Yusra3
VIP Contributor
Your credit score plays a big role in your financial life. It determines whether you can get approved for credit cards, loans, and other services. A higher score also means you'll likely get better interest rates. Here are two effective ways to improve your credit score over time.
1. Pay bills on time
One of the biggest factors in your credit score is your payment history. When you pay bills late, it's reported to the credit bureaus and damages your score. Set up autopay through your bank or with individual creditors to ensure you never miss a payment deadline.
If you do happen to pay late, call the creditor right away and ask if they will waive the late fee. Pay the outstanding balance promptly. With time, the late payment will have less impact on your score, especially if you don't repeat the mistake. Avoid letting an account go to collections, as this causes much more dramatic damage to your score.
2. Lower credit utilization ratio
This measures how much of your available credit you are using. Experts recommend keeping it below 30%. To calculate your ratio, add up balances on all credit cards and divide by total credit limits.
Say you have a $2,000 limit on one card with a $500 balance. You have a second card with a $5,000 limit and $1,000 balance.
$500 + $1,000 = $1,500 total balances
$2,000 + $5,000 = $7,000 total available credit
$1,500 divided by $7,000 equals a credit utilization of 21%.
Pay off cards with high balances to lower your ratio. You can also ask issuers for a credit limit increase. Just be sure to maintain low card balances going forward.
Improving your credit takes diligence and patience over time. But following these two steps consistently will help build your score so you can access more financial opportunities. Monitor your credit reports regularly and address any errors or suspicious activity promptly.
1. Pay bills on time
One of the biggest factors in your credit score is your payment history. When you pay bills late, it's reported to the credit bureaus and damages your score. Set up autopay through your bank or with individual creditors to ensure you never miss a payment deadline.
If you do happen to pay late, call the creditor right away and ask if they will waive the late fee. Pay the outstanding balance promptly. With time, the late payment will have less impact on your score, especially if you don't repeat the mistake. Avoid letting an account go to collections, as this causes much more dramatic damage to your score.
2. Lower credit utilization ratio
This measures how much of your available credit you are using. Experts recommend keeping it below 30%. To calculate your ratio, add up balances on all credit cards and divide by total credit limits.
Say you have a $2,000 limit on one card with a $500 balance. You have a second card with a $5,000 limit and $1,000 balance.
$500 + $1,000 = $1,500 total balances
$2,000 + $5,000 = $7,000 total available credit
$1,500 divided by $7,000 equals a credit utilization of 21%.
Pay off cards with high balances to lower your ratio. You can also ask issuers for a credit limit increase. Just be sure to maintain low card balances going forward.
Improving your credit takes diligence and patience over time. But following these two steps consistently will help build your score so you can access more financial opportunities. Monitor your credit reports regularly and address any errors or suspicious activity promptly.