8 Ways to Improve Your Credit Score

A good credit score can help you secure better interest rates on loans, mortgages, credit cards and other financial products. It can also lower your auto insurance premiums and even reduce the security deposit required when you rent an apartment.

Credit scores range from 300-850, with 300 being very poor credit and 850 being excellent. Regardless of where you are starting, the following eight tips will help you improve your credit score over time.

1. Pay all your bills on time.

Your payment history is the most important factor in determining your credit score. Set up reminders or schedule automatic payments for at least the minimum amount due.

2. Reduce your credit utilization rate. 

This is the second biggest factor affecting your credit score. Your credit utilization rate is the balance you currently have on a credit card or line of credit, divided by the total credit limit of that card or credit line. You should aim to use no more than 30% of your credit limit on each card. Using less is even better. People with the highest credit scores tend to keep their credit utilization below 10%.

3. Think twice before closing old accounts.

Your length of credit history is a factor in determining your credit score, so keeping an old account around can be very beneficial. If it’s an old credit card that you don’t prefer to use because it does not offer much in the way of rewards, consider using it for automatic monthly payments for something small such as a streaming service. Then, set up automatic payments from your checking account to pay the card off in full each month so you don’t have to worry about forgetting about it.

4. Limit how often you apply for new accounts.

When you apply for a new loan or credit card, it will trigger what’s referred to as a hard inquiry. Having too many hard inquiries over a relatively short period of time can cause your score to go down. Additionally, opening new accounts will decrease the average age of your accounts, which could also negatively impact your credit score. Remember to be intentional and strategic about opening new accounts.

5. Have a variety of credit types.

This does have an impact on your credit score, but I am definitely not going to suggest going out and borrowing money just to possibly add a few points to your score. Mortgages, auto loans, and credit cards are each different types of credit. If you only have a credit card, and no other debt, then opening an additional credit card may help. It may also help if you only have a mortgage and no other credit. But again, if all you have are credit cards, don’t go out and get a car loan just to have a different type of credit added to the mix.

6. Consider applying for a secured credit card.

If you have little or no credit history, or if you have poor credit history, you may find it difficult to obtain new credit. In this case, applying for a secured credit card can help build your credit history and your credit score. This type of card is backed by a cash deposit that you provide to the credit card company. You use it just like a normal credit card, so paying on time each month helps build your credit history and increase your credit score.

7. Pay off any accounts you may have in collections.

If you have any accounts in collections, work to pay them off as quickly as possible. You may even be able to persuade the collection agency to stop reporting the debt once you have paid it in full. It certainly can’t hurt to ask them!

8. Review your credit reports regularly.

Visit the website annualcreditreport.com to obtain your credit reports for free. You should review your credit reports on an annual basis to verify the accuracy of your information. If you notice anything that is incorrect, report it immediately to each credit reporting agency that is showing the discrepancy.

Remember, improving your credit score is a process that will likely take some time. The sooner you begin implementing these strategies, the sooner you can begin seeing results.