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5 simple steps to boost your credit score

Victor Polich
Mortgage Banking

A credit score is an indicator of financial health. It signifies your strength to banks and can help determine how easy or expensive it is for you to buy a home or car.

Young couple sitting against stacked moving boxes in their still-empty, sunny new home.If you’re in the market for a new home, want to refinance your existing mortgage, or simply want to manage your personal finances more effectively, it’s essential to maximize your credit score.

How credit scoring works

First, let’s consider how credit scores are determined. Most creditors use the FICO scoring system, which combines financial data collected from the three major nationwide credit reporting agencies – Equifax, Experian, and TransUnion.

Second, your credit score is tied to your payment history, amounts owed, length of credit history, new credit, and credit mix. Each scoring system ranges from 300 to 850; the higher the number the better.

Tips for boosting your score

Here are five ways to increase your credit score:

  • Pay your bills on time. Making timely payments in full is key to improving your credit score. And if you miss a payment or are late, get current as quickly as possible. Your payment history is typically the most important factor in your credit score because lenders want to know if a potential customer has paid past debts on time.
  • Keep low balances on credit cards. A rule of thumb is to maintain balances below 30% of total available credit. Paying down debt because helps your score more than simply shifting the balance to another card.
  • Be selective about opening new credit accounts. Think twice about opening a new store credit card to get a 20% discount on a one-time purchase.
  • Avoid opening new accounts that you don’t need. Opening multiple credit accounts in a short time may be perceived as a sign of financial trouble and may lower a person’s credit score.
  • Maintain the right mix. Using a credit card can help your FICO score, but only if you manage your debt responsibly and make payments on time. Don’t add accounts just to attempt to boost your credit score.

Overall, it’s important to stay aware of your credit score by checking it periodically. In fact, the Federal Trade Commission estimates that 20% of consumers have errors in their records that could affect their score.

To better manage your credit, request a copy of your credit report from any (or all) of the three credit reporting companies. Remember that you’re entitled to one free copy per year of your credit report from each credit service.

View your reports for free at

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