How to Improve Your Credit Score

A good credit score can save you a surprising amount of money.

Building strong credit is one of the foundations of winning at personal finance. It can help you qualify for lower interest rates on loans, improve your chances of getting approved for an apartment, and make it easier to get or use a credit card when you need it.

The good news? Improving your credit score isn’t complicated. It mostly comes down to a few simple habits practiced consistently over time.

A strong credit score can make many of life’s big purchases less expensive.

What is a credit score?

Think of your credit score as your financial reputation.

It’s a number that helps banks and others that lend you money determine how likely you are to repay it. The higher your score, the more a lender will want to lend money to you.

Several companies calculate credit scores, but the factors that influence them are pretty similar.

What impacts your credit score?

Here are the biggest factors affecting your credit score and how each factor is weighed in calculating your credit score:

Payment History (35%): Do you pay your bills on time?

Credit Utilization (30%): Of all the credit cards and loans you have, how much of that are you using?

Length of Credit History (15%): How long have your credit card and other loan accounts been open?

New Credit Inquiries (10%): Have you recently applied for a lot of new credit cards or loans?

Credit Mix (10%): Do you have a mix of credit cards, loans, and other credit accounts?

Six ways to improve your score

1. Review your credit report

Start by checking your credit report for errors or surprises. You can access your credit reports for free and make sure everything looks accurate.

If something is off, make sure to file a dispute to keep the record straight You can’t fix problems you don’t know exist.

2. Pay on time

This is the biggest factor affecting your credit score. Set reminders, automate payments, or do whatever works best for you.

Missing a payment can hurt your score, while consistent on-time payments can help it steadily improve.

3. Lower your credit utilization

Credit utilization is simply the amount of your available credit you’re using. In general, lower is better. If possible, try to pay down high balances and avoid maxing out your credit cards. One of the fastest ways to improve your score is often reducing credit card balances.

4. Keep older accounts open

Older accounts demonstrate a longer credit history. Unless an account has high annual fees or other drawbacks, keeping older accounts open can sometimes help your score.

5. Pay down debt strategically

High-interest credit cards and loans don’t just cost you money. They can also make it harder to improve your credit score.

A common approach is to focus on paying off the highest-interest credit cards or loans first while making minimum payments on everything else.

Paying down credit cards and loans helps both your credit score and your financial health.

6. Monitor your progress

Improving your credit score takes time. Check in from time to time, track your progress, and celebrate the small wins along the way.

You don’t need to obsess over it every day, but it’s worth keeping an eye on.

Why it matters

A higher credit score won’t make you wealthy. But it can help you borrow money at lower rates and keep more money in your pocket. And improving your credit score should be an important part of your overall financial plan.

At Firreo, we believe every dollar saved on interest is a dollar that can be used for something more important, whether that’s paying down debt, building an emergency fund, or investing for the future.

Good credit creates opportunities.