How to Improve Credit Scores

The article may contain affiliate links from one or more partners. Learn how we make money to continue our financial wellness mission.

Your credit score is a reflection of how you’ve handled credit and loans. By making sure you make timely payments and do not carry credit card balances from month-to-month your score should be satisfactory. However, mistakes do happen either from financial institutions reporting incorrect information to a missed payment due to simply forgetting a due date.

Depending on your individual situation there are a few ways to improve your credit score. We’ve compiled the top ways to improve your credit score.

Pay Your Bills On Time

One of the best things you can do for your credit is to pay your bills on time. While one or two 30- to 60-day late payments won’t have too much of an impact, just one 90-day late payment can damage your credit for up to seven years. To ensure you always make on-time payments, use account management and online bill reminder serviceswhich will remind you when your bills are due. Not only will this help keep your credit score from dropping, but it will also help you save money on late fees.

Keep Your Credit Utilization Ratio Low

You may have heard before that closing a credit card can negatively affect your credit score, but there’s a reason for it: It can cause your credit utilization ratio to skyrocket. You should keep your credit utilization ratio, which is the percentage of your credit limit that you actually use, at around 10 percent or at zero, according to FICO.

Here’s what closing a line of credit could do to your utilization ratio: Let’s say you have two credit cards: One has a $5,000 limit and the other has a $10,000 limit. Each month, you use your credit card for about $1,500 worth of expenses, which brings your utilization ratio to a safe 10 percent. However, you decide that because you never really use the card with the $10,000 limit, you’re going to cancel it, but you don’t change how much you’re spending each month. Now, your credit utilization ratio has jumped to a whopping 30 percent, which can cause your score to drop.