How To Improve Your Credit Score [Complete Guide]

By: Yara Pollard

Credit cards can help you get ahead in life if you know how to use it in a proper and responsible manner. Moreover, there are a lot of advantages with having a credit card more than just being able to use it for making purchases on credit.

However, what goes between you and having a credit card and better credit options is your credit score. If you have a low credit score, your credit options can be few because for banks, credit score is the determinant of your creditworthiness.

This means that if you have a low credit score, getting a credit card can be harder for you. Low credit scores can be improved. There are different ways to improve your credit score but it takes discipline to make them happen.

Improving your credit score begins with knowing the factors that affect it. According to Nerdwallet, these are the factors that affect credit score:

  • 35% – Payment history
  • 30% – Amount of debt relative to credit limits
  • 15% – Age of credit
  • 10% – Recent application for credit
  • 10% – Credit mix

Knowing these factors will help you get a better idea on what to do and what not to do to build your credit score. Moreover, you also have to know score ranges to understand what credit scores mean.

There are different score models but having a score of 700 or higher means that you have a good credit score. Here are ways on how you can improve your credit score.

Pay Bills On Time

The major factor that determines your credit score is your credit history. This accounts for 35% of your credit score. Paying bills on time helps build your credit history. To pay bills on time, you can set up an autopay for recurring bills.

This way, even when you forget to pay your bills, payment is automatic. However, you need to make sure your checking account has enough money to cover everything. Otherwise, you risk paying up more fees.

It can be difficult to pay bills if a lot of them are due on the same day. See if you can change due dates with your creditors so you can have an allowance between due dates.

Pay Debt

Second to paying of bills on time is paying your debt. This accounts to 30% of your score. Not paying your debt when it’s due can hurt your credit score. When you use credit, be sure you are able to pay it full at the end of the month or pay the certain amount whenever it is due.

Another key information you need to know about credit and paying debt is to just use less than 30% of your available credit. Experts have mentioned that doing this can help improve one’s credit score.

According to Rod Griffin, director of public education for Experian, “the 30% level is not a target, but rather is a maximum limit. Exceeding that level will have significantly negative impact on credit scores.”

Rod goes on to say, “the lower a person’s utilization rate, the better from a scoring standpoint.” Know that Experian is one of the leading credit reporting agencies in the world. This rule is also reflected in the FICO scoring model

According to Can Arkali, principal scientist for FICO, “consumers with FICO scores of 800 use on average, 7% of their available credit.” If you are planning to improve your credit score, just use less than 30% of your total credit and pay your dues on time. 

Age of Credit and Credit Mix

The length of time of how long you’ve been using credit and credit mix also affects your credit score. The two together accounts for 25% of it. If you still don’t have a credit card but eligible for one, you might want to consider getting one today and using it to build a good credit history.

Credit mix is having different types of credits such as installment loans and revolving credit. Examples of installments loans are those with level payments like mortgage or a car loan. Meanwhile, revolving credit has the same nature as a credit card.

If you love shopping, here’s the good news, a lot of stores offer credit cards that can help you build a good credit history while enjoying certain benefits like discounts and reward points. 

A good example of this is the Target Red Card. Target’s red card comes in two forms. Target red cards and can either be a:

  1. Credit Card
  2. Debit Card

Both gives you the benefit of having a 5% discount at Target stores and Target.com. If you love shopping at Target, apply for the Target red card.

Another is Lowe’s credit card. If you need equipment and other materials for home renovation, Lowe’s credit card is ideal. With the card, you get a 5% discount on purchases from Lowe’s.

Other than the discount, other main rewards with having the card is 6 months of special financing and project financing. However, you need to be responsible with your finance if you do decide on getting a credit card from Lowe’s because of their high APR.

Having a good credit score helps but there have been reports of people being accepted into the program even when they have a bad credit score. Know your limits each time you decide on using your credit cards.

Improving your credit score begins with developing a good habit of being responsible with your finances. Remember, your credit score just reflects your creditworthiness based on your credit history.

Start building a good credit history and you’re well on your way to having an excellent credit score. Don’t wait for the perfect moment, make the moment perfect. Start today. 

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