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Posted August 3, 2017

Credit is a powerful tool. You may not have a need for it today but there will likely come a time when you do; as we all know, life has a way of surprising us and often things happen all at once. The car breaks down, the cooling system needs repair, and the little one gets sick.

Secure a loan approval when it matters by improving your credit score. The process is very much the same for us all regardless of whether you are rebuilding credit or just establishing it. Learning about the five components that are factored into your credit score and understanding how your behavior affects your credit score is a good place to start.

What You Need to Know to Improve Your Credit Score

Did you know your payment history makes up 35% of your credit score? By simply making payments on time you are positively impacting your score. If there are late payments on your credit report, take corrective action. Set reminders on your phone or put a note on the refrigerator. If you know you always have the money, enroll in auto pay.


Make it a point to keep your balances low as this has the second largest impact. Experts recommend you keep your utilization ratio below 30% which means you should aim to borrow less than 30% of all the credit that has been extended to you. Pay your balances in full whenever possible and strive to give more than the minimum payment to avoid accumulating interest.

Length of accounts.

The longer you have your accounts, the better. Why? Older accounts are rich in history. More credit history gives lenders a better sense of your borrowing habits. If you get to the point where you want to close an account, reconsider. Remember that you are losing that history and increasing your utilization ratio.


You also want to have a mix of credit as this shows you can be responsible with different types of credit. Keep in mind, not all debt was created equal. While a mortgage may be seen as an investment, consumer debt may not be as favorable. If you already have several credit cards or lines of credit, do you really need another?

New Credit.

Be wary when applying for new credit and only apply for credit as needed. While a discount on your purchase today sounds great, a charge card may not be in your best interest in the long run. Moreover, avoid having too many inquiries in a short period of time as this may be seen as an indication of financial distress.