How to Improve Your Credit Score
Simple ways to improve your credit score, and start saving money
Your credit score is important, so keeping it as high as possible can help you save money in the long run. But if your score isn't where you want it to be, we have good news. You have the power to improve it! And it starts with these simple tips.
As you read this list, you may discover insights you've never considered before. However other tips will seem obvious. We mention them all because they're highly effective when employed together. If you can incorporate them all in your new routine, you'll be well on your way to rebuilding your credit history, improving your score, and reshaping your financial future.
- Make it your priority to pay bills on time.
Did you know late payments — even those just a day or two late — can drop your credit score? Don't let a small mistake make a big impact on your score. Many customers set up free bill pay reminders, or even automatic bill pay with their bank, to insure they don't have a late payment. Some set up automatic bill pay to send the minimum payments on certain debts — to make sure they're covered — then send extra money as they can each month to chip away at their debt.
- Try to keep your total debt as low as possible.
That may seem obvious. But here's why it's so important. The total you owe at any given time is a major factor in the formula credit bureaus use to calculate your credit score. Lenders and creditors like to see a big gap between the amount of credit you're using and the total amount you have available (it's called your "debt-to-credit limit ratio"). If this ratio is high, try to limit your credit card spending to necessary expenses only, and make an effort to reduce or eliminate purchases you don't really need. Then, attack your debt by sending as much as you can toward paying your credit cards off — even if it's just an extra $10 to $20 above your minimum monthly card payments. A few extra dollars can actually end up saving you hundreds or even thousands in interest, and help you pay off the debt years earlier!
- Check your credit report at least once a year to make sure it is accurate.
Everyone has a right to see their credit reports for free, once a year. We strongly encourage you to review your latest credit report for inaccuracies — like payments you know you made on time that may be incorrectly listed as late. Also, check the amounts you owe on your accounts to make sure they're correct. These are the kinds of errors that could artificially be lowering your score. Reporting them to the credit bureaus may get you a few quick points right off the bat. Find out how to see your credit report.
- Don't open credit cards to get special, one-time savings.
It sure can look tempting to get 20% off today's entire purchase simply by opening a store card. But in the excitement of signing up at the register to get that big discount, you probably won't bother checking the card's APR which could be higher than others in your wallet. What's more, having a bunch of cards you don't need can actually lower your credit score, costing you even more money in the long run.
- Don't close unused credit cards.
As strange as it may sound, the simple act of cancelling a credit card could actually lower your score, depending on your situation. That's because having a long, positive credit history has a more beneficial effect on your score. So if you have an active credit card that you haven't been using much, keep it open and use it occasionally. You'll help your credit rating!
Make today the day you start, and stick with it!
With strategies like these, some patience and a lot of discipline, you can raise your credit score and improve your financial life. Increasing your credit score gives you the confidence to feel secure when applying for everything from a new loan to a new job. You'll find that the results (and the long term savings) are more than worth the effort.