How to Improve Your Credit Score

Online shopping

Improving your credit score is one of the most important things you can do to improve your financial health. Simply put, the higher your credit score, the lower your interest rates will be! Below we have listed things you can do to help improve your credit score, which will save you money!

Quick Tip: Register today to get your free credit score, no credit card is required — and it’s refreshed monthly to help you monitor your credit report.

Things to do to improve your credit score

  1. Monitor your credit report and score - The first step of improving your credit is knowing your credit report and score. Monitor your credit report on a monthly basis to identify any inaccuracies that should be disputed with the three major credit bureaus. Did you know that over 70% of credit reports have erroneous information that may negatively impact your credit score?
  2. Pay every account on time - This should be obvious but it never hurts to reiterate. You need to pay your bills on time. Did you know that payment history is one of the most important factors that affect your credit score? Over 30% of your credit score is determined by the on-time payment history.
  3. Pay off collections – If possible, negotiate to remove those from your credit report entirely, and make sure that you get it in writing. Paying in full is the next best option, even if you can’t get them to remove the actual line item; a paid collection is treated more favorably than an open collection account.
  4. Keep your credit card balances low - Credit scoring models do not look favorably on balances that are approaching you credit limit. The best strategy for credit cards is to charge small amounts and pay in full each month. The next best strategy is to keep your balances as low as possible; you will achieve a significantly higher credit score if you can keep your balance under 30% of your total credit limit.
  5. Pay your highest interest debt first - If you have multiple trade lines, you can super-charge your debt reduction strategy by making additional payments on your highest interest debt first. With less to pay toward interest, you’ll have more to go to principal.

Things that have a negative impact on your credit score

  1. Don’t close old credit cards – Many people think they can improve their credit score by closing unused credit cards, but this is not necessarily the case. Open unused credit cards actually help improve your score by lowering your credit utilization – the total balance versus the total credit limit. All credit scoring models look at your outstanding balances in relation to your credit limits.
  2. Don’t open new accounts- In the long run, more credit can help your score, but new accounts can work against your score in the short term. If you are planning on financing a major purchase like a house or a car, avoid applying for and opening new credit unless it’s absolutely necessary. When applying for credit, such as a new credit card, the creditor will run a credit check, thus slightly lowering your score in the short-term.
  3. Don’t pay that old charge-off – Often, consumers think that they can improve their score by dealing with old charge-off accounts. Dealing with an old charge-off can actually work against you. Charge-offs will drop off of your credit report after seven years. If you make a payment to settle an old charge-off, it will actually update the date of the charge-off and it will appear on your credit report for another seven years. The only exception would be if you can get them to agree to remove the account entirely from your report. Again, get it in writing.
  4. Don’t shop around for consumer credit – When you apply for credit, the lender will pull your credit report and when they do, you get what’s called an inquiry. Numerous inquiries in a short period of time can hurt your score. The scoring models think that you are getting denied for credit or desperate to get a loan. Luckily, this does not apply to shopping around for a mortgage or new car loan, which is always smart to do; most credit scoring models consider multiple inquiries for mortgage and auto as one inquiry, as long as they occur within a short period of time.

Monitor Your Credit Score for Free

You can keep track of your credit report and score with CreditSesame.com. Get your truly free credit score monthly – no credit card required, or trial periods. And, find out how much you can save with refinance, low interest credit or loan option with Credit Sesame’s debt analysis tools.

  • Featured Credit Card