How to Improve my Credit Score

Shopping for a new home or car can often be a stressful experience, but it can be even harder if you don’t have a good credit score. Almost all lenders including banks, mortgage companies, car dealerships, and credit card companies use your credit score as a key factor in helping them decide whether or not they should offer you a loan or a new line of credit. Your credit score will also be considered for borrowing terms like your interest rate, reserves, and the down payment.

One of the more common reasons mortgage applications are denied is because of poor credit scores. Fortunately, improving your credit score can be a lot easier than you may think. So, let’s take a look at credit scores and offer five ways that may help you improve yours.

How Are Credit Scores Determined?

There are two main credit scores that lending institutions may look at. The first is your FICO Score. The second, your VantageScore. Both scores are on a scale of 300-850, but their determining factors are a bit different. It’s not a magic formula, but knowing how your credit score is determined can show you areas that can help you improve it.

FICO Score

FICO Scores are the most common type of credit score, and they were originally created by First Isaac Corporation in 1989 as a way to create an objective and unbiased way of looking at a person’s ability to repay a loan. Here’s how the FICO Score is broken down:

  • Payment History - 35%
  • Amounts Owed - 30%
  • Length of Credit History - 15%
  • Credit Mix - 10%
  • New Credit - 10%


The VantageScore was first released in 2006, and was developed by the three main credit reporting agencies: TransUnion, Experian, and Equifax. This credit score model may be used by lending institutions in place of, or in addition to, your FICO Score. Here’s how the VantageScore is broken down:

  • Payment History - Extremely Influential
  • Age and Type of Credit - Highly Influential
  • Percent of Credit Limit Used - Highly Influential
  • Total Balances/Debt - Moderately Influential
  • Recent Credit Behavior and Inquiries - Less Influential
  • Available Credit - Less Influential

What is a Good Credit Score?

Just as the determining factors vary between the two types of credit scores, so do the determinations of what is a good credit score. Below, we’ve listed the ranges to help you understand where your credit score lands on each scale.

FICO Score Scale
  • 300-579 - Very Poor Credit Rating
  • 580-669 - Fair Credit Rating
  • 670-739 - Good Credit Rating
  • 740-799 - Very Good Credit Rating
  • 800-850 - Exceptional Credit Rating
VantageScore Scale
  • 300-549 - Very Poor Credit Rating
  • 550-649 - Poor Credit Rating
  • 650-699 - Fair Credit Rating
  • 700-749 - Good Credit Rating
  • 750-850 - Excellent Credit Rating

5 Ways to Improve Your Credit Score

  1. Pay Your Bills on Time

    The largest determining factor of your credit score is your payment history. Therefore, nothing hurts your credit rating like missing, or being late on, a payment. So, in order to improve your credit score, the most important thing you can do is to pay your bills on time. This is especially true on any debt payments you already have.

    If being punctual about paying bills is a problem for you, set up payment reminders for yourself on your phone or calendar. You may also be able to set up automatic bill payments through your bank or with whatever companies that hold your debt. Just make sure that you have enough money in the account when the bill is scheduled to be paid.

  2. Reduce Your Debt

    Both the amount of credit you already have available and how much of that credit you are using make up a good portion of your credit score. The first thing you should do to help reduce your debt is to stop using your credit cards. After that, you should make a list of all of your current debts and their interest rates. Once you’ve done this, create a debt payment plan that can help you pay off, or pay down, your debts in a timely manner.

    One effective payment plan is to pay the minimum amount due on most of your debts while shifting a larger portion of your available budget to the debt with the highest interest rate. Once you have paid off your highest-interest debt, shift that payment amount to the next debt on your list. As you continue in this manner, you will see your current debt start to drop faster and faster until it is at a much more manageable level.

  3. Avoid Unnecessary New Debt

    Other key determining factors of your credit score include the length of your credit history and new credit accounts. Opening a number of new credit card accounts or taking on a lot of new debt prior to applying for a mortgage can really hurt your ability to get approved or get the low interest rate you want.

    When you have a lot of new debt, lenders may think you’re desperate for cash or determine that you won’t be able to pay the required amount on the loan you’re asking for. In this situation, they may decide that you are a high-risk borrower, which can lead to you being turned down or charged a high interest rate.

  4. Have a Manageable Debt Load

    The type of debt you have is another manageable part of your credit score. Many lenders like to see a good mix of fixed-rate, long-term loans and variable-rate, short-term loans. It’s important to have a debt load that is easily manageable within your current means. Remember, a red flag for lenders is a borrower with a plethora of high-rate debt, like credit cards.

  5. Check Your Credit Report Regularly

    Mistakes on your credit report can also hurt your credit score. Make a habit of checking your credit regularly. Under Federal law, you are entitled to one free credit report every 12 months from each of the three major credit bureaus (TransUnion, Equifax, and Experian). If you split them up, you could technically check your credit report for free every four months. You can also compare the different reports to see if one of them is showing different information than the others.

    Regularly checking your credit report is particularly important in the age of identity theft, whether you have credit problems or not. If you’re worried about how your credit score, or credit history, might affect your ability to get a mortgage, talk it over with a loan representative. Visit to compare current mortgage rates and get in touch with a licensed mortgage specialist today!