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How to Improve Your Credit Score

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Your credit score is important because it determines whether you will be able to get a loan and the rate you will pay on a loan if you qualify for one. Credit scores determine cell phone plan options, they set auto and home insurance premiums, and often determine if you can rent an apartment. To have more options, and better ones at that, it is important to have a good credit score. But how do you know what your credit score is and how can you improve it if it isn’t great? There are five things to consider when embarking on a credit score improvement goal.

First, you have to know what your current credit score is. It is important to know that checking your own credit score has no impact on your score; in fact, you can obtain a free copy of your credit report from all three credit bureaus each year. Visit to access the credit reports and to learn your current score. There are two important factors that affect your credit score: payment history and credit utilization ratio. Credit utilization ratio is the portion of your credit limit that you are using at any given time and payment history is how well you pay your bills on time.

According to, payment history is the most important factor in determining credit scores. “FICO credit scores are used by 90% of top lenders and are composed of five distinct factors: payment history (35%), credit usage (30%), age of credit accounts (15%), credit mix (10%), and new credit inquiries (10%).”1 That being the case, it is incredibly important to pay your bills on time. If you are behind, get current and stay current.2 Consider creating a system to keep track of monthly bills, set due date reminders, or automate bill payments directly from your credit union account. Paying off debt and keeping low balances on credit cards and other revolving credit is essential to improving your credit score. Start by paying off the highest interest rate cards first while maintaining minimum payments on other accounts. But don’t close unused credit cards, keep their balance low and don’t use them or incur additional debt.

New credit inquiries, or hard inquiries, are applications for new credit. A lender begins a hard inquiry when you apply for new credit cards, a mortgage, or a car loan. The occasional hard inquiry is no big deal – but applying to open new credit cards often is going to drop your credit score. Don’t apply for or open new cards. For example, when you check out at a store and the cashier says, “Would you like to apply for a credit card and save 15% today?” Your new response should always be, “No, thank you.” You do not need more credit cards. Remember: more credit cards lead to more debt and a lower credit score. Lower credit scores lead to less favorable financial options.

When you review your credit report it is incredibly important to look for inaccuracies because inaccurate information drags credit scores down. Each of the three credit bureaus allow you to dispute inaccuracies3 and you should! Follow the directions on each of their sites for disputing inaccuracies.

Finally, remember improving your credit score takes time. Be consistent and patient. Delinquencies remain on your credit report for seven years, so take immediate action to resolve them. Bankruptcies remain for ten years and hard inquiries remain for two. There are no shortcuts to repair your credit score; but it can be done. Keep calm, create a plan, and take action to improve your score!

1 How to Improve Your Credit Score (
2 How to Improve Your FICO Score | myFICO | myFICO
3 How to Improve Your Credit Score Fast - Experian