The 7 Most Important Ways to Improve Your Credit Score

It’s important to have good credit if you want to get loans and credit cards with low interest rates. But a lot of people have trouble with low credit scores because they’ve made mistakes like paying late, having high balances, and so on.

That being said, there are real things you can do to raise your credit score. You can start to see improvements in just a few months if you know what factors affect your score and work on the areas that need work.

Here are the 7 most important things you can do to improve your credit score

1. Make All Payments On Time

Payment history is the most important factor in determining your credit score; it makes up 35% of your FICO score. If you pay your bills late, the credit bureaus will report it and lower your score.

To boost your score:

• Set up automatic payments or payment reminders to avoid missed payments
• If you’ve missed payments, get current and make on-time payments going forward
• Allow extra time for mailed payments to avoid late fees

You can start rebuilding your credit score history by making payments on time every month. Even a payment that is late by one day can hurt your score, so try to make all of your payments on time.

2. Lower Your Credit Utilization Ratio

Your credit utilization ratio is the percentage of your total available credit that you’re using. Keeping this ratio low demonstrates responsible credit management.

Ideally, keep your utilization rate under 30%. To lower your ratio:

• Pay down balances, focusing on maxed-out cards first
• Ask for credit limit increases
• Make multiple smaller payments before your statement date

Reducing your utilization rate from 50% to 30% could boost your score by 40-50 points or more.

3. Limit New Credit Applications

When you apply for new credit, the lender runs a hard inquiry on your credit report. Too many inquiries in a short period can negatively impact your score.

Before applying for new credit:

• Check for prequalification offers to avoid unnecessary hard inquiries
• Space out applications by at least 6 months
• Don’t open store cards just to save 10% on your first purchase

Limiting applications will help minimize credit report inquiries and prevent opening unnecessary accounts.

4. Correct Errors on Your Credit Report

Incorrect information on your credit report, like late payments you didn’t actually make, can sabotage your score. That’s why it’s critical to check your reports from Equifax, Experian, and TransUnion annually.

If you find errors:

• Dispute them immediately in writing with the credit bureau
• Provide documentation like bank statements proving the error
• Get errors deleted so they stop damaging your score

Correcting credit report mistakes can lead to an instant boost in your credit score.

5. Maintain Old Accounts

The average age of your credit accounts impacts 15% of your credit score. The longer you maintain accounts in good standing, the better it is for your score.

To maximize the average age, avoid:

• Closing your oldest credit cards, even if you don’t use them
• Opening a lot of new accounts in a short period of time

Nurture your longstanding accounts while limiting new applications.

6. Build Your Credit Mix

Lenders like to see you handling different types of credit responsibly, like credit cards, a car loan, and a mortgage. This credit mix diversity makes up 10% of your score.

You can build credit mix organically as you take out loans over time. Avoid opening accounts just to diversify credit types. Focus instead on managing what you already have responsibly.

7. Monitor Your Credit Report

Besides correcting errors, monitoring your credit report helps you identity signs of fraud and track your credit profile. You’re entitled to one free report annually from each of the credit bureaus.

Monitor your report at least once yearly to:

• Verify all accounts are yours
• Check for errors or fraudulent activity
• Review negative items like collections
• Confirm your personal information is accurate

Regular credit report monitoring enables you to protect your score from inaccuracies and fraudulent accounts.

By taking these actions, you can start to see an improved credit score within a few months. But remember that building strong credit takes time. The most important thing is developing responsible long-term habits like paying bills on time and keeping balances low.

With diligence and commitment to these credit score boosting steps, you’ll be well on your way to an excellent score and improved financial opportunities. Monitor your progress monthly, dispute errors immediately, and stick to good habits. Healthy credit is well worth the effort!