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How to Build a Better Credit Score

Lots of people say, “I’m not a numbers person.” While this likely means they aren’t into math, there’s one three-digit number everyone should be aware of and care about — your credit score.

Before we get to building or improving your credit score, let’s take a look at what a credit score is and how it’s calculated.

What is a credit score?

Your credit score is a number (ranging from 300-850) that creditors use to assess creditworthiness. In other words, it’s a reflection of your credit history and how likely you are to repay your debts.

National credit bureaus, such as Experian, TransUnion, and Equifax, collect information about your borrowing and payment habits. Your credit history is then compiled, and each bureau creates a score based on that information.

What makes up a credit score?

Since there are several credit bureaus and each of them calculates scores with their own formula, there’s not one standard calculation for arriving at a credit score.

Typically, your credit score is comprised of the following:

  • Payment history (35% of score)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • Credit mix (10%)
  • New Credit (10%)

How to improve your credit score?

Now that we have that covered, let’s get into how you can improve your score. Here are six tips:

  • Pay your bills on time
    Whether you set an event reminder on your phone or get text alerts from your lender, paying your bills on time is key. If you can, pay in full to do the most good for your credit score. Otherwise, make sure you’re paying at least the minimum amount consistently.
  • Pay off maxed-out accounts first
    If you’re hitting your credit limits, you may see your score drop. If you’re using less than 30% of available credit, you will likely see a more positive rating.
  • Consider not closing older accounts
    Creditors appreciate a history of reliability, so be aware that closing old accounts could affect your score. Long-standing accounts show responsibility to repay and will often yield a better score.
  • Mix it up
    The type of credit you have matters. A mix of installment accounts (auto, mortgage, etc.) and revolving credit (credit cards) can help boost your score.
  • Apply for new credit cautiously
    While length of credit is important, it’s understood you will occasionally have a newer account — which is OK — just refrain from applying for several accounts in a short period of time. If you are considering getting more credit, do so carefully and only if it’s truly needed.
  • Review your credit report
    A mistake on one of your credit reports could be the culprit for keeping your score down. Review your reports regularly to make sure your report is accurate.

Whether you’re trying to maintain your score or improve it, knowing what impacts the final number is key. No matter where you are in your financial journey, following these steps may help improve your score.

Eric Jordan
By Eric Jordan, GM Financial

Eric Jordan is passionate about helping others strengthen their financial savvy. He also spends a lot of time strengthening his dad skills as a father of four boys. It’s not uncommon to find Eric rearranging car seats in his Yukon XL, or playing “the bad guy” to the kiddos “superheroes.”


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