How to Improve Your Credit Score

Your credit score is one way that financial institutions, landlords, potential employers, and others can learn about how you handle your finances.

The higher your credit score, the better your chances of getting a new line of credit, obtaining a personal, car, or home loan, renting an apartment, or even landing a job. Plus, if you have a higher credit score, you’ll be more likely to be offered a lower interest rate on loans and credit lines, which means you’ll pay less over the life of the debt. If your credit score is on the low side, try employing some easy methods to raise it.    

Check your credit reports

In the United States, your credit scores are determined mainly by the three major credit reporting agencies, Equifax, Experian, and TransUnion. Every year, you’re allowed to pull your credit report for free from each bureau to check what’s being reported on your credit history. Once you see what’s adversely impacting your score, you can work to improve it—including addressing potential errors that can be corrected or removed from your file or taking care of any collection accounts.  

Pay your bills—and pay them on time 

Payment history has the biggest impact on your credit score, which means that every late payment can drag it down—and missed payments are even worse. If you can create a system to help ensure that you always pay your bills on time, your credit score could improve. Whether you use automatic bill payments, a calendar reminder system, or some kind of filing system to stay on top of your bills, your timely payments will help prove to potential lenders that you can manage your finances and won’t neglect your payments.  

Request higher credit limits

“Credit utilization” has the second-largest impact on your credit score—the less of your available credit you use, the less negative influence it will have. Keeping high balances on revolving credit accounts (like credit cards) leads to a high credit utilization rate on your credit report. To lessen that impact, shoot for a debt range that’s less than 30% of your available credit by either paying down high balances (or paying your balance off each month) or requesting a higher credit limit on your credit cards so that you have more available credit (but be sure not to tap in to that additional credit).  

Be aware of your credit use

If you have only one type of credit on your history, consider adding a different type (as long as you keep it in good standing) to your mix. If your credit report reflects only personal loans, add a credit card or two, or if you have only credit cards, apply for a loan. This shows that you can manage different types of credit, and it can help with your overall credit utilization ratio. 

Be choosey when requesting a new account

“Hard inquiries” into your credit history can draw down your overall score. Unlike “soft inquiries,” which include your own checks into your credit report, a potential employer checking your score, or a financial institution you already have an account with looking at your history, hard inquiries are direct requests for credit, such as applications for a mortgage, a new credit card, or a car or personal loan. Too many direct requests in a short period can raise a red flag on your report that can damage your score because it can look like you’re in dire financial straits. Avoid applying for a new account unless you need it or it makes strategic sense. 

Follow a plan to a better credit score

Having a higher credit score can benefit you in many ways, but it doesn’t just happen overnight. Follow a plan to increase that number by being timely with your payments, decreasing debt as compared to your overall available debt, and mixing your credit types. If you feel overwhelmed or unsure of where to start, use the resources at hand. Bellco Credit Union offers financial counseling through its partner, GreenPath Financial Wellness, and you can always educate yourself more online.