Your credit score is a three-digit number lenders use to help them decide how likely it is they will be repaid on time, if they grant you a credit card or a loan. The higher your score, the more likely you are to qualify for the most favorable terms. An excellent to good credit score is usually anything above 720. A bad credit score is usually anything below a 620.


If your credit score is not where you need it to be, there are tips you can follow to improve it. Raising your credit score takes time, but the sooner you start working on the issues that have lowered it, the faster it can go up. Most scoring models take into account your payment history on loans and credit cards, how much revolving credit you regularly use, how long your accounts have been open, the types of accounts you have and how often you apply for new credit.


Three Things You Can Do Right Now

1. Start by checking your credit scores at all three credit reporting bureaus (TransUnion, Equifax, and Experian) for any inaccuracies. Incorrect information on your credit reports could bring down your scores. Verify that the accounts listed on your reports are correct. If you see errors, dispute the information and get it corrected right away. Along with your scores, you will get information about the factors that are affecting your scores the most.

2. Set up payment reminders. Making payments on time affects your credit scores more than anything else. Enrolling in automatic payments through your credit card and loan providers and having payments automatically debited from your bank account may help, but you should make more than the minimum payment, if you want to significantly lower your debt.

3. Reduce the amount of debt you owe. The first thing you can do is stop using your credit cards. Then follow the 5-step Snowball Plan described in our article “Paying Down Credit Card Debt.” This plan also will work for any other debt you have, like student loans or overdue utility bills.

Three Things to Always Consider

1. Payment History: Together, payment history and credit utilization ratios can represent up to 70 percent of a credit score. FICO Scores are the most widely used credit scores, used by 90 percent of top lenders. Payment history contributes 35 Percent to a FICO® Score calculation, but problems like missed or late payments are not easily fixed. Prevent them by:

  • Paying your bills on time.
  • Getting and staying current on any previous late payments.
  • Insisting on a “pay for delete” agreement before paying off an account that has gone to collections. This means that that the collection company will delete the account from your credit report, rather than let it stay on your report for seven years.
  • Seeking assistance from a credit counseling service. This will not hurt your FICO Scores.


2. Amounts Owed: This category contributes 30 percent to a FICO® Score’s calculation. People with the best credit scores often have very low credit utilization ratios. It tells lenders you haven’t maxed out your credit cards and that you follow these guidelines:

  • Keep balances low on credit cards and other revolving credit
  • Pay off debt rather than moving it around.
  • Don’t close unused credit cards. Closing an account may increase your credit utilization ratio.
  • Don’t open new credit cards that you don’t need


3. Length of Credit History: New accounts lower your average account age. This has a larger effect on your scores if you’re new at managing credit. Opening a new credit card can increase your overall credit limit, but the applying for credit creates a hard inquiryon your credit report. Too many hard inquiries can negatively impact your credit score. Hard inquiries remain on your credit report for two years.


There Is No Quick Fix for Bad Credit Scores

Time is your ally in improving your credit scores. If your credit report has negative information, such as late payments, bankruptcy, or too many inquiries, you should follow the advice above and wait. The length of time it takes to rebuild your credit history depends on the reasons behind negative changes.


How Do Specific Changes Affect Scores?

It is impossible to provide a completely accurate assessment of how one specific action will affect a person’s credit score. This is why the credit risk factors provided with your score are important. They identify what elements from your credit history are having the greatest impact so that you can take appropriate action. Credit scoring involves complex calculations. These components tend to be the most important:

  • Negative information remains on your credit report for a set period of time. The good news is, all negative information will eventually cycle off your credit report.
  • Settling accounts for less than the full amount you owe can harm your credit scores. Any time you fail to repay a debt in full, it can negatively affect your credit.


Maintaining a good credit score can open doors for you, from helping you qualify for the best interest rates and terms when you borrow money to buy a home, to influencing how much you pay for life insurance. Because credit scores are so important to your overall financial well-being, it’s wise to do everything you can to ensure yours are as good as possible and stay that way. Prevention is much easier than the time, patience and discipline it takes to fix something that brought your scores down.