4 Steps to Improve Your Credit Score

improve your credit score

4 steps to improve your credit score


Credit scores are a big deal.

Companies use them to decide whether or not to approve your credit card or auto loan, accept your apartment application or offer you a mortgage. Credit scores are also used to determine the interest rates and credit limits you receive. They can even affect a job application.


Some of the factors that make up a typical credit score include:

  • Your bill-paying history
  • Your current unpaid debt
  • The number and type of loan accounts you have
  • How long you have had your loan accounts open
  • How much of your available credit you are using
  • New applications for credit
  • Whether you have had a debt sent to collection, a foreclosure, or a bankruptcy, and how long ago

Most credit scoring companies use a range of 300 to 850. A credit score of 700 or higher is generally considered good. If your credit score is lower than that, it’s time to get to work. Here are four ways to start improving your credit today:


1. Review your credit reports

The first step toward improving your credit score is knowing exactly what you need to work on. Your scores are calculated based on the information contained in your credit report, which reflects how likely you are to pay back loans or services.

You can get free copies of your credit reports from each of the major credit reporting bureaus by visiting www.AnnualCreditReport.com.

Begin by checking your credit report for any errors. If you find mistakes, be sure to dispute them immediately by contacting the credit bureau or the creditor listed on your report. This is one of the simplest things you can do to boost your credit score.


2. Pay your bills on time

Make every effort to pay your bills on time, especially the ones that show up on your credit report. These include credit cards, student loans, mortgages and auto loans. If this is not an easy habit for you to keep, companies like AutoPayPlus can automate your bill payments to help reduce debt and take greater control of their financial future.

But, what happens if something unexpected busts your budget and you find yourself with more bills than money at the end of the month? If you have to miss a due date or payment, The Simple Dollar suggests picking bills that generally don’t impact your credit score, such as utilities, medical bills, mobile phones service and gym memberships.

Keep in mind, however, that even if past due payments don’t affect your credit, they can have other negative effects such as late fees, account closure, service suspension or membership cancellation. Even worse, missing several payments in a row can put you into default and potentially send your account to a debt collection agency who almost always reports to the credit bureaus.


3. Reduce your total debt

Easier said than done, right? You’re not alone. Nearly 3 out of 4 workers are in debt today, and more than half of them think they always will be.

So, where to begin? There are lots of different strategies out there to pay down debt. One is the stack method – also known as the debt avalanche method – that has you rank your debts based on their interest rates and then pay off the higher interest debts first.

Another one is the snowball method. This one has you rank your debts based on the balance owed, and pay them off in order, starting with the smallest, gaining momentum as you go. When the smallest debt is paid in full, roll the money you were paying on that debt into the next smallest balance, and so on.


4. Don’t cancel unused credit cards

It is a common misconception that closing a paid-off account will increase your credit score. Doing so, however, can actually have the opposite effect.

Length of credit history – meaning the amount of time you’ve had your accounts – is an important component when calculating your credit score. Older accounts show you’ve been maintaining credit for longer periods of time. Keep these accounts open, but monitor them to ensure no fraudulent activity occurs.

If you are overwhelmed by your financial situation and repairing your credit seems beyond reach, there are resources that can help. You can find a local credit counseling agency through the National Foundation for Credit Counseling. You also can look on your credit card billing statement for a phone number to call if you’re experiencing trouble making your payments.


Improving your credit score takes time and tenacity. Remember, damaging your credit didn’t happen overnight, and neither will repairing it.

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