1. Pay Your Bills on Time
This may seem like an obvious one, but it’s the most important. When lenders look over your credit report and get a credit score for you, they will always look at how reliable you are when paying your bills. How you paid other lenders in the past gives them a good idea of how you’ll pay them in the future.
You can help protect your score by paying all your bills on time as agreed every month. Paying late or settling an account for less than what you originally agreed can bring down your credit score.
This includes all of your bills—not just credit cards or any loans you may have (like auto loans or student loans), but also your rent, utilities, phone bill and so on. It’s a great idea to take advantage of any tools that work for you like automatic payments or calendar reminders to help keep yourself on track every month.
If you're behind on any payments, bring them current as soon as possible. While late or missed payments show as negative marks on your credit report for seven years, their impact on your credit score goes down over time: Older late payments don’t affect your credit as much as recent ones.
2. Pay off Debt and Keep Credit Card and Other Revolving Credit Balances Low
The credit utilization ratio (the ratio of how much you’ve spent on your credit card vs the cards limit) is another important number that helps make up your credit score. If you normally charge about $2,000 each month and your total credit limit across all your cards is $10,000, your utilization ratio is 20%.
To figure out your average credit utilization ratio, look at all your credit card statements from the last 12 months. Add the balances for each month across all your cards and divide by 12. That's how much credit you use on average each month.
Lenders like to see ratios of 30% or less. The people with the best credit scores usually have really low credit utilization ratios. This tells them that you haven't maxed out your credit cards and that it’s likely you are good at managing your credit. To make yours better you could:
- Pay off debt and keep balances on credit cards low.
- Become an authorized user on another person's account. (just make sure they use credit responsibly!)
3. Open and Apply for New Credit Accounts Only when you Need Them
Don't open accounts just to have a better credit mix—it probably won't do much for your credit score.
Credit that you don’t need can hurt your credit score in multiple ways, from putting too many hard inquiries on your credit report to tempting you to overspend and rack up debt.
4. Don't Close Credit Cards you aren’t Using
Keeping unused credit cards open (as long as they're not costing you money in annual fees) is a smart thing to do. Closing one of these accounts could increase your credit utilization percentage that we talked about earlier. If you owe the same amount yet have less open accounts it will lower your credit score.
5. Don't Apply for Too Much New Credit, Creating Multiple Inquiries
While opening a new credit card can increase your overall credit limit, actually applying for credit will create a hard inquiry on your credit report. Too many hard inquiries at once can bring down your credit score, although the impact does go down over time. Hard inquiries only stay on your credit report for two years, and recent ones impact your score more than the old.
Client Login
Download Our
