How to Improve Your Credit Score

Most Americans don’t take their credit score seriously enough. However, whether it’s applying for a car, student or home loan, apartment lease, or a job that requires handling cash, a good credit score is crucial. But by the time you need to provide a good credit score, it may be too late to remedy the score. The result could be high interest on a loan or credit card, or a failed rental apartment or job opportunity.

The credit score, which ranges from 300 to 850, is a reference for lenders to assess an applicant’s risk profile. The higher the FICO credit score, the better. The 2019 NerdWallet data points out that consumers’ average FICO credit score is around 704, which is in the lower end of the “good” range, but still higher than in the past.

The first step in improving your credit score is to understand what a credit score is made of.

Components of a Credit Score

The credit score depends on several factors, but each factor does not have the same effect on the final score.

Paying bills before the payment deadline (i.e. payment history) has the biggest impact on credit score, accounting for 35%.

Total credit limit utilization (revolving accounts such as credit cards or personal lines of credit) accounts for 30%. Ideally, the credit limit utilization is less than 30% of the total credit limit. For example, if your total credit limit is $1,000, if you want to improve your credit score, you should not use more than $300.

The final three elements that make up a credit score are credit history time (15%), account diversity (10%), and new credit (10%). Lenders prefer to refer to longer-term credit accounts because such accounts can demonstrate a good credit history. At the same time, they are also happy to see a variety of credit types, because it means consumers can flexibly manage multiple accounts at the same time. As for new credit, every time someone checks your credit report, a record is left. Occasional inquiries won’t affect your credit score much, but too many inquiries can affect your credit.

Credit agencies will take these credit behaviors and backgrounds into account and then create a FICO score based on your credit history. Since credit scores are so important, people with low scores should face the problem. A negative credit score can lead to a variety of consequences, including loan rejection, high-interest rates, and loss of eligibility for certain types of jobs.

Are you worried about your credit score not meeting expectations? You can gradually improve and protect your credit score by:

Check your credit report you are entitled to receive free credit reports annually from Equifax, Experian, and TransUnion. You can also get an online credit report at When checking your report, you’ll want to confirm that all information is correct, including account number, credit limit, and balance. If you find discrepancies, you can challenge the credit bureau. Raising a challenge can help you fix mistakes quickly without adversely affecting your score.

Pay your bills on time

One of the main reasons for a bad credit score is not making repayments or paying only part of what is owed without negotiating a new repayment agreement with the creditor. If you often run out of money before you pay your bills, create a household budget to track your spending. You can also schedule your payment into a calendar application before the payment deadline. Your goal is to gradually pay off what you owe. After seven years, credit scores skip missed and late payments.

Keep the credit card used limit below 30% of the limit

Have you maxed out your credit card? This practice amounts to damaging your credit to enjoy greater financial freedom and prolongs the time it takes to repair your credit score. Make sure to pay off your credit card debt on time. When the card debt falls below 30% of the limit, the credit score goes up. When lenders look at your available credit limit, they’re happy to see low usage. Think twice before swiping your card in the future unless you pay off or nearly pay off your balance every month.

Keep the oldest card available

You may be tempted to close all credit accounts, but keep the oldest card available as long as possible. It can help you increase your credit age, which in turn increases lenders’ trust in you. You can also apply to become someone else’s supplementary card user and take advantage of the longer card age of others to slightly improve your credit score. Before agreeing to become a supplementary card user, please check whether the other party has good credit.

Building good credit takes a long time, but remedying a bad score isn’t that difficult. Persevere, step by step. With good money management, you can turn around what your lenders say about you.

By Cary Grant

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