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Credit Score Tips

7 things you can do to improve your credit score.

A credit score evaluates a consumer's creditworthiness and is based on credit history. Lenders use credit scores to evaluate the probability that an individual will repay his or her debts. A person's credit score ranges from 300 to 850, and the higher the score, the more financially trustworthy a person is considered to be.1

There are no quick fixes to getting a good score. However, you can raise your score over time by demonstrating that you consistently manage your credit responsibly.

Here are 7 things you can do to improve your credit score:

  1. Pay your bills on time. If you have a history of paying your bills on time, you’ll have an easier time getting a mortgage loan, auto loan or credit cards. Even if you’ve had serious delinquencies in the past, a recent history (24 months) of on-time payments carries weight in credit decisions.

  2. Keep credit card balances low. It’s ideal to have a credit utilization ratio of less than 30%, meaning you should aim to keep your balances below 30% of your total credit limit if possible. 

  3. Pay down debt. Creating a step-by-step plan for reducing debt can help immensely. Include debt payments into your budget, and consider paying more than the minimum required if you can. Once you've reduced your debt, begin using a money management tool to help you better your spending habits.

  4. Use credit cards – but manage them responsibly. In general, having credit cards and installment loans that you pay on time will raise your score. Someone who has no credit card tends to have a lower score than someone who has already proven that he can manage credit cards responsibly.

  5. Don’t open multiple accounts too quickly, especially if you have a short credit history. This can look risky because you are taking on a lot of possible debt. New accounts will also lower the average age of your existing accounts which is something your credit score also considers.

  6. Don’t close an account to remove it from your record. A closed account will still show up on your credit report. In fact, closing accounts can sometimes hurt your score unless you also pay down your debt at the same time.

  7. Shop for a loan within a focused period of time. Credit scores distinguish between a search for a single loan and a search for many new credit lines, based in part on the length of time over which recent requests for credit occurred.

These ideas won’t create a dramatic improvement in your credit score overnight, but over time, they will help. Remember, it takes time to develop a strong profile. Once you’ve done it, you’ll find it easier to apply for credit and may be offered more favorable interest rates.