit then reduce the card’s limit,” he says.

Want more tips on overcoming any barriers your business is facing? Sign up to the Prospa Blog email.

The information in this post is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.

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How to Improve Your Credit Score

How do you feel when you apply for a loan and your request is declined? Not so great right? I can tell you because I have been there before.

No sentence hurts more than “Unfortunately, you are not eligible for a loan” when you need quick cash for an emergency or business.

Nancy’s story changed when I shared tips on how to improve her credit score and she followed these tips dearly. she got a loan weeks ago to scale up her business online capacity, which was a much-needed measure due to COVID-19 Outbreak and the lockdown. All thanks to boosting her credit score and of course to me! 😀

Your credit score is one of the most important measures of your financial health. It helps your lender determine how responsible you are. The better your score, the easier your loan requests are approved. A higher credit score can grant you access to the lowest interest rates in the market.

There are some simple things you can do If you’d like to improve your credit score on FairMoney. It takes a bit of effort and, of course, some time. Here’s a guide to achieving a better credit score with FairMoney.

1. Use FairMoney To Pay Bills

Some people just delete the FairMoney app once they don’t get a loan the first time, that’s a wrong move. To improve your credit score, you need to keep the app on your phone and pay bills, buy airtime and data. This will help us get more information to give you a loan offer.

2. Ensure You Receive SMS From Your Bank

One of the things the credit engine checks on your mobile phone is your credit alerts. It helps to determine your credit behaviour. Hence, you need to keep your bank alerts on your phone, ensure the sim that receives the alert is active on the android phone you use in applying for a loan.

3. Upload Your Bank Account Statement.

If you do not receive SMS alerts on your phone or you probably lost your sim, one thing that would help improve your credit score is to upload your statement of the account while requesting for a loan. This way, your credit and debit alerts can still be accessible.

4. Pay Loan On Or Before Due Date.

Your repayment history is key and can be the most influential factor in getting a loan. Repaying your loan on or before the due date shows that you’re responsible with credit, and might help you get higher loans.

Also, ensure you are not indebted to any other loan platform and your BVN has not been tarnished (a BVN could be flagged from the bank due to some inappropriate activities and behaviours avoid such). Follow all these steps and watch how your chances of getting a loan increase.

If you find these tips helpful, kindly share it with your friends and also drop a comment.

How to Improve Your Credit Score

Derin Clark

At a glance

  • Your credit score is a measure of how creditworthy you are based on several factors.
  • Lenders use different methods to calculate your score but, in general, the higher your credit score then the more likely you are to obtain credit on good terms.
  • If your credit score is too low, the lender may well decline your application for credit.

Understanding your current credit report

Before improving your credit rating it’s important to learn about the different credit reference agencies, what information they examine and what they can deem as a good or bad credit score. Our helpful guide to credit checks explains everything you need to know.

Check your latest credit score

It’s important to check your latest credit score before making steps to improve it . Make sure that all the information on the report is accurate, and get it corrected by contacting the lender or credit reference agency if it isn’t. TotallyMoney can provide you with a credit score and report, free, forever. Use them to track your finances and to find lenders most likely to accept you for credit.

1. Disassociate yourself from your ex-financial partner

When you take out a joint mortgage or joint bank account, you become “financially linked” to the person you’ve taken it out with. If they have a bad credit rating, it could impact yours. If you have split up with your partner, husband or wife and/or the joint financial product you have taken out is no longer between you both, inform the credit reference agencies of your disassociation. If not, the other person’s financial dealings could still have an impact on your credit score.

2. Get on the electoral roll

Getting on the electoral roll will improve your chances of being accepted for credit. This is because prospective lenders and credit reference agencies use this to check you are who you say you are, and you live where you say you live. Ensure your credit record shows correct address details. Living at the same address, being employed in the same job (with the same employer) and having the same bank account for a reasonable period will also help.

3. Close unused credit cards, store cards, direct debits and mobile contracts

Lenders may consider the amount of credit you have access to, as well as the amount of debt you owe. Close all credit accounts such as credit cards, store cards, mobile contracts and accounts that you don’t use or need anymore. Cutting up cards is not enough – you need to physically contact the provider and close the account! They will ask you why because they don’t want you to leave, so be prepared to stick to your guns and close it down.

4. Don’t miss or make late repayments

Missed and late payments can stay on your credit file for up to six years. If you’ve made a late payment due to circumstances beyond your control (i.e. your direct debit wasn’t set up in time), so long as you made the payment promptly when you noticed, talk to your credit provider and see if you can get this black mark removed. This also applies to late payments for utility bills like gas or electricity.

Start to improve your credit now

There are specific credit builder credit cards and bad credit loans designed to help you improve your credit over time. A credit builder credit card has the advantage of no interest as long as you pay back your full balance on time each month.

Bad credit loans are for people with low credit scores, or who have little to no credit history. These loans typically have higher interest rates and greater restrictions than other loans however, they can be useful if managed responsibly. Compare bad credit loan rates today.

5. Pay off your debts

Pay off more than just the minimum payment. This signifies good behaviour to a prospective lender. To be managing your debt well, ensure that you’re making headway into repaying what you’ve borrowed.

6. Build your credit history with a credit card

If you’ve never had credit before, it’s difficult for a lender to assess you. Consider taking out a credit building credit card , making a couple of purchases on it each month and then repaying the balance in full at the end with a direct debit to build a good credit history. This will show that you can responsibly manage credit.

7. Space out your credit applications

Credit reference agencies don’t get told if you are rejected for credit, but a note is made every time a credit search is made by a lender. Don’t use a scattergun approach when applying for credit. The more credit searches carried out in a short space of time, the less likely you are to be accepted for credit. Space out credit applications and, if possible, try to find out whether you’re likely to be accepted before applying. Do not apply for products unless you really need them.

8. Take out a prepaid card to repair your credit

Credit builder prepaid cards can help you improve your credit rating. They charge a monthly fee (about £5) which is in the form of a small loan, which you’ll need to keep paying for 12 months, but at the end they will add an entry to your credit file that you have successfully repaid the debt. A prepaid card doesn’t require a credit reference as you don’t borrow funds on it.

Moneyfacts tip

If you are refused or declined credit, you are entitled to know the reason, as well as the name of the agency that provided your credit reference. Read our guide to credit checks to learn more.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

If your credit took a tumble over the holidays, here’s how to fix it

While the holidays have been over for weeks, the impact on your credit score may just be starting. If you opened new credit cards to nab a discount at the register, or if you’re carrying a balance, your score may have taken a tumble.

That can make a serious difference in your financial well being in the year ahead. A poor score can increase your costs. A car loan, for example, could cost you as much as $5,000 more than if you had an excellent score, according to the Consumer Federation of America.

“When you have a top credit score, lenders feel more comfortable not only lending you money, but lending it to you at a lower rate than they may offer to others,” says Bruce McClary, vice president of communications at the National Foundation for Credit Counseling, a group that represents nonprofit credit counseling agencies.

The most widely used score is the FICO score, created by the Fair Isaac Corp. The score typically ranges from a low of 300 to a high of 850.

Improving your credit score can take time—anywhere from a year to two years, depending on the kinds of changes needed to be made, according to the NFCC.

With interest rates starting to climb, it’s more important than ever to get started now to improve your credit score if it isn’t as high as it should be.

Do you need to improve your credit score?

Tell us in the comments section below.

Steps to Take

Start the process quickly by taking these steps.

Check your report. Holiday shopping season is also high season for identity theft, so now’s a good time to request your free credit report from to make sure it doesn’t contain any errors that could be bringing down your score. “You want to make sure that any derogatory or late payment information is correct, and dispute anything that’s not,” says Gerri Detweiler, a credit expert with Nav, a credit service for business owners.

You’re entitled to one free copy of your report from each of the three biggest credit bureaus every year—Experian, Equifax, and TransUnion. Checking your own report will not have a negative impact on your score. In addition to checking your payment history, take a look at current and previous addresses and the spelling of your name. Any mistakes there could indicate that your file may have been combined with another. Call the credit bureau to make any corrections.

Track your credit score. It’s easier than ever now to see your score for free (previously you could only access the report.) Most of the big credit card issuers will now provide the score to customers free of charge, and Discover will now give it to anyone in exchange for some personal info.

Some credit scoring models are now shifting to “trending data,” which look at your credit patterns over time. That minimizes the impact of one-time events, but it also means that it may take longer for better habits to start to make a significant difference when you try to improve your credit score. “Delinquencies or late payments take time to work their way into the report,” says Keith Gumbinger of HSH Associates, a company that analyzes consumer debt markets.

Make payments on time and never miss a payment. Keep an eye out for credit card bills from newly issued cards, which may be easy to miss, and set all payments to auto-pay so that at least the minimum amount due is always paid. Missing even one payment can have an immediate negative impact on your score, since more than one third of your FICO score, the one used by the vast majority of lenders, reflects on-time payments. “You need to pay all your bills on time, over time, in order to materially improve your credit score,” Gumbinger says.

Improve your credit-utilization ratio. One of the key factors that go into your credit score is how much credit you use relative to how much credit you have. While you can lower this ratio by paying down debt, you can also lower it by increasing the amount of overall credit available to you. Often simply calling your issuer and asking for a higher balance can help lower your utilization-ratio. “Even if you pay all your bills on time, if your balances are high relative to your credit limits, your score could be taking a hit,” McClary says.

You should also avoid closing card accounts, even those that you use infrequently, since doing so will reduce the amount of available credit and increase your utilization ratio. One exception: It generally still makes sense to close cards that carry a high annual fee, unless you’re in the market for a large loan such as a mortgage in the next few months.

Don’t ignore other loans. Having a student loan or auto loan—and successfully paying them on time—can actually help your credit score. Having a mix of different types of credit accounts for 10 percent of the score for a typical borrower.

FICO (Fair Isaac Corporation) scores are designed to be an independent standard measure of consumer credit risk and are commonly used by lenders when making decisions about things like giving you a credit card, a mortgage or a car loan. A good score can get you better rates while a bad score can result in you paying more or not getting a loan at all. Knowing this, it’s obviously beneficial for you to know how to improve your credit score.

FICO scores are calculated from a range of 300 to 850. According to Equifax, the range of credit scores are as follows:

  • Poor: 300 – 579
  • Fair: 580 – 669
  • Good: 670 – 739
  • Very Good: 740 – 799
  • Excellent: 800 – 850

Higher scores are rewarded to people generally with long credit history, low credit usage and on time payments. On the other hand, lower scores may be the result of extensive use of credit and late payments.

New FICO Credit Score

Announced in January 2020, the new FICO 10 system is expected to be introduced later this year. FICO estimates that about 110 million consumers will see a change of less than 20 points to their score under the new credit score model. Overall, roughly 80 million consumers will see a change in score of 20 or more points in either direction — upward or downward — according to FICO.

The new scoring model will likely create a wider gap between those who are considered good credit risks and those who are not. The new score will also monitor the use of personal loans, which are generally considered more risky since these are typically not collateralized by a house or car.

How Credit Score Is Calculated

If you want to improve your credit score, it’s important to understand how it is calculated. Five categories of data are used for the calculation. The breakdown is as follows:

35% = Payment History. Lenders want to know whether you have paid your bills on time. Having late payments or collections on overdue bills will negatively impact payment history.

30% = Debt Level. The amount of debt you have compared to your credit limit is referred to credit utilization. If you are currently using a lot of your available credit, a lender may interpret that as a higher risk of default. So a higher credit utilization will hurt your credit score.

15% = Length of Credit History. Having a longer credit history will improve your credit score because it gives more information about your spending habits.

10% = Inquiries. Opening several credit accounts in a short period of time will hurt your credit score since an inquiry is made each time you apply for credit.

10% = Credit Mix. Your ability to manage different types of credit (credit cards, auto loans, mortgage loans) will be viewed favorably by lenders.

How to Improve Your Credit Score

Now that you know what data is being used to calculate your credit score, the main question is how you can improve your credit score. First and foremost, it is important to know that improving your credit score takes time. So the sooner you begin to repair your credit the faster your credit scores will go up.

Here are some things you can do in order to improve your credit score:

1. Check your credit report and fix any errors

Obtain a copy of your credit report from all three credit reporting agencies (Equifax, Experian and TransUnion). Verify that the accounts and activity on those reports are correct. Carefully review the reports to see if there are any errors and contact the bureaus immediately to dispute any inaccuracies.

Checking your own credit does not negatively impact your credit score. Fixing any errors should be the first step in improving credit scores. You can also sign up for a credit monitoring service to minimize the chance of having future mistakes on your credit report.

2. Pay all your bills on time

Set up automatic recurring payment features or create calendar reminders to pay all your bills (mortgage payment, credit card, utilities, etc.) before their due dates. We all get busy sometimes with our daily lives and things fall through the cracks. The last thing you want to do is to forget about paying bills on time and have them become delinquent. This is especially important since 35% of your credit score relates to your payment history.

3. Keep credit utilization rate below 30%

Lenders calculate the credit utilization ratio by adding up your credit card balances and dividing that amount by the total credit limit. For example, if you charge $350 on your credit card every month on average and your total credit limit is $1,000 for all your credit cards, then your credit utilization is 35%. Always try to keep this ratio below 30%. Anything above that may be an indication to credit agencies that you are taking on more debt than you can afford.

4. Only apply for credit when needed

Some people may be tempted to apply for more credit cards as a way to improve their credit utilization ratio. Applying for a lot of credit within a short time frame may convey to credit agencies that you suddenly need a lot of credit. You probably don’t want to give the impression that your financial situation has changed, since it may increase your risk profile. In addition, credit card companies will make a hard inquiry into your credit report to assess your creditworthiness. Hard inquiries will negatively impact your credit score.

5. Keep unused credit cards open

There is no reason to cancel unused credit cards. In general, credit scoring models will reward you for having a longer credit history than a shorter one. Besides, cancelling a credit card may increase the credit utilization ratio. By keeping unused credit cards open, the ratio of outstanding debt as a percentage of available credit will be kept lower.

What you should know about the credit score algorithm

How to Improve Your Credit Score

A high credit score nowadays is one of the most valuable things you can have. A low credit score can prevent you from renting that new apartment, buying a new car, or purchasing a new home. We live in a society where most of us are not able to buy these large purchases without borrowing money from a lender.

Maybe you have no credit built up, or maybe you are sitting at an average score. There is always room for improvement. A high credit score is powerful, so it is no surprise you want to improve yours. The first step towards a higher score is understanding how your score is calculated.

I want to preface this by saying I am not a financial advisor and this article is for entertainment and informational purposes only. You should consult a licensed financial advisor or do your research before making any financial decisions.

Your score is composed of five factors. Each factor has its respective weighted effect on your score.

How to Improve Your Credit Score

Your payment history makes up 35% of your overall score. This means that you should be doing whatever it takes to pay all your bills on time. Lenders do not like to loan out money to people who do not pay on time or do not pay them back at all. It is very easy to forget a due date so keep track of all your due dates. You can do this on your phone or with good old paper. Consistently look at this schedule, so you never miss a payment. Keep all your accounts in good standing. This is by far the most impactful factor in determining how financially responsible you are. The formula to calculate payment history is as follows; (Total possible payments-late payments)/total possible payments. For example, let us say you have 200 payments under your belt, but 4 late payments. You would have a 98% payment history rating (200–4)/200=98%. Let just aim for 100% though.

Your utilization rate or also known as “ amount owed” has the next largest impact on your credit score. This rate composes of 30% of your overall credit score. The rule of thumb is that you should keep your credit use below 30% of your total credit limit. I recommend that you pay in full every month and report a 0% utilization rate by the time your billing cycle ends. You will save money and avoid paying interest if you pay in full as well. However, if you need to carry a balance over to the next month, 10% is also considered a “good amount.” The lower your usage rate is, the higher your score will be.

Credit age makes up about 15% of your overall credit score. This factor tracks your newest account, your oldest account, and the average of all your accounts. If you open a new account, your credit age will decrease. If you keep your accounts open, your age will increase. If you are young, you have a key advantage here. Time. It is better to open up accounts when you are younger because you have the time to wait for those accounts to mature. You should keep your accounts open. Do not close your oldest credit card. You will regret it. Make sure to occasionally use old credit cards you have kept open but do not use. This will help avoid having your account closed due to inactivity. I usually use my old cards once every 2–3 months.

Hard inquiries make up 10% of your overall credit score. A hard inquiry is essentially anytime someone runs a “hard” pull on your credit report. This typically happens anytime you apply for credit. Maybe it’s a new card, your new auto loan, or an airline flight loan. Do not confuse soft inquires with hard inquiries. Soft pulls do not impact your credit score, hard pulls do. Hard inquiries usually stay on your credit report for at least two years. Lenders do not like seeing several inquiries within a short period of time.

Lastly, the number of accounts and the number of different accounts have a 10% impact on your overall credit score. Lenders like to see individuals who are able to responsibly handle a variety of accounts. This could be a combination of an auto loan, a travel credit card, a mortgage, or a retail credit card. You do not need all of them, but it is beneficial to have a few of them.

Now that you know all the factors that impact your credit score, you are probably asking “ well how does the algorithm work? ” You see, improving your credit score is like saving for retirement. It is better if you start young, remain consistent, and think of it as a long-term investment. You will be fueling this credit score in hopes that you can use it sometime down the road for your own personal gain. From my own personal experience, I have found that making all my payments on time and keeping my utilization rate at 0% or as low as possible has helped me the most. These two should be mastered and perfected before you do anything else. It takes a lot of discipline to handle several accounts and large credit limits, so once you have this down, you should start to apply for new accounts or increases in your credit limits. You do not want to apply for several lines of credit within a short period of time because of the hard inquiries reported but spread it out over a period of time. You may be taking a hit due to the new hard inquires and the decrease in credit age but at the same time, you are increasing your credit amount, which in turn decreases your utilization rate. At the same time, the number of accounts you hold increases, which is a plus. Those inquires will drop off after two years and you will only feel the effect of those in the short term. If you are younger, you have time for your accounts to age, so a decrease in your credit age will have little effect on your score long term.

To sum it up, even though you might get dinged in some areas, you are making up for it in other areas that have larger impacts on your overall score. Your score will have more volatility at first, but if you consistently work on these five factors, you will end up with a higher score. It takes time, but from my experience, all this has helped me reach the magical number of 800 in the credit world.

Editorial Disclosure

Opinions, reviews, analyses & recommendations are the author’s alone and have not been reviewed, endorsed or approved by any of these entities.

How to Improve Your Credit Score

Kumiko Ehrmantraut

How to Improve Your Credit Score

How to Improve Your Credit Score

Kumiko Ehrmantraut

How to Improve Your Credit Score

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How to Improve Your Credit Score

If you know anything about my story, you know I changed my whole approach to money and budgeting so I could be free from debt. And while becoming debt-free has made my life so much better, that doesn’t mean I no longer see the value in having good credit.

Credit scores still matter. They can affect your ability to qualify for a loan when you need one. Credit scores can influence how much you’ll pay for financing when you’re approved. Yet even if you’re not borrowing money, like me, there are other ways your finances can be impacted by credit too.

Auto and homeowner’s insurance premiums are often priced based in part on your credit scores. Bad credit might cause you to be turned down for an apartment lease or might mean a higher deposit before you can move in. Credit can even influence whether you have to put down a deposit to open a new utility account or establish new cell phone service.

What’s a Bad Credit Score?

So, what exactly is considered a bad credit score? A bad credit score is one that costs you money and opportunities.

Most lenders use FICO Scores when you apply for financing, like a mortgage or an auto loan. FICO Scores range from 300 to 850.

Experian says that any FICO Score below 669 is either fair or bad. If you apply for a loan with a FICO Score under 669, you’ll be considered a “subprime” borrower. That means you’ll probably either have a hard time qualifying or the lender may offer you higher rates and worse terms on your loan.

Check Your Credit Score

It’s important to check all three of your credit reports from Equifax, TransUnion, and Experian. Mistakes happen on credit reports and, when they do, they could hurt your credit scores.

Thanks to federal law (the Fair Credit Reporting Act), you’ll allowed to check all three of your credit reports once every 12 months for no charge. Just visit to claim your free reports.

But free annual reports don’t include your credit scores. If you want to check your credit scores, you have a few options. First, you can pay to access your credit scores. There are also several places online where you can download your credit scores for free, including Credit Karma.

How to Improve Your Credit Score

When you check your credit scores online, you might find that they’re not in the best shape. It happens. And while bad credit can be discouraging, there’s good news too. You have the power to change your credit situation.

Here are 5 credit improvement tips to help you get started.

  1. Dispute Credit Errors — Once you claim your free credit reports from, check your reports for errors. If you find mistakes (even small ones), they might be hurting your credit scores.Thankfully, you can dispute credit reporting errors when you find them. This guide from the Federal Trade Commission shows you how.
  2. Pay Down Credit Card Debt — Paying your bills on time isn’t enough to earn great credit scores. You also need to watch your credit utilization (aka the balance-to-limit ratio on credit cards).When you use a higher percentage of your credit card limits, your credit scores can drop. Paying down your credit card debt, however, might improve your credit scores over time.
  3. Secured Credit Cards — Sometimes establishing new credit accounts can help improve your credit scores. But be careful not to go into new debt just because you’re trying to build credit.

There’s also a catch. It can be tough to find a lender that’s willing to do business with you when your credit scores are low.

Secured credit cards can be a good option when you’re in this situation. These accounts give you a way to build credit without going into debt. (Just be sure to pay off your full balance every month.)

Secured cards are usually easier to qualify for than other types of credit. With a secured card, you put down a deposit to open the account. Your deposit usually matches the credit limit you’re given. Most secured cards will report to all three credit bureaus (but you should verify that with the card issuer first). So, if you make all of your payments on time and pay off your balance monthly, a new secured credit card might boost your credit scores.

Remember to compare multiple offers first. This can help you find the lowest fees, best APR, etc. Here’s a list of to help you start your research.

  1. Credit Builder Loan — Another way to build new credit without going into debt is to apply for a credit builder loan, like those offered by Self Financial. Credit builder loans are usually easy to qualify for even if your credit isn’t perfect. In fact, people trying to repair credit after a bankruptcy or other major credit setback might be able to qualify for this type of account.

With a credit builder loan, the bank who issues the loan holds on to your money. It’s stored in an interest-bearing account and you can’t access the funds until you make your final loan payment (usually 6-12 months later).

Once you complete your monthly payments, you’ll hopefully have several months of on-time payment history reported to the credit bureaus plus the funds from the loan. (Just be sure the lender reports to all three credit bureaus. Some don’t. Self Financial does.)

After you pay off the loan, you can use the money however you like. Maybe you’ll establish an emergency fund, pay down debt, or add money to other sinking funds. The choice is yours.

  1. Credit Monitoring — Monitoring your credit reports and scores is an important part of protecting your financial health. You need to check your three reports and scores often to stay on top of your progress. It’s also wise to keep an eye out for fraud and credit mistakes regularly.

How Fast Can You Raise Your Credit Score?

Remember to be realistic when you’re trying to improve your credit. You can think of improving your credit score like a race, but it’s a marathon, not a sprint.

Significant credit improvement will take time, a good plan, and consistent follow through. Yet as long as you don’t give up, it is 100% possible to boost your credit scores over time.