Personal Finance  |  October 25, 2022  |  Lisa Litant

5 Tips for Building Your Credit Score

Learn about what a credit score is and how to improve it.

What you'll learn
  • What a credit score is
  • The factors that affect your score
  • The best things you can do to improve your score

A healthy credit score is important if you want to borrow money, whether you’re applying for a new credit card, student loan, or car loan. It can also help you get a better interest rate on that loan. These tips can help you build your credit score, whether you’re new to credit or want to see your score go even higher.

First, what’s a credit score?

Your credit score is a number—FICO® Credit Scores are the most popular—with a range of 300 to 850. The number helps lenders evaluate how creditworthy you are; namely, how much of a risk it is to lend you money; in short, how responsible you are with your finances. The score is largely based on your outstanding credit, payment history, and public records. The higher your score, the more likely you’ll be to qualify for that new credit card or loan.

1. Pay your bills on time

It may sound simple, but this is one of the most important factors in how your score is determined. Lenders want to be sure you’ll pay your bills; a payment that’s even a few days late can dampen your score. This doesn’t only cover credit card bills—delayed cellphone, electric, and rent bills can impact your credit if they’re reported to credit bureaus.

2. Keep your balances low

It’s best if you pay the entire amount due each month. But if you don’t, try to pay off as much as you can. Just because you have a high credit limit doesn’t mean you should keep your balance up to that limit. It’s a good rule of thumb to keep your total debt lower than the overall credit that’s available to you—below 30%, if possible. The lower, the better. Why? If you get too close to your limit, creditors may think you’re biting off more than you can chew, or that you’re supplementing your income with credit.

3. Consider a credit card

Creditors want to see how you’ve been managing credit. Your credit history shows how long you’ve been using credit, how you’ve handled that responsibility, and how responsible you’ve been.

If you’re at least 18 years old, getting your first credit card may be a good way to start building your credit history. There’s a catch, however. If, like many teenagers, you don’t have strong credit yet, your best bet for approval might be to apply with a creditworthy cosigner—an adult who’s willing to share the responsibility legally with you. Their good credit can help you be approved and, when you pay the bills on time, you can start building a good credit rating—just like when you have a cosigner on a private student loan.

4. Don’t apply for more credit cards than you need

Applying for lots of cards won’t necessarily boost your score. You could be tempted to use them (and spend more), plus, a lot of inquiries on your credit report may raise a warning flag to potential lenders.

5. Keep an eye on your credit report

Now that you understand what makes up your credit score, it’s important to check your credit reports—that’s how your credit score is established. There are three national credit reporting bureaus: Experian, TransUnion, and Equifax. You’re entitled to a free credit report from each of them every year, which you can request from AnnualCreditReport.com. Be sure you check your reports for accuracy and take care of any problems ASAP.

How to keep your credit score healthy

The best thing you can do to keep your credit score healthy is to pay your bills on time. Also, be careful not to exceed account limits, and make sure none of your accounts are delinquent. If you take these steps, you can achieve a higher, healthier credit score. And that’s something that money just can’t buy.

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