9 Tried-and-True Tips For a Healthier Credit Score

Road sign that reads: Good Credit Ahead

Your credit affects many aspects of your life and financial health. Having a good credit score is a huge advantage. It can lead to better interest rates, higher credit limits, and ultimately more money in your pocket. 

Here are 9 tips to help you keep your credit score healthy. 

1. Learn what determines your credit score 

Learning what goes into determining your credit score can help you maintain and improve it. The most commonly used credit score is the Fair Isaac Corporation score, also known as the FICO Score.  

There are five factors used to determine this score:  

  • Payment history: Whether you’ve made payments in full and on time. 

  • Accounts owned: The number of credit accounts you have open. 

  • Length of credit history: How long you’ve had credit. 

  • Credit mix: The different types of credit you have (credit card, auto loan, mortgage, etc.) 

  • New credit: How recently you’ve opened new lines of credit. 

By keeping track of all the factors that make up your credit score, you can see where you’re doing well and which areas need more work, which can help improve your score.  

2. Keep credit balance as low as possible 

Using too much of your available credit can negatively affect your credit score. Because of this, it’s advised that you use below 30% of your available credit. Keeping your balance low shows that you’re able to handle the amount that’s been given to you. This can increase your score and lead to better loans with lower interest rates in the future. 

3. Keep old credit  

The length of your credit history is one of the things that affects your FICO Score. The longer you’ve had credit, the better you look as a borrower (and the more likely it is to improve your score). Instead of closing credit cards you don’t use as much, keep them open. This shows that you’re able to responsibly maintain credit over a long period of time. It also adds to your total credit, allowing you more flexibility in the amount of credit you can use without hurting your score. 

4. Avoid making new credit applications 

When you apply for new credit, borrowers make an inquiry into your credit report. They do this in order to determine if they’d like to lend you money and to see if you’re able to responsibly use the credit you already have.  

These inquiries can actually hurt your score. The more lines of credit you apply for (and the more inquiries are made), the more your credit may be affected. 

5. Always make bill payments on time 

Staying on top of your bill payments is crucial to maintaining a healthy credit score. It shows that you’re able to afford your credit and are not overextending your use of it.  

The best way to do this is to pay your whole balance (rather than a minimum payment). This shows that you’re able to responsibly manage your credit use. However, if you can’t do that, at least pay the minimum, since paying anything is better than not paying at all. 

Paying your bills on time is as important as making payments in general. By paying your credit bills on time, you reduce your overall balance, avoid paying late fees, and end up paying less in interest. This also applies to other expenses, like cell phone bills and utilities. Even though they are not always considered in your credit report, they could be, so defaulting on these payments may cause them to go to collection and could lower your credit score. 

6. Work on lowering your overall debt 

Having outstanding debt can negatively affect your credit score because it shows that you’ve borrowed more than you are able to pay. This is why you should work on repaying all of your debt, instead of just working on repaying higher debts or debts with higher interest rates. It also lowers your overall credit balance, which can raise your credit score. 

Many lenders will understand if you have outstanding student debt. This is to be expected of most borrowers in your position. The key here is to make your payments on time each month to show that you’re capable of handling debt responsibly. 

7. Try to use more cash or debit  

Relying too heavily on credit is one of the biggest ways of lowering your credit score. One of the benefits of having credit is that it allows you to make purchases you can’t afford out of pocket. By using your credit solely for larger purchases and relying on cash or debit for everyday use, you could lower your credit utilization ratio, which can increase your credit score. You’ll also avoid paying interest, which can save you a lot in the long run. 

8. Keep your eye on your credit report 

Your credit report contains a detailed report of your credit history. This is what lenders use to decide whether you are creditworthy. It’s made up of four things: Personally identifiable information (PII, which includes your legal name, Social Security number, driver’s license number, and bank account number), credit accounts, credit inquiries, and public records and collections.  

Keeping track of your report is essential to keeping your credit healthy. It’s possible for mistakes to be made or for someone to steal your identity and make fraudulent charges on your behalf. If you keep an eye on your credit report, you can track these changes and report any that are incorrect or fraudulent. Because your credit report plays such a large role in your creditworthiness, it’s important that it’s as accurate as possible. 

9. Consider using a credit monitoring service 

Many factors contribute to your credit score. Because of this, it can be challenging to consistently monitor your credit on your own. This is why many people turn to credit monitoring services, which keep track of your credit for you. They do this by looking at your credit score and credit report to notify you of potential fraud, as well as alerting you of changes that drastically affect your score. This helps keep you and your credit up to date. 

Healthy credit is the best credit 

Taking care of your credit is one of the best things you can do for your long-term financial health. While many people rely on credit to make ends meet, it’s important to use it responsibly and show that you’re able to maintain it and pay it back. When you have a healthy credit score, you show lenders that you’re a trustworthy client. This leads them to trust you with more money (and give you lower interest rates), helping you keep more of your money in the long run.  

The material presented here is for informational purposes only and does not represent specific financial advice to you or your circumstances personally.