How Can I Improve My Credit Score?

Man and woman working on computer to improve credit score

Your credit score — a number comprised of three little digits that have a huge impact on determining how easily you’ll qualify for credit approval. It’s one of the first things finance companies and other businesses check when you’re trying to get approved for financing, whether it’s applying for a car loan, housing or a credit card. But why?

Your credit score gives banks, finance companies and other businesses a snapshot of how you operate when it comes to paying back money you borrow. According to the Consumer Financial Protection Bureau, many credit scores range from300 to 850, but different companies use different ranges. The higher your credit score, the higher your chances of getting approved for financing or a loan. Your credit scores are generally based on information in your credit reports. This information is reported by your creditors to credit reporting companies. The three biggest are Equifax, Experian and TransUnion.

Since having a good credit history is an important factor in obtaining credit approval, this can make it tough for those who have bad credit or no credit established. The good news is that there are several ways you can improve your credit score:


  1. Pay your bills on time, every time.
    Late payments can have a negative impact on your credit score. One way to ensure your payments are on time is to set up automatic payments and/or electronic reminders. If you have any missed payments, get current and stay current.

  2. Keep balances low on your credit cards.
    Some credit scoring models look at how close you are to being "maxed out," so try to keep your balances low in proportion to your overall credit limit. Experts advise keeping your use of credit at no more than 30 percent of your total credit limit.

  3. Build your credit history.
    Since credit scores are based on experience over time, your score will likely improve the longer you have credit, open different types of accounts and pay back what you owe on time.

  4. Apply for and open new credit accounts only as needed.
    Credit scores may consider your recent credit activity, which is an indicator of your need for credit. If you apply for a lot of credit over a short period of time, it may appear that your economic circumstances have changed for the worse.

  5. Be careful closing accounts.
    If you close some credit card accounts and put most or all of your credit card balances onto one card, it could hurt your credit score if you are using a high percentage of your total credit limit. Frequently opening accounts and transferring balances can hurt your score as well.

To learn more about how you can establish or improve your credit, download this article. If you are looking to purchase your next car, Credit Acceptance can help you get your credit approval started.