Your credit score makes a really significant impact on your day-to-day life, influencing where you live, what you can buy, and how much you can save. If your credit score isn’t quite where you want it to be, that’s okay: you have the power to change it.
No matter what your financial situation looks like, the following tips can help boost your credit score over time.
1) Pay Minimums on Time
The best thing you can do to improve your credit is to pay your bills on time, every pay cycle.
Your bill payment history is a huge part of your credit score. Luckily, newer information typically holds more weight in calculating your credit score than older information—this means that even people with past unpaid bills can better their credit score by paying new bills on time.
Even if you’re struggling with debt, there are ways to keep up with your bill payments. Try to:
- Pay off everything by the due date: If you’re not struggling with credit card debt, the best way to improve your credit score is to pay off your entire credit line before the payment is due.
- Pay the minimum by the due date: If you’re struggling with credit card or other debt—and don’t quite have the funds to pay off your entire credit line—try paying the credit minimum for each payment cycle. Meeting minimum payments each month will help keep your credit score afloat while you work to pay off your remaining debts.
- Set up automatic payments: If you have a hard time remembering to pay your credit card off, consider setting up automatic billing. Most credit card companies will offer an auto-pay feature, making it extremely easy to pay your entire credit line or meet your minimum payment each cycle.
2) Catch Up on Unpaid Bills
Once you’re paying your bills on time, try shifting your focus to paying off any remaining debts you may have.
Your payment history has a huge impact on the overall health of your credit score. Unpaid debts can take a bite out of your credit score, but the opposite is also true: once a person pays off their debts, their credit score tends to bounce back.
If you’re struggling with debt, check out our list of the best debt solution services out there. While some solutions (such as debt relief negotiation) may harm your credit, others (such as debt consolidation services) are less risky. Once you’re out of the hole, it's typically much easier to build up your score.
3) Practice the 30% Rule
Credit scores are also affected by a person’s “credit utilization,” the amount of available credit a person uses per payment cycle. For example, if a person has an available credit line of $10,000 but they only put $3,000 worth of purchases on their card, they’d have a credit utilization of 30%.
To grow your credit score, try and walk a balance between spending too little and spending too much on your credit card each month. Most credit card companies recommend that credit card holders keep their credit utilization to about 30% each cycle: not too much, not too little.
When tracking your credit utilization, keep these tips in mind:
- Switch to debit: If you’re over 30% on your credit utilization, but you still have purchases to make, switch to a debit card or use cash.
- Remember that credit utilization is shared: Your credit utilization is shared across all of your open credit cards, meaning you can’t simply swap to another credit card to extend your credit utilization. For example, charging $1,500 on Card A and $1,500 on Card B will still equal $3,000 towards your non-combined credit limits for each card (in other words, your credit limit between the two cards does not add together, but your credit utilization between two cards is added together).
Zero Debt + Higher Score
One of the best things you can do for your credit score is to pay off any outstanding bills or debts. Easier said than done, right? Not quite: our list of debt solution professionals can help you pay down your debt with real, actionable steps.
Check out our list of the best debt solution companies, below: