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How to Increase Your Credit Score

A strong credit score is linked to upward mobility and financial independence. There are many key benefits of having a good credit score, such as enjoying a lower interest rate on your auto loans, home loans, credit cards and personal loans. Alongside savings on interest, a good credit score also allows you to save money on security deposits and insurance. Using your credit responsibly and wisely is what helps you to maintain a good score. Understanding how to use your credit wisely is the first step to obtaining good credit.


Know the Make Up of a Good Credit Score

The more you know about what goes into making up your credit score, the easier it will be to maintain a good one. Five key pieces of information are used to calculate your credit score:

  • payment history

  • level of debt (aka credit utilization)

  • credit age

  • mix of credit

  • recent credit

Some things do not affect your credit score. For example, checking account overdrafts and utility payments won’t automatically help (or hurt) your credit score.


Pay Bills On Time


That goes for all your bills, not just your credit cards and loans. While certain bills don’t get reported to the credit bureaus when you pay on time, they could end up on your credit report if you fall behind.

Even a small library fine could wind up on your credit report if it's left unpaid and sent to a collections agency. Continue to pay all your bills on time to maintain a good credit score.


Setup automatic payments or a bank draft to capture 100% payment history. Payment history is the single most important factor in your credit score. Get it right and you'll credit score will be high.


Keep Credit Balances Down


The relationships between your credit limit and the amount of credit limit which has been used is known as your credit utilization. The higher your credit card balance in relation to your credit limit, the lower your credit score will be. Your combined credit card balances should be within 30 percent of your combined credit limits to maintain a good credit score. That’s $3,000 on credit cards with combined limits of $10,000.

Charging more than 30 percent of your credit limit is risky even if you plan to pay off the balance when your monthly billing statement arrives. Credit card issuers typically report the balance as a snapshot on the day your statement closes, so that's the number that will be reflected on your credit report.


It's a good idea to be aware of your accounts online and pay enough to reduce your balances to less than 30 percent just before the billing month closes at a minimum.


Pay Your Statement Balance Before the Payment Due Date


To maximize your credit score, it's best to pay the full statement balance prior to the due date every month. By paying the balance in full monthly, you'll avoid paying interest and optimize your credit score.


Remember to setup automatic payments to avoid having to remember. Setting up automatic payments is the #1 way to ensure a 100% payment history and boost your score.


Keep Your Oldest Credit Accounts Open

When you close a credit account, your credit issuer no longer sends updates to the credit bureaus, and the credit scoring formula places less weight on inactive accounts.


After 10 years or so, the credit bureaus will remove that closed account's history from your credit report, and losing that credit history will shorten your average credit age and cause your credit score to fall.

Closing a credit card also reduces your available credit which subsequently will reduce your credit score. For example, if you have three cards with a combined credit limit of $12,000 and you close one with a $4,000 limit, your combined credit limit will be reduced to $8,000. Since your goal is to keep your credit card utilization at less than 30 percent of your available credit, closing that card reduces your threshold.


Manage Your Debt


Credit card balances aren’t the only factors that influence your credit score. Loan balances such as mortgages and lines of credit also impact your level of debt. Having too much debt can cost you many points on your credit score. The lower your debt and utilization, the easier it will be to maintain a good credit score.


With love,




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