How to Improve Your Credit Score


  • Having a good or excellent credit score can earn you the most advantageous interest rates.
  • Knowing what your credit report says is essential to understanding your credit score.
  • The single most important step you can take is to pay your bills on time.
how to improve your credit score - How to Improve Your Credit Score

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I imagine the phrase “how to improve your credit score” is one of the most searched terms on the internet. And with good reason. An individual’s credit score is an important measure of their financial health. It’s not the only measure, but it’s like one grade on a report card.

A good or excellent credit score makes it much easier to obtain credit needed for conventional debt instruments such as a credit card, personal loan, mortgage, car loan or a line of credit.

And your credit score also determines the rate of interest you’ll be paying for the debt you’re taking on. The better your score, the lower your interest rate. Over your lifetime that can save you hundreds of thousands of dollars, so if you need to improve your credit score, it’s well worth the effort.

In this article, we’ll give you simple, actionable steps that you can take to improve your credit score no matter where you’re starting from.

Get a Copy of Your Credit Report

A crucial step in improving your credit score is to understand what your credit report says about you. If your credit score is a grade, then this is your progress report. Every American can get one free copy of their credit report every year. For those that can afford it, there are monthly subscriptions that cost as little as $30 a month that can allow you to monitor all three of your credit scores.

That’s right, there are three credit bureaus that issue a credit report for you. And each bureau uses different methodologies. In some cases, some forms of credit don’t show up for one or more bureaus. That means it’s a virtual certainty that you’ll have three different credit scores. And since a few points can be the difference between one rating and another, it’s good to know where you stand with each bureau. This is because when you apply for credit, the lender will usually only choose one of the bureaus from which to pull your credit report.

The Most Important Step You Can Take

Improving your credit score means paying attention to a number of factors, such as not utilizing all of the credit you have (i.e., maxing out your credit cards). It’s suggested that you keep your utilization rate under 30% (e.g., having no more than $300 of outstanding credit on a $1,000 credit line) and spacing out times when you’re applying for new types of credit. Also, when applying for some forms of credit you can get pre-approved without the lending company doing a “hard pull” of your credit report.

But the single most important step you can take to improve your credit report and keep it in good standing is to pay your credit on time every month. This may seem obvious, but a credit score is an indication of how responsible you are with credit. Lenders may overlook you applying for multiple forms of credit. However, making late payments is an indication that you are living beyond your ability to pay. That is likely to get you rejected for credit, and if you are approved, you will have to pay a much higher interest rate.

Improving Your Credit Score Is Time Well Spent

I started this article by comparing your credit score to a grade on your financial report card. The good news is that it’s not a pass-fail grade. Many people with poor credit scores can go from a “D” or even an “F” to a “B” or an “A.” However, the nature of how your activities are reported to the major credit bureaus means it can take time to see a real difference.

We can be an impatient society. But patience really is a virtue when it comes to improving your credit score. If your score is poor or fair, you know that it didn’t get there overnight. And it’s not going to improve overnight. But if you take the simple steps outlined here and continue to build good credit habits, it can be done.

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

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