How and Why to Improve Your Credit Score

by RC on April 6, 2011

While some people obsess over their credit scores, most of us don’t think about it too often until we get ready to borrow something- borrow money, that is.

Whether you are taking out a loan for a car or making a big step and purchasing a home, your credit score does matter when you are borrowing money.

But that’s not the only time your credit score can come into play. Some other instances where your credit score may be checked include:

Car insurance- Car insurance companies may check your credit, and many do these days. Apparently, they believe if you have a lower credit score, you are a higher risk to file a claim, and therefore may cost them money, and they may charge a higher premium as a result.

Getting a job/getting hired- Many employers, particularly service oriented ones may check your credit score or worthiness as part of the application process, along with a background check.

Getting a security clearance- This is fairly common for branches of the military, as well as on-site clearance/access for large industrial companies, such as refineries, chemical plants, etc.

Whether you think that it is right or fair for your credit score to be checked by insurance companies or a potential employer, the fact is it does happen.

So even if you aren’t planning on taking out a loan or borrowing money, you having good credit and a good credit score can be beneficial.

What are the components of a credit score?

According to, the following factors are used in determining your credit score:

    35%- Payment History
    30% Amounts owed
    15%- Length of credit history
    10% New Credit
    10% Types of credit used

How Do You Review and Improve Your Credit Score?

Review Your Credit Report

Knowing what is on/in your credit report is very important.And thanks to recent (last few years) federal government regulation, you are entitled to a free copy of your credit report from all 3 credit bureaus. (Transunion, Experian, and Equifax ) This is available at

You should review your report for any errors or other discrepancies, which may be adversely affecting your credit.

Check Your Credit Score

Unfortunately, there is no government program that offers you a free credit score once a year- but that would be great if there were!

In order to get your credit score, you will have to pay for it directly, or obtain it through an offer from a company that offers it as part of a service or along with another service.

Pay for it directly- at the credit bureaus, (such as Experian, Transunion, or Equifax), or for your fico credit score at You can order your credit score from an individual bureau all three at once, depending on where you purchase it.

Use a free trial offer to get all 3 for free- Some companies, like, offer you a trial service for a period of time, (7 days for for their monthly credit score access and credit monitoring service. If you cancel within 7 days, you will not be charged and therefore can get your credit scores for free. offers Transunion, Experian, and Equifax scores with their service. Be sure to cancel before the trial period ends if you do not want to pay for their monthly service.

Use a service that will provide one for free- Companies like Credit Karma and Credit Sesame, both fairly new to the scene, will offer a free credit score from one bureau (Credit Karma uses Transunion, Credit Sesame uses Experian), and will also offer you ways save money, or bank account deals, etc. (they make money if you sign up for one of their offers). I’ve heard fairly good reviews on both, and am going to check them out and review their services, so look for reviews in the near future.

Now that you have reviewed your credit report and checks your credit score, how do you improve your credit and credit score?

Improving Your Credit Score

Pay off any collections, past due amounts, or delinquent or late bills- If you’ve been late on bills, get current. If you have past due amounts that you haven’t paid off you should pay them off, if at all possible. Unpaid bills , such as those that have gone to a collection agency, generally will stay on your credit report for 7 years.

Pay your bills on time- If you get behind on bills, it may hurt your credit score. Many companies will report a late payment of greater than 30 days overdue to credit agencies, which will get recorded on your credit report and likely reduce your credit score.

Pay off credit card debt- Carrying credit card debt, and not paying of balances can hurt. If you utilize more than about 30% of your available credit, you score may suffer. Paying off your debt to get the percentage of credit utilized as low as possible will improve your credit score over time.

Keep your credit card debt low compared to credit available- As mentioned above, if you use to much of your available credit card capacity, your credit score can be adversely affected. If you do carry a balance, keep it under 30% if possible.

Don’t close accounts- Closing open credit card accounts, can hurt your credit score, as it reduces the amount of available credit, and can make the percentage you owe vs. available credit higher. It also has an effect on the time length of your credit history if it is an older card, which can ding your score as well.

Don’t open new accounts to move debt around- Opening too many new credit card accounts
or installment loans to quickly can hurt.  One or so may not do too much damage, and taking out a zero percent balance transfer, for example, may help you pay down debt faster. Just don’t open too many
and just shuffle your CC debt around though, you need to pay it off.

If your credit score is low because you don’t have much of a history, you need to establish your credit. You want to do this over time though, as opening too many accounts to quickly can hurt your score too.

Keeping your credit in good standing, and your credit score as high as possible, is a good thing to do, whether or not you are planning on taking out a loan or borrowing money in the near future. A higher credit score can save you money paid in interest if you do, as the higher your credit score, the better interest rate you usually get.

Even if you aren’t planning on borrowing money, it can have an effect on your car insurance rates, and potentially even your employment, so it’s always good to manage your credit wisely and stay on top of your credit report and credit score.

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{ 1 comment… read it below or add one }

Joshua Fitzgerald April 19, 2011 at 6:13 pm

I try to communicate the importance of credit. Credit now plays a role in so many aspects of our lives. Keeping on top of your credit is definitely a huge variable in our personal formulas for success.


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