Your credit score is a crucial measure of your financial health. Lenders use this three-digit number to see if you use your credit responsibly and to decide how likely it is they’ll get their money on time. The higher your score, the more easily will you find an approval for new credits. It can also increase the chances of receiving a lower interest rate when you apply.

Although it’s rare for people to have the credit score they want, there are several options available for improving yours. In this post, we will present you some of them.

Pay the bills on time

Lenders, when reviewing your credit score or a request for credit, will be very interested in how reliable you are in paying your bills. This is because current payment performance is often considered a good indicator of future performance. You can make a positive impact on this credit factor by paying all your bills on time, as agreed, while paying late or settling an account for less than what you originally agreed to pay will have the opposite effect.

This includes paying all bills on time – not just credit card bills or prior loans, like student or auto loans, but also your utilities, rent, phone bills, etc. To get better at this, it is a good idea to utilize available tools and resources, like calendar reminders or automatic payments to ensure everything is completed on time, as intended.

Review your credit score

In order to improve your credit, you must first know what is working in your favor – or working against you. Some factors that could contribute to a higher credit score include a history of low balances on your credit cards, on-time payments, a mix of loan accounts and credit cards, minimal inquiries for new credit and older credit accounts. Missed or late payments, collections, high credit card balances, and judgments can be some of the major detractors.

This is where checking your credit score online comes in. You can either find websites or check the credit bureau or bank reports. Then, review and compare them to see what’s helping or potentially damaging your score. When you finally get your credit, you will be able to confirm which factors influence it the most. A credit score reflects credit payment pattern in time, with emphasis on more recent data.

Pay off loans and keep balances low on credit cards and other revolving credits

The credit utilization ratio is the amount of your credit limit you’re utilizing at any time. After payment history, it’s probably the second most crucial factor in FICO credit score calculations. The easiest way to maintain your credit utilization ratio is to pay your credit card balance in full each month.

While it is not always possible to do so, a good rule of thumb to follow for credit utilization is to keep your total balance at 30 percent or less of your total credit limit. Then you can work on reducing that to 10 percent or less, which will be ideal for improving your credit score. A low credit utilization ratio tells lenders you didn’t max out your credit cards and that they will likely manage new credit well. Use your credit’s card’s high balance alert feature to watch at your balance and stop adding new changes when necessary.

Deal with delinquencies and keep the old account open

Your credit age is the average age of your credit accounts. The older it is, the more will the lenders appreciate it. If you have old unused credit accounts, don’t close them down yet. While the credit history on them is accounted into your credit report, closing credit cards while there is still balance on other cards will reduce your available credit and in turn increase your credit utilization ratio, which will knock off a few points off your credit score.

Also, if you have charge-offs, delinquent or collection accounts, act on resolving them. An account with multiple missed or late payments, for example, will lower the quality of your payment history. Work out a plan to resolve them and to make future payments on time.

While a perfect credit score is hardly achievable in today’s economic downward spiral, some planning and action can drastically improve it. An improved credit score means a lot, particularly when you’re planning to apply for credit. The sooner you start working to improve it, the sooner will you see the results.

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