Six Easy Ways to Increase Your Credit Score

by Apr 6, 2020

Your Credit Score is a very important aspect of many financial decisions that you make.

It affects interest rates, credit card approvals, mortgage rates, and more. Potential landlords, insurance companies, and creditor/lendors can all request to see what your current score it.

Most people think that your credit score is out of your control. They think that the “imaginary number” can’t be changed and you’re just stuck with it because of something you may have done in the past.

The good news is that this is NOT true. Here are six easy ways to increase your credit score with very little effort. You will see the financial benefits immediately leaving you with extra money in your pocket.


A credit score is a number that statistically evaluates your creditworthiness. This score is primarily based on your credit history.

Your credit history takes into account multiple factors such as the number of accounts that you have open, the total amount of debt that you have, and your repayment history.

Lenders use your credit score to determine the probability that you will be able to repay your loans in a timely manner. Your credit score can range from 300 to 850.

The higher the score, the more financially trustworthy you are considered to be.

The credit score model was created by the Fair Isaac Corporation, also known as FICO score. This model is used by most financial institutions when determining whether or not to approve you for a loan.

Below is a breakdown of the credit scores and associated description.

FICO Credit Score Rating Description
800-850ExcellentThis is the best rating that you can achieve and you will receive the best available interest rate from lenders
740-799Very GoodPeople with this rating will receive better-than-average interest rates from lenders
670-739GoodPeople with this rating will receive average interest rates and lenders are still likely to approve you
580-669FairLenders consider you to be “subprime”. Higher than normal interest rates are expected
300-579PoorIt is unlikely to get approved for a loan with this score. If you do, a co-signer will be required


Maintaining a reputable credit score significantly affects your financial decisions throughout your life. This score plays an integral part in a lender’s decision to offer you a loan or credit card, and at what interest rate.

A credit score of 670 or above is usually considered average or above average and will result in you receiving a lower interest rate. This lower interest rate means you will be paying less money in interest over the life of the loan. 

If your credit score is below 670, you are are considered to be a subprime borrow. Lending institutions often charge interest on subprime mortgages at a rate higher than a conventional mortgage in order to compensate themselves for carrying more risk.

Lending institutions may also require a shorter repayment term or a co-signer for borrowers with a low credit score.


There are five main evaluation factors that are used to calculate your credit score.

A. Payment History counts for 35% of your credit score and shows if you paid your obligations on time.

B. Total Amount Owed or Credit Utilization counts for 30% of your credit score and is the percentage of credit available to you that is currently being used.

For example, if you have a credit card limit on your card of $10,000 and you are carrying a balance of $4,000 on that card, then your credit utilization is $4,000/$10,000 or 0.40. Lowering the credit utilization ratio can help you to improve your credit score.

C. Length of Credit History counts for 15% of your credit score. A longer credit history is considered less risky because there is more data to determine your payment history.

D. Types of Credit counts for 10% of your credit score. This identifies the different kinds of credit that you are using such as credit cards, mortgage loans, car loans, etc.

E. New Credit counts for the final 10% of your credit score. This considers how many new accounts you have, how many new accounts you recently applied for, and when you opened the most recent account.


Now that you have a more thorough understanding of what a credit score is, how credit scores work, and how your credit score is calculated, here are six easy ways to increase your credit score.

1. Pay Bills On-time

The most important thing that you can do in order to keep your credit score as high as possible is to make sure you pay your bills on-time.

Setting up auto-pay or setting a reminder on your phone or computer will help you remember to make these important payments on-time.

As discussed earlier, your Payment History is the largest evaluation factor in determining what your credit score is. One late payment of 30 days or more has the potential to decrease your credit score by up to 100 points!

This delinquent payment will show up on your credit report for up to six years, resulting in a negative impact on your credit score for a while.

If you did end up being late on a payment, it could take about six months of on-time payments in order to start seeing a noticeable increase in your credit score.

One approach that is worth trying is to call your credit card company and explain to them why you missed your payment.

If you have a good history of always making your payments on time, they might be willing to correct that missed payment and remove it from your credit history.

2. Decrease your Credit Utilization

We discussed earlier that Credit Utilization is the second largest component of your credit score. It is calculated by dividing your total credit card balance by your total credit limit.

A credit utilization of at least 30% will have a positive impact on your credit score. The lower that your credit utilization is, the more positive impact it will have on your credit score.

If you are able to decrease your credit utilization even a little bit, your credit score is likely to go up.

You can easily decrease your credit utilization rate by calling your credit card company and asking them to increase your credit limit. It is important that you don’t spend up to this amount so you are able to maintain the lower credit utilization rate.

As an example, if you normally use $5,000 of your credit each month and your credit cards have a combined credit limit of $25,000, your credit utilization is 20%. If you increase your credit limit to $30,000, then your credit utilization drops to 16%, thus improving your overall credit score.

3. Monitor Your Credit Score

Especially in today’s digital age, it is extremely important to make sure you monitor your credit score. Approximately 1 in 4 people identified errors on their credit reports that might affect their credit scores.

Approximately 1 in 5 people had an error on their credit report that was corrected by a credit reporting agency after it was disputed. These statistics come right from a study conducted by the Federal Trade Commission.

You are legally allowed to request your credit report from Experian, Equifax, and TransUnion at least once per year, for FREE. So every four months, you can request from one of these agencies in order to review all aspects of your credit report to check for any inconsistencies.

Visit every four months to monitor your credit report from these three credit agencies for FREE.

Other very good free services that are available for free credit monitoring include Credit Karma, WalletHub, and Credit Sesame.

There are also many paid services available that will monitor your credit report for you. This provides a more detailed protection approach for your credit report.

These services typically include daily credit checks, real time notices if your credit score changes, $1.0 Million in identify theft protection, and FICO score access every 30 days.

TransUnion offers a very intricate paid service if this level of detail is something you are looking for.

4. Do Not Close Your Old Credit Cards

Your initial instinct when you no longer want to use a credit card is probably to call the credit card company and close it. That is actually not the best idea. Closing your old credit cards open can really decrease your credit score.

The reason this is true is because as we talked about earlier, Length of Credit History accounts for 15% of your credit score.

If you have have a credit card open for the past ten years even if you rarely use it to make purchases, that increases your credit history and therefore increases your credit score.

If you were to close this credit card and the next longest card that you have open is three years, your credit history drops significantly, so you can expect your credit score to drop as well.

Closing an old credit card will also impact your credit utilization. Your old card that you rarely use still had a credit limit on it that helps keep your credit utilization low.

If you close that credit card, you decrease your total credit limit, and therefore decrease your credit score.

5. Minimize Hard Inquiries

There are two types of credit checks that occur when lenders or agencies try to look at your credit report. These include “Soft Credit Checks” and “Hard Credit Checks”. It is important to understand the difference between these two types.

Soft Credit Checks occur when a person or lender gets limited access to your report.

“Pre-qualified” credit card offers and “pre-qualified” insurance quotes use soft credit checks. Your employer might conduct a soft credit check before hiring you. You also may use a soft credit check when trying to check your credit score through WalletHub, Credit Karma, or Credit Sesame.

Soft credit checks DO NOT have any impact on your credit score and they are only visible to you when you view your credit reports.

Hard Credit Checks, on the other hand, occur when a lender or credit card company checks your credit score before making a lending decision. In this case, they get full access to your credit report.

Hard Credit Checks usually take place when you apply for a new credit card or when you apply for a mortgage. In most cases, you need to authorize this type of credit check. Other examples of hard credit checks include auto loan, student loan, and personal loan applications.

A Hard Credit Check DOES have an effect on your credit score, although it tends to only lower your score by a few points. What you really need to be careful about is having multiple Hard Credit Checks over a short period of time. This is where your credit score can really be significantly reduced.

Multiple hard credit checks in a short amount of time could lead lenders and credit card issuers to consider you a higher-risk customer. It gives the appearance that you may be short on cash or getting ready to rack up a lot of debt.

6. Diversify Your Types of Credit

We talked earlier how your different types of credit contribute towards 10% of your total credit score. The more types of credit that you have, the better off you are.

Having a credit card account, a mortgage payment, and a car payment will end up contributing to a higher credit score compared to someone who only has a credit card payment.

Additionally, having multiple accounts of a certain type of credit (multiple credit cards) can also increase your credit.


It is important to understand what a credit score is, how it works, and how it is calculated. These six easy ways to increase your credit score can help you boost your score the little bit that you need in order to secure that lower interest rate.

The financial benefits of just a small increase to your score can realize a significant cost saving.

Following these six steps will help you realize significant financial benefits because these increases to your credit score will save you money.

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