My credit score wasn’t great when I first started blogging about money, but recently I received an email letting me know that I was in the excellent credit club.
Over the years I’ve been blogging I was able to raise my low credit score to one that is considered excellent. This excellent credit score has helped save me lots of money in interest rates on my loans and has put me in a much better position financially.
Learning how to improve my credit score took some work so I’d like to share the tips to improve credit scores that I learned along the way.
How To Improve Your Credit Score
While I don’t take pride in having a great credit score, it has been something I’ve worked to improve over the years. I knew that in the future I’d want to buy a car and get a mortgage loan to purchase a house for my family. Ultimately a high credit score wasn’t a point of pride but a practical matter that I needed to improve to help myself and my family.
My own credit score went from the low 600s to the high 700s and now to the low 800s which improved my loan interest rates and will helped us get a good mortgage rate.
If you want to improve your credit score, here are the steps I took and you can take too.
- Check your credit score for free with Credit Karma.
- Pay your bills on time every month and never be late.
- Keep your balances low on credit cards and revolving credit.
- Do not close old accounts you don’t use.
- Apply for and open new credit only as needed.
- Pay off debt as you can rather than moving it from account to account.
- Make responsible purchases on credit that you know you can pay off.
- Don’t obsess about your score, just let it improve over time.
These are the basics for improving your credit score. I’ll break each one down further below.
Check your credit score for free.
It all starts with knowing your credit score and knowing where you stand with credit. Once you know what you are working with you will know how much it can improve by implementing the basic ideas for improving a credit score.
You can check your credit score for free from a number of sources these days. You should never have to pay to get your credit score. My bank Capital One 360 even gives me my credit score in the app along with my checking and savings accounts. It’s easy to know where your credit score is at any given time for free.
Once a year you can also pull your credit report for free. You should do this yearly to make sure nothing has changed or been reported incorrectly.
Pay your bills on time every month and never be late.
Paying your bills on time is a huge part of credit worthiness. If you can’t pay the bills you already have on time it is unlikely that you will be able to pay new bills on time. When you make payments late or miss them altogether it will drop your credit score dramatically.
Strive to always pay your bills early or on time. Doing this over and over again will raise your credit score to an excellent level.
Keep your balances low on credit cards and revolving credit.
How much credit you are currently using will affect your credit score. If you are only using a small percentage of the credit you could be using then your score will be higher.
Don’t max out your credit lines if you want to have good credit. You need to show that you are using credit responsibly and have room to spare.
Do not close old accounts you don’t use.
While this is debated by some in the personal finance world, I found that not closing accounts helped my credit score. When I finished paying off a debt or simply moved on to a new credit card for rewards, I never closed the old account unless it had an annual fee.
Having old accounts still open for use will help increase your credit score since age of accounts is a big factor in your score. You don’t have to use your older credit lines often but just enough to keep them open.
Apply for and open new credit only as needed.
Having multiple accounts open for long periods of time can help your credit score but that doesn’t mean more is better. You don’t need to open 25 different accounts to get a good credit score. In fact I have less than 10 and have an excellent credit score.
Be selective in the credit lines that you open. Don’t max yourself out with too many new open lines of credit. It will drop your credit score temporarily and it could potentially put you in a precarious situation.
Pay off debt as you can rather than moving it from account to account.
Personally I loosely follow Dave Ramsey’s baby steps where I don’t carry debt balances and pay off all my debt. Paying off debt rather than moving it around with transfer balances is a smart move, even if it doesn’t make a huge impact on your credit score.
Paying off debt can help improve your score if you are reducing the amount you owe and freeing up space you can use. Debt utilization amounts are a part of the credit score as we discussed before.
Make responsible purchases on credit that you know you can pay off.
Don’t obsess about your score, just let it improve over time.
It might be tempting to pay someone to help improve your credit score quickly, but be weary of these services. You can improve your credit score over time by following common sense credit guidelines and getting on a budget.
The less you obsess about your credit score the better off you will be. Ultimately a credit score isn’t the most important thing in your financial life and there are ways to operate around a bad credit score or no credit score at all.
If you are planning to use credit less and don’t need it for a future mortgage or car loan or new job then your credit score will be less important. Remember that even if you are planning to use credit you don’t need to open new accounts to improve it. Just work with what you already have and pay things on time and use it responsibly.