All About That Credit: Improving Your Credit Score

May 3, 2016

All About That Credit is a 4-part series about establishing, improving and maintaining good credit. Credit is a complex topic, and while I hope this series will be informative, I welcome questions specific to your particular situation.

Part 4: Improving your Credit Score

Over the last few weeks we have discussed various ways to obtain credit and use credit. Here we are at Part 4: Improving your Credit Score.

A credit score is a way for lenders to assess your credit risk. Will you pay on time? Can you afford to pay? What interest rate will be used?

Most scores range from 300 to 850, the higher your score, the better. Generally, a score of 750 or higher is considered excellent credit. A higher score will generally provide for better terms on a loan because a it is not considered high risk.

Throughout our blog discussions we have actually discussed several ways that will lead to improving your score. Let’s take a moment to recap:

In Part 1: Respecting your Credit Card we discussed using your credit card appropriately and effectively. Know what you can afford, pay on time and in full, and keep your balances low. If you have a high credit card balance, create a debt reduction tailored for you, based on your income and fixed costs. This will take some discipline, but well-worth the sacrifice when you reach your financial goal of being credit card debt-free.

During Part 2: Installment Accounts we took the time to understand how larger loans such as a mortgage or student loan are structured. The APR on the loan will be determined by factors including your credit score, income, and debt-to-income ratio. Lenders want to know that you can actually afford, and pay your monthly payment on time now and in the future.

Part 3: Your Credit Report reviewed the factors that go into your credit report and why it is important to review yours at least once a year. From false information to identity fraud, you need to protect yourself by reporting errors or incorrect information with the credit reporting agency. Should any wrong credit cards, lines of credit, or personal information show up on your credit report, this may influence your credit score and put you at risk.

Improving your credit score will not happen overnight. There are number of influences and circumstances on why your score may be low in the first place, but being responsible with your credit is the best way to build your credit worthiness and help you increase your lines of credit.