How to Improve Your Credit Score

A credit score is a number that represents your creditworthiness. It’s calculated from the information in your credit report and influences whether you get loans and how much interest you pay on them. A good credit score can help you save money by getting better deals on auto loans, mortgages and even insurance premiums. While there isn’t any secret trick to building up your credit score overnight, some simple steps can help you improve it over time. Here are some of the main ones:

Pay off credit card debt

Paying off credit card debt is the most important thing you can do to improve your credit score. For example, credit card companies report your monthly payments to the three major credit bureaus, which means making payments on the right time and in full will directly impact your score.

If you’re ready to start paying down your debt, there are several strategies for doing so:

  • Consolidate loans into one payment—this will simplify the process and make it easier for you to pay off all of those monthly expenses at once. If this is something that interests you, visit some other guides on how to consolidate student loans and car loans.
  • Apply for a 3% cash back credit card—these cards allow users to earn up to 3% cash back when making purchases on their accounts each year (or more if they use their cards often). As per SoFi professionals, “Upgrade from 2% cash back rewards to 3% cash back rewards for a whole year by getting approved.”

Pay bills on time

The major factor in your credit score is payment history. If you pay bills on time and in full, it will help you improve your credit score. To be sure that paying bills on time is a part of your financial routine, set up automatic payments for all of your bills.

Use less than 30% of available credit on your card

Your credit score is based on a number of factors, but one of the most important is your utilization rate. Utilization is calculated by dividing the amount of available credit that you have by the amount of debt owed on all cards in your name. As such, it pays to keep this number low: The lower it is, the better your score will be!

Keep credit cards open

One thing you can do to improve your credit score is to keep all of your credit card accounts open. These cards are a great way to build good credit and help you establish a history of responsible use. If you no longer need one of these accounts, it’s okay to cancel it as long as you’ve paid off the balance on time in full every month for at least 12 months and don’t have too many inquiries on your report.

Credit scores are important for a variety of reasons, but the most significant is that they allow you to get approved for loans and credit cards. Fortunately, there are many ways to improve your score and make sure it stays high. The best thing about improving your credit score is that it doesn’t have to take much time at all! So don’t wait any longer before improving your financial future today.