How to Improve Credit Scores

A credit score is a number based on the information in your credit report that lenders use to determine how likely you are to repay debts. It’s a three-digit number that’s calculated by one of the major credit reporting agencies. A high credit score can make it easier to get a loan, rent an apartment, or even lower your insurance rates. But it’s important to know that your credit scores change all the time, depending on what’s in your report. That’s why it’s important to check your credit report regularly and take steps to improve your score.

The most influential factor in a credit score is your payment history, which accounts for 35 percent of the total score. Paying on time is a crucial element in improving your credit, and it may help you avoid negative impacts from missed payments that can stay on your report for up to seven years. Another key component is the amount of credit you have available versus how much you’re using, known as your credit utilization rate. Lenders often prefer a low credit utilization rate to show that you’re only borrowing what you need.

Paying down balances and limiting new credit card activity are also critical to improving your credit. You can also ask for a credit limit increase with your lender or card issuer to raise your credit utilization ratio, but be wary of applying too often for new credit. Each time you apply for a line of credit, it triggers a hard inquiry on your reports, which can hurt your scores.

Other factors that can affect your credit score include the length of your credit history (15%), the mix of credit types you have (10%), and whether or not you have any recent new accounts (5%) on your credit report. If you have a thin credit file, it can take longer to see real improvements to your score. If you find yourself struggling to pay your bills, consider using any windfalls you receive—like birthday or holiday bonuses or tax refunds—to pay down high-interest debts.

It can be difficult to improve your credit scores in a short amount of time, as information about things like new accounts can take several weeks to appear on your credit report. But there are steps you can take to improve your credit scores over the long haul.