tips to improving your credit score

Tips to Improving Your Credit Score

If you checked your credit score recently and were disappointed, you’re not alone. According to, more than 20% of Americans have a FICO score that falls under 600. This is considered a “bad” credit score that can harm your ability to borrow, lease, and even work. Debt is a real problem in the United States with our consumer-oriented culture and economy. To top it off, there’s more than $1.48 trillion in outstanding student loan debt. If you happen to be one of these individuals with a fair amount of debt and less-than-stellar credit score, try not to stress. We know how overwhelming it can feel carrying the weight of debt on your shoulders, struggling to make ends meet, and dealing with poor credit, but there’s a slew of viable solutions out there you can take advantage of. This article reveals tips to improving your credit score.

FICO Score

Understanding your FICO score is one of the first steps in the right direction. Your FICO score is used by lenders to determine whether to extend a line of credit to you. It’s the most commonly used measure of credit scores. Ranging from 300 for very poor credit to 850 for a perfect score. Below is a breakdown of the factors and weightings that go into computing your FICO score.

tips to improving your credit score

Consolidate Debt 

If you have a sizeable amount of credit card debt at high-interest rates, there’s a good chance your credit utilization ratio is higher than it should be. Typically, utilization ratios over 30% directly impact your credit score in a negative manner. Meaning if you have $30,000 of total credit at your disposal and using $20,000 of it, you’re credit score will go down. If you can afford the monthly payments, consolidating your credit card debt into a personal loan can have a two-fold positive impact on your credit score.

First, it will lower your credit utilization ratio by effectively paying off those balances (providing you continue to keep the credit card accounts open). Second, it will continue to build payment history if you make your payments on time every month. As an added bonus, it will lower your overall interest rate allowing you to become debt free quicker.

Keep Your Accounts Open

While it may be tempting to close the account after finally paying off credit card debt, it’s important to remember that payment history and length of credit history account for roughly 50% of your credit score. Lenders look for more than 5 years of history in your accounts and look for total credit available to you. If you close an account prematurely, you risk hurting your history AND the total amount of credit you have available. Go ahead and cut up that card or hide it in a shoebox so you aren’t tempted to use it, but keep the account open in order to build a strong credit history.

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Apply for Credit Only When Needed

Every time you apply for a new card or new loan, the potential lender does a hard inquiry into your credit history. Having multiple hard inquiries in a short period of time can lower your credit score and make it difficult to borrow. If you are looking to borrow, say for a mortgage or car loan, do your research first. Make sure you understand how your current credit score impacts your ability to borrow and scope out which lenders will most likely approve you at favorable terms.

Once this is sorted out, then you can apply and hopefully only once. Using a company like can reveal some valuable insight into what you are likely to qualify for, and can even provide some potential opportunities for improvement all for free without negatively impacting your score.

Be Alert and Be On Time

Unfortunately, identity theft these days is as common as traffic in Seattle. Scammers are always coming up with new ways to get access to your sensitive information and take advantage of your credit to enrich themselves. The only way to minimize the impact is to regularly monitor your score and credit activity to catch it early.

This also doubles as an opportunity to find any errors that might pop up from incorrect reporting from lenders or credit card companies. Even if you are always current on your debts, errors in the reporting process are possible.

Lastly, make sure you always pay your debts on time. Even if you have large outstanding debt obligations (e.g. student loans), making your payments on time, month after month, can improve your credit score.

Bottom Line

Maintaining good credit is certainly a process. One that requires a certain degree of discipline, but it doesn’t have to be challenging by any means. If you can keep your utilization low, make your payments on time, and keep your accounts open for long credit history, chances are your credit will always be good to great. However, if it needs improvement, try implementing just one of these above methods and track the progress in the coming months. 

If these tips to improving your credit score aren’t helping and you need further guidance, feel free to reach out to us and schedule a free consultation to review your current debt & credit situation.

Levi Sanchez, CFP®, CPWA®, CEPA®, BFA™
Levi Sanchez, CFP®, CPWA®, CEPA®, BFA™
Levi Sanchez is a CERTIFIED FINANCIAL PLANNER™, CERTIFIED PRIVATE WEALTH ADVISOR®, CERTIFIED EXIT PLANNING ADVISOR®, BEHAVIORAL FINANCIAL ADVISOR™ designee and Founder of Millennial Wealth, a fee-only financial planning firm for young professionals and tech industry employees. Levi’s been quoted in the New York Times, Business Insider, Forbes, and is a frequent contributor to Investopedia. He is an avid sports fan, personal finance and investing geek, and enjoys a great TV show or movie. His mission is to help educate his generation about better money habits and provide financial planning services to those who want to start planning for their future today!

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