How to Improve Your Credit Score

Your credit score is a three-digit number that shows how responsible you are when you borrow money. The score considers your financial history and predicts how likely you are to repay debt. The higher your credit score is, the more likely you will get approved for loans and credit cards with lower rates and favorable terms.

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How Your Credit Score is Calculated

There are a number of factors that are used to determine your credit score, but the most important factor is payment history. Every time you miss a bill payment, your credit score will likely go down, while maintaining a history of on-time payments can increase your score.

Another essential factor is credit utilization, which shows how much of your available credit you're actually using. Your credit utilization ratio equals your current debt balances divided by your total credit limits. To lower your credit utilization and improve your credit score, pay down your debt or open a new credit account to raise your credit limits.

How to Increase Your Credit Score

Wondering how to improve your credit score? Here are some tips to help you out.

Pay Your Bills on Time

Make every effort to pay your rent, mortgage, car loan, and other bills on time, every time. If you're worried you may forget a payment, sign up for automatic payments or set up calendar reminders on your phone. Even one missed payment can lower your credit score, so this is the best way to improve your credit.

Pay Off Your Debt

Less debt can lead to a lower debt utilization ratio and higher credit score. Therefore, it's a good idea to pay off any debt you may have. To do so, pick up a side gig, cut your expenses, or live on a strict budget where you only spend money on essentials.

Keep Your Balances Low on All Credit Cards

Be mindful of how much you charge to all of your credit cards and keep your balances as low as possible. If you're using 30% or more of your credit limit on one card, make a payment or switch to another credit. You may want to get rid of your credit cards altogether if you constantly overspend.

Be Careful of New Credit

If you recently took out a car loan, don't apply for a personal loan shortly after. Opening too many credit accounts at once can cause your credit score to go down, especially if companies make a hard inquiry into your account every time.

Dispute Any Credit Inquiries

Visit AnnualCreditReport.com to get free copies of your credit reports from the three major bureaus, Equifax, Experian, and TransUnion. If you notice any errors or inaccuracies, dispute them with the appropriate bureau.

What to Avoid When Improving Your Credit Score

When working to improve your credit score, it’s important to avoid pitfalls. There are strategies that may seem like they’ll help boost your score further but may actually affect your score in a negative way.

Although opening new credit cards may seem like a good idea because this could increase your available credit, don’t apply for multiple cards all at once. Similar to applying for too many loans at once, this can lead to multiple hard inquiries on your credit report, which can impact your score. Lenders may also consider you a riskier borrower.

Another pitfall to avoid is canceling your credit card after you pay it off to build credit. This can decrease the length of your credit history, which is an important factor that helps determine your credit score. Only cancel your credit card if you have a good reason to, like if it’ll help you avoid the temptation to overspend.

How Fast Can I Increase My Credit Score?

The time it’ll take to increase your credit score depends on a variety of factors, like your current credit score, what’s lowering your score, and what you’re doing to improve it. It may take a few months or years to significantly increase your score, but you’ll see improvement over time as long as you continue to pay off your debt, make on-time payments, and keep your credit card balance low.

How to Get a Loan Without a Good Credit Score

If you don't have time to improve your credit score and need some cash to cover an immediate expense, Advance America can help. We offer a variety of loan options and may approve you with any credit level including fair or even bad credit. Our payday loans, installment loans, and other online loans can help you meet your short-term financial goals with ease.