6 Tips to Improve Your Credit Score (and Why it Matters)
Maintaining a good credit score is an important aspect of maintaining overall financial health. Credit scores can determine how easy it is for someone to open a credit card, get auto financing, take out a home loan and more. Having a low credit score can indicate a financial risk and could result in rejection or higher rates.
Understanding what impacts credit can help you improve your score and maintain good credit health. Here are some of the biggest factors that impact credit scores, along with tips to improve and build your credit.
1. Pay bills early or on time.
Paying your bills on time has the biggest impact on your credit score, and making payments consistently early or on time can be a simple way to boost your score. Consistency is key here, so consider setting up automatic payments or setting payment reminders to make sure you stay on track with bill payments.
2. Utilize credit wisely.
The lower the better is the rule here, and using as little of your available credit as possible is best for improving your credit score. Your credit utilization ratio indicates how much of your available credit is in use, and you should aim to keep that amount under 30%.
3. Consider your credit history.
The length of your credit history can be out of your control to a degree, but the sooner you can start building your credit history, the better. Securing traditional credit, such as a credit card or a loan, can help build your credit history since it is typically repaid over a longer period of time.
4. Use a variety of credit types.
Having a mix of different types of credit is generally better, but it’s important to avoid taking on too much debt. You want to have sufficient credit usage to build your credit, but not so much that you are unable to make payments on time and end up lowering your credit score.
5. Limit new credit applications.
Limiting the number of credit cards and loans you apply for within a certain period can help improve your credit. Keep in mind that applying for new lines of credit could temporarily lower your credit score.
6. Borrow and spend in moderation.
The key to building credit is moderation. Only borrowing what you need when getting a loan can help you repay the loan on time more easily, and using credit cards only for specific needs or emergency situations will help limit your credit utilization ratio. It’s okay to be cautious, but don’t avoid using credit altogether. Set boundaries, be mindful of your credit utilization ratio, and make credit card and loan payments on time.
Kevin Cerveny is the consumer lending sales manager for Arvest Bank - Greater Kansas City and can be reached at kcerveny@arvest.com.
With more than $27 billion in assets, Arvest is a full-service bank that delivers financial solutions to individuals and businesses of all sizes. Since entering the Kansas City market in 2009, Arvest has grown to a top 20 bank and the sixth largest mortgage lender in the metro. The bank has 20 locations in the metro area. Arvest is an Equal Housing Lender and Member FDIC.
