Think of your credit score as a kind of financial GPA: Your goal is to keep improving it, and then maintain it when it’s the highest you can achieve. Always strive to keep it higher than it is currently. And if you’ve recently earned a failing grade—say, in the form of making late payments—you’ll need to work that much harder to raise your score!
Making Sense of Your Credit Score
To better understand the credit-scoring system, it may help to compare FICO credit-score ranges to a report card. Think of it like this:
Already have a good credit score? Follow these tips to maintain it:
- Pay your bills on time. Continue to pay all of your bills on or before the due date.
- Keep track of your credit report. Request a free copy of your credit report each year and review it for inaccuracies. You’re entitled to one every year from each of the three credit reporting agencies. If you spread them out—requesting one from a different agency every four months—you’ll be able to catch any errors or suspicious activity sooner than if you received all three at the same time.
- Don’t open new lines of credit. Each time you submit an application for a new credit card, your credit score takes a hit. Avoiding or limiting new applications for credit will allow you to keep your credit score on track.
- Keep credit balances low. Running up higher balances can result in a lowering of your credit score. And higher balances are harder to pay off. Keeping low or zero balances will allow you to maintain your positive credit score.
- Don’t close old credit accounts. The longer your record of using credit, the better. Closing old or inactive credit accounts will result in those creditors not reporting information to the credit bureau, thus shortening your reported length of credit history and average credit age, which will result in a decline in your credit score.
Not making the grade? Take these steps to improve your credit score:
- Request a free copy of your credit report. Review accounts and balances in detail. Contact the credit reporting agency to dispute any inaccuracies.
- Reduce your debt. Stop using credit cards; instead, make purchases using cash or your debit card. Start by making a monthly budget to plug spending leaks and determine how much you can afford to pay against debt each month. The first credit card you should pay off is the one charging the highest interest rate.
- Get current on past-due bills. If you have a history of missing payments, correct the problem and get up-to-date on all outstanding accounts.
- Set up reminders to pay bills. Paying your bills on time is one of the best ways to improve your credit score. Make reminders on your smartphone, online calendar, or standard calendar—but get those payments made on time!
- Be patient. According to Experian, delinquencies and public record items can remain on your credit report for seven years, bankruptcies for 10 years, and credit inquiries for two years.
The old adage knowledge is power is true: The more you know, the more in control you can be. Take the time to review your credit report regularly, fix any errors, and have a plan for using your credit wisely so you can watch your credit score rise over time.