A credit score is a financial rating that measures your credit health and determines if you can qualify for things like credit cards and loans. Without a good credit score—generally considered 670 or higher, with a max score of 850—it’s more difficult to finance a new car or rent an apartment.
Your credit score is based on information in your credit report and calculated by considering factors like how much money you’ve borrowed, whether you’ve been able to pay installments back on time, and how often you’ve missed a payment.
You might think you don’t need to have a line of credit open if you’re living within your means, but it’s not just about having extra spending money. Unless you’re a Rockefeller or Vanderbilt, you’ll need to pass a credit check to show creditors that you’re responsible, and to give yourself a firm financial foundation to grow on.
But what if you don’t have a good credit score? Below are some of the best ways to boost it.
1. Make your payments on time.
The best thing you can do to start raising your credit score today is to make all of your monthly payments on time, every time—it’s one of the key habits of financially successful people. To keep track of them all, create a payment calendar, set payment reminders on your phone, or put your payments on autopay. Use whichever method seems natural to you, since on-time payments are one of the crucial ways you can take control of your credit.
2. Maintain low credit utilization.
Credit utilization is how much of your available credit you actually use. The lower your credit utilization, the better your credit score. Experts say to use 30 percent or less of your available credit at any one time, but people with the highest scores have credit utilization under 10 percent. For example, if you have a $1000 credit limit, then aim to spend $300 or less each billing cycle (and if you really want to rock it, $100 or less).
To keep your credit use in the black, charge smaller amounts on your credit card and make payments on large purchases before your bill is due.
3. Keep a few lines of credit open.
Though there is no perfect number of credit lines to have open, most Americans have three or four credit cards at any given time. But using this tip to boost your credit score is less about how many lines of credit you have, and more about how you manage them.
Start with one, then when you get comfortable keeping your credit utilization low and making your monthly payments on time, see if opening another line of credit can improve your score.
4. Apply for a line of credit only when you’re ready to buy.
Every time someone runs your credit, there will be an inquiry against your credit score.
There are two types of inquiries. A “soft” inquiry shouldn’t affect your credit score, but a “hard” inquiry can temporarily lower your credit score—and too many hard inquiries can really impact it. Plan to apply for loans, credit cards, or another line of credit only when you’re confident that you’re ready to make a purchase. Otherwise, your credit score may go down during the buying process, limiting your purchasing options.
5. Stick to a budget.
Your credit score is basically a numerical value of your ability to stay on a budget. Perhaps this goes without saying, but to increase your credit score, you have to stick to a budget and live within your means. Doing so helps you become more financially responsible and aware of your spending habits.
An easy way to stay on track? Review all of the subscriptions, streaming services, and automatic payments you’ve signed up for, and get rid of the ones you no longer use. You may also look at the number of times you order takeout, buy stuff online, or take Ubers every month, and choose to cut down on the unnecessary purchases.