Our financial lives depend on our creditworthiness. When we go for a loan, lenders review our credit report and our FICO credit scores to determine what our annual percentage rate (APR) should be. Generally, the higher our score on a 300-850 score, the lower the borrowing rate we will pay on our loans for our car, mortgage or college tuition.

7 Reasons Why You Need  To Review Your Credit Report And Score:


  • Knowing where you stand before making important financial decisions.
  • Borrowing for a home purchase.
  • Car loan or lease.
  • Student loan.
  • Checking for inaccuracies, identity theft, and fraud.
  • Getting a job.
  • Renting an apartment.


Can You Improve Your Credit Score?

The short answer is yes, you can!  We will go over tips to increase your scores. First, let’s talk about how the FICO Scores formula is calculated with its five different criteria of the total:

Payment History: 35%

This carries the greatest weight in your score and is the most important factor. The longer the credit history the better. Having a good track of not missing payments and being on time works in your favor.

So those who are new to being approved for their credit cards need to show a consistently positive pattern.  These are different account types such as credit cards, retail or store accounts, installment loans, mortgages, and finance company accounts.

Credit Utilization: 30%

As a big influence on your credit score, credit utilization is the ratio of your total outstanding revolving credit balances divided by total available credit. Revolving credit refers to your credit cards and credit lines you may have but does not include your car loan (unless on your credit card) or your mortgage.

The utilization ratio is also referred to as the balance of debt to available credit or debt-to-credit. It measures how much credit you have used of the amount available to you. You don’t want to “max out” your cards. You should not be above a 30% ratio as it will impact your score. I would stay in the mid-20s range to be assured of not hitting the 30% level.

Credit History: 15%

Your experience with credit matters to lenders. The length of time of your oldest credit account and  the average age of all of your accounts determine your credit history. The older the account the better for your credit score. If you are new to obtaining credit, it will take time to get this benefit showing up in your score.

Credit Mix: 10%

Lenders favor some variety of borrowing in your mix of credit. A borrower handling different kinds of debt products may reflect less risk to lenders. Someone without a credit card tends to be seen as a higher risk. That said, don’t go out and get different kinds of loans for the sake of improving your mix.

New Credit: 10%

When you apply for new credit, that inquiry will be reflected on your credit report for up to two years. That is called a hard inquiry and can negatively impact your credit score, particularly if you are making multiple inquiries. However, don’t let it stop you from doing comparison shopping for the same type of loan.

A soft inquiry occurs when you are checking your credit score or report. Soft inquiries do not generate negative hits.

Related Post: Common Credit Mistakes And How To Avoid Them

6 Ways To Increase Your Credit Score:


1. Check Your Credit Report For Errors

Reviewing your report for inaccuracies and missing information may be the fastest and easiest way to improve the score. An FTC study reports that 5% of consumers had errors that may carry enough weight to result to get a lesser favorable loan. One in four consumers had errors in one of three credit reports.

If you find an error, contact each of the credit bureaus (Experian, Equifax and TransUnion). You will need to give them specific information as to what you believe is incorrect. They must investigate the item(s) you have raise usually within a 30 day period. You are able to do all of this online but it is a good idea to follow-up if you don’t hear back from them.

Fix Errors As Quickly As Possible

Initiate your inquiry as soon as you spot the error by following these steps. The credit bureaus may back burner your issue if they deem it to be frivolous so be specific and provide the needed information as part of your inquiry.

Sometimes what appears to be errors are fraudulent charges and scams.

Read our related post: 9 Ways To Better Protect Your Privacy Against Fraud And Scams

2. Pay Bills On Time

The credit bureaus require you pay the minimum amount required on time. They are looking at your payment history which counts a lot towards your overall credit score. Missed or late payments are harder to repair and can lead to delinquent payments which take 7 years to get rid of on your report.

Automate Payments

Consider automating payments online through your bank portals for credit card companies. Set up online payments with your other loan providers. Stick to a monthly schedule or pay these bills every two weeks to lessen the burden.

If you have missed payments, get current as quickly as possible. Be consistent thereafter as the creditors look for a favorable pattern of timely payments before you see score improvements.

You do not want a collection account to appear on your credit report. Even if you pay that account, it has long-lasting negative effects. It puts a 7-year stain on your report. Don’t let that be a disincentive from paying off the collection debt as it will stay on longer. You might want to check with the creditor to see if it was “charged off” as bad debt before making a payment.

Pay Credit Card Balances In Full

Although the strategy of making the minimum payment on your credit balance is good for your score, it will keep you in debt longer. It is far better to pay off your monthly debt balances in full. Otherwise, you are paying those card balances at mid-high teen interest rates.

That makes the credit card companies happy but, of course, that is not your goal.

3. Reduce Your Debt

The credit utilization ratio is an important contributor to your overall credit score. Being disciplined about your debt levels is important for the financial future. As it relates to the score, this ratio reflects how much of your available credit has been used. Lenders look at debt usage on a per-card basis as well as on total debt relative to total credit available.

Creditors look at a 30% threshold. Ratios above that level may provide negative consequences to your score. Consider targeting a lower ratio in the mid 20’s if you must carry month-to-month balances at all. You may not realize that making sizable purchases such as moving to a new home caused you violated the 30% ratio.

Raising Credit Limits Too Tempting For Some

I have read others recommend that you should seek higher limits on your credit cards to lower the ratio. That may work mathematically but for some of us it is too tempting to have more credit available to spend more. It sort of reminds me of how our elected officials thrash out at each other, then raise our nation’s debt ceiling rather than reducing our borrowings.

Rather than raise limits on your credit cards, make a plan to zero out your debt balances to gain financial flexibility or stop using your cards and spend less.

If you are having trouble making ends meet because of exigent circumstances (eg. job loss, death in the family), contact your creditors to see if there is something they can do, such as modify your credit terms temporarily. Another recommendation is to go to a financial counselor for some strategies to reduce your debt significantly.

Related Post: How To Pay Down Your Debt For Better Financial Health

4. Little To No Credit History

When you have a relatively “thin credit file” it means you don’t have much in the way of showing that you are responsible with credit yet. This accounts for about 15% of your credit score. There are a couple of things for you to do.

You can become an authorized user on someone else’s account like a parent. Make sure that they use their credit responsibly or it won’t be beneficial to you.

Related Post: A Guide To Your Child’s Credit Report: Pros And Cons

Strengthen Your Credit File

You can apply for a secured credit card where approvals are easier to get than unsecured credit cards. Your credit limits will be far lower, usually capped at around $500. You will need to post a refundable deposit as security. Secured credit cards are good for those with bad history as well as those with little or no history.

You may want to consider Experian’s recently launched free product, Experian Boost. It allows consumers to include utility and cellphone payments into their credit score calculations using this tool. It may provide an incremental boost for those with thin or poor credit history files. Basically, you are connecting your online bank account to your Experian credit report

5. Don’t Close Any Unused Credit Accounts

If you have credit cards you no longer use or need, it is better to cut them up and put those cards in a drawer and forget about them. The exceptions to de-classing them to your sock drawer are you will be too tempted to spend or if you are paying annual fees.

Otherwise, if you call the company to close the account you are likely to lose a few points off your score. Closed accounts even if they have zero balances stay on your credit report for 10 years.

Keeping the account open and unused benefit your scores at least two ways:

  • your credit utilization ratio will rise because you have removed available credit.
  • eliminating an account might hurt your credit history if it is an older account.

The impact of closing an unused account may be tougher on young people or someone that is trying to build up their credit file. I made this rookie mistake by closing a retail store’s account when I was younger. It was an expensive store and not one I found myself shopping at anymore.

I thought I was making a smart move when I closed the account and had my score dinged. I recommend the “scissors approach” and cutting the cards and put it away.

6. Apply For New Credit Sparingly And Only If Needed

Credit mix is a factor in your score though not as influential as credit utilization. Think carefully before applying for more credit than necessary. It may result in counting as a hard inquiry on your credit report and therefore a negative point reduction in your score.


How Long Does It Take To Rebuild Your Credit Card:


  • Credit errors, repairs  3-6 months
  • Closing accounts        3 months
  • Hard inquiries             2 years
  • Missed Payments       18-24 months
  • Car Repossess           7 years
  • Delinquencies             7 years
  • Bankruptcies               7-10 years


Credit Score Ranges Per Experian:

  • 800-850 Exceptional
  • 740-799 Very Good
  • 670-739 Good
  • 580-669 Fair
  • 300-579 Very Poor


How Much Of A Difference Does A Credit Score Make On Your Loan?

Using myFICO Loan Savings Calculator,  here are national 30 year fixed mortgage rates on July 22, 2019 according to the following scores:

Scores      APR                  Monthly Payment

  • 760-850    3.468%                 $2,862
  • 700-759    3.69%                   $2,942
  • 680-699    3.867%                 $3,007
  • 660-679    4.081%                 $3,085
  • 640-659    4.511%                 $3,247
  • 620-639    5.057%                 $3,458


If your score is currently in the 660-679 range, you can save an extra $80,263 over the life of the loan by improving your credit to the 760-850 level. It is definitely worth the effort to do so.



Most of us are in the 620-719 score range. We have several ways we can raise our credit scores incrementally and produce meaningful savings. This improves our ability to borrow and satisfy those like our landlord who want us to be creditworthy.

We should be more financially responsible by reducing debt, paying our bills on time and zeroing out our costly credit card balances. We need to have greater financial flexibility and make better decisions for our  fulfilling our needs and wants in our lives.

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Related post: Are You Creditworthy? All About Your Scores And The Five C’s

Have you checked your credit report recently? It is important to review to do so for errors and ways to improve before core ahead of your needs to borrow. Do you have any experience you can share that you dealt with repairing credit errors  or increasing your score?

We would like to hear from you!


















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