Personal Finance FAQ Series: What Can I Do To Improve My Credit Score?

If you have damaged credit, it’s probably tempting to check out a “credit repair agency” and see if they can improve your credit score. Here are a couple of secrets:

  • They won’t, and you’ll lose money
  • Your goal in life is to not need credit

In the meantime, though, you need to do something.

What Can I Do To Improve My Credit Score?


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The transcript for this video follows below.

Unfortunately, we live in a world where our financial strength often is measured not based on our assets and our income, but, rather, on our ability to borrow money and to give it back in a timely manner.

It’s screwed up.

Still, it’s a fact of life. Oftentimes, your insurance rates, your rental agreements, and even your employment is based on your credit score. It’s a lazy shortcut to truly analyzing risk, but it’s a reality we have to deal with.

So, what do we do?

Here are some things which you can do to improve your credit score:

  • Pay off your bills on time, every time. If a credit score is a model of how well you’ll pay off money you borrow, then you should pay off money that you borrow. Pretty simple.
  • Don’t max out your credit. Credit scores are measured based on the percent of the available credit you have which you actually use. There are two components to this formula: borrow less and have more credit available. As long as you responsibly use credit and don’t use available credit as a piggy bank or an excuse to let Monkey Brain tell you to go spend, then the more available credit you have, the better. However, if you’re carrying a balance, it’s more important to pay that off than to go get more credit. You haven’t shown that you can use credit responsibly, so don’t subject yourself to more temptation.
  • Don’t close old cards. The longer you’ve had a card, the more weight that card carries in the scoring model. If you signed up for a card back in college and still have it, don’t close it. If you’re going to close cards, close cards which charge you an annual fee and then the most recently opened cards.
  • Check your credit reports for inaccuracies. Get your free credit reports from annualcreditreport.com. Don’t pay for the other services. Look at the three credit reports. If there’s any incorrect information, dispute it. However, don’t dispute something just because it’s bad; if you did it, own up to it.

There is no quick fix to improving your credit score. Anyone who offers to clean up your credit for a fee is going to accomplish one and only one goal: getting your money into their pocket. Act responsibly and work to pay down your debts, and your credit score will improve over time.

Here are some other articles and videos with my take on credit:

What questions would you like to see me answer? Leave me a comment and let me know!

About Jason Hull, CFP®

Jason Hull, CFP®, is the Chief Technology officer of myFinancialAnswers, an online comprehensive financial planning service.

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