How to Improve Your Credit Score

Written by Carly Simon-Gersuk

Your credit score - the number that evaluates and rates your creditworthiness based on credit history - is an important factor in your financial life. The higher the credit score, the higher the creditworthiness and your likelihood of qualifying for loans and credit cards at favorable rates. While we all start with a score of zero and build it up, have you checked your score lately? Hopefully you are checking your credit score regularly to maintain good credit and prevent errors.

If your credit history is not where you want it to be, know you are not alone. Improving your credit score takes time, but the sooner you start addressing the issues the sooner your score can go up. Here are five ways you can build and maintain a high credit score.

1.Check for errors

Review your credit report and carefully look for any incorrect information that may be affecting your score. It is important to dispute any inaccurate or missing information with your lender or bank as soon as possible to deem your creditworthiness and keep them from causing any damage to your score. Types of errors to look for include identity errors or theft, duplications, balance or account errors.

2.Pay your bills on time

Lenders want to know you are reliable and pay your owed amount timely as agreed on for your monthly terms. It is important to pay all your bills including rent, utilities, phone and so on, in addition to your credit card and loans. All these payments are reflected in your credit score and late payments can appear as negative information on your report. Utilize tools, such as automatic payments and calendar reminders, to help you ensure your monthly payments are made on time. 

3.Pay off debt

The less you owe, the less of a risk you are thus seeming like an ideal candidate for a loan. Paying down your debt will help you save money on interest and keep your balance low, making it easier to also pay off other monthly bills. Also, paying your debt will lead to a lower credit utilization ratio. The credit utilization ratio is calculated by adding all your credit card balances at any given time and dividing that amount by your total credit limit. Lenders typically like to see low ratios of 30% or less, which shows that you have not maxed out credit cards and are likely to manage credit well. 

4.Build your credit line

Improve your score by upping your credit line. This does not mean that you should spend that higher amount, but by having a higher allowance with a lower credit utilization rate you can boost your score. For example, if you have a $2000 credit limit and are regularly spending close to $1600, you are using 80% of your available credit. So raising your credit limit will reduce the percentage of money being used and lower the credit utilization ratio.

5.Do not close or cancel credit card accounts

Instead of closing down or canceling credit card accounts - as long as they are not costing you money in annual fees -  it is best to stop using that card and have it open to increase the length of your credit history and credit limit. Know that a closed account can still show up on your credit report and may be considered when calculating your score. 

There is no quick way to fix your credit score, but with patience and discipline you can repair your credit history. Manage your credit responsibly over time and you will see improvements.


Written by Carly Simon-Gersuk