Find out what steps could help you improve your credit score.
Knowing your credit score is essential because it can impact your financial future. The good news is it's possible to improve your credit and increase your credit score if you make the right moves. Recently, I was surprised to learn that my credit score is 835 -- which is the highest it's ever been. Here's how I got my score to this number.
1. Payment history
Your payment history makes up 35% of your FICO® Score. You can improve your credit score by staying on top of your bills and making on-time payments regularly. When you miss a payment or make late payments, it negatively impacts your credit score. You may also have to pay late payment fees, which wastes money.
Luckily, I've always been on top of paying my bills, so I have an exceptional payment history. Thanks, anxiety! If you're forgetful and have missed payments, you may consider setting up alerts on your phone or using a calendar to track when bills are due. Another option is to use budgeting apps to monitor your spending and easily track due dates.
2. Amount of debt
Another factor that impacts your credit score is how much debt you have. For revolving debt, like credit cards, your credit utilization ratio is examined. This is the ratio between the amount of credit available to you and how much you use. This factor makes up 30% of your FICO® Score.
If you're hoping to improve your credit and increase your credit score, monitor how much credit you're using and maintain a lower credit utilization ratio. Experts recommend keeping your credit utilization below 30% for the best results. I've been careful to monitor my credit usage; at the time of writing, I'm using 3% of my available revolving credit.
3. Length of credit history
The length of your credit history is another crucial factor to pay attention to if you want to improve your credit. This makes up 15% of your credit score. It pays to start building your credit early, and it's also beneficial to keep credit accounts open for a while rather than closing them after a short period of time. A lengthy credit history helps show creditors you have a history of successfully managing credit.
I am privileged to have learned some basic financial knowledge early in life. I opened my first credit card soon after I became an adult and learned the importance of only charging what I could afford to avoid costly interest charges. My average credit age is 10 years, and my oldest credit account is 17 years old; these figures have helped me grow my credit score.
4. Credit mix
Having a mix of credit is also beneficial because it shows you can manage different types of credit. Your credit mix makes up 10% of your credit score. That doesn't mean you should rush to take out loans you don't need. You can improve your credit mix by using multiple credit cards. Right now, my credit mix is rated as exceptional. I have several credit cards, a mortgage, and a personal installment loan.
5. New credit
When you apply for a new line of credit, a credit inquiry appears on your credit report. New credit, or how many new accounts you have, and the number of credit inquiries on your credit account are considered, and these factors make up 10% of your FICO® Score.
It's best not to apply for credit frequently. You can improve your credit score by keeping your credit inquiries to a minimum and only applying for new credit when necessary. My most recently added credit account is a little under two years of age. My other accounts are older, which has helped me improve my score.
You can improve your credit score
If you're unhappy with your current credit score, that's okay. But don't give up on your credit. You can make positive changes that help you to increase your credit score over time. Check out these personal finance resources for additional ways to improve your finances.
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