How To Increase Your Credit Score

Understanding Credit Scores: How to Improve Yours

Building a healthy credit profile isn’t just for mortgage-seekers or car buyers. As a young adult or college student, a strong credit score can lead to lower interest rates, better credit card options, and more affordable insurance premiums. 

But if you’re starting from scratch, juggling student loans, or living on a tight budget, it all feels overwhelming. 

This guide breaks down what credit scores are, why they matter, and how you can increase your credit score step by step.

What Is a Credit Score?

A credit score is a three-digit number (300–850) that indicates the likelihood of repaying borrowed money on time. Lenders, landlords, and insurers use it to determine if you're a good candidate for a credit card, loan, apartment, or insurance policy. Your credit score also determines the price. 

Most FICO and VantageScore models share this 300–850 range. Scores break out into categories:

• Poor (300–579): Qualifying for a loan or credit card may be difficult if you have a poor credit score. Even if you succeed in qualifying, the terms could involve higher interest rates compared to those offered to individuals with better credit.

• Fair (580–669): You may find it easier to qualify for credit cards or loans as your credit improves.

• Good (670–739): With a good credit score, you can qualify for lower interest rates and fees.

• Very Good (740–799): This score gives you great terms. You can also qualify for most lenders’ credit accounts.

• Excellent (800–850): An excellent score will give you the best deals available. It may also provide you with some flexibility in case your financial situation changes.

Different scoring models can report slightly varying numbers. These are calculated from your credit report of every credit account, payment, and inquiry that you or someone makes on your behalf. For example, when you apply for a credit card, the bank conducts an inquiry to determine if you qualify.

You can use AnnualCreditReport to access one free report per credit reporting company every year.

The Credit Scoring Model: 5 Key Factors

Credit score formulas may be secret and proprietary, but they universally weigh five categories.

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This is the most significant slice. Every payment, including those made with credit cards, student loans, and investment loans, is recorded. Even if you make just one late payment or miss a payment, it can negatively impact your score for years. More severe derogatory marks, like collections and bankruptcies, are more damaging to your score.

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This measures how much credit you’re using versus how much you have. If your total outstanding balance is $500 on a $2,000 credit limit, that’s 25% utilization. According to the Armed Forces Bank, it’s best to keep it under 30% to avoid signaling you’re maxed out.

Age matters. The older your oldest account (i.e., the period of time it’s been open) and the higher the average age, the better. So think twice before closing your first credit card!

When you have a mix of revolving credit (like credit cards) and installment credit (student loans), it shows that you can manage different types of debt effectively.

Every time you apply for a loan or credit card, a “hard inquiry” appears. Multiple inquiries in a short span can appear to be a sign of financial stress, which is why it’s essential to space out new applications.

How to Improve Your Credit Score

To increase your credit score, you must tackle each of the five FICO factors in turn. Start with payment history and credit utilization rate. Then layer in credit age, mix, new inquiries, plus vigilant monitoring and error-fixing.

Let’s dive deep into these tactics. 

Your score takes into account your record of on-time vs. late payments. Credit Karma states that one 30-day late payment can remain on your score report for up to seven years. Shriram Finance reports that this may also cause you to lose 90-110 points instantly.

Here’s what you can do to prevent this:

• Set up automatic payments: Do this for at least the minimum payments each month. This guarantees you never miss a due date, even if you’re in class or between shifts.

• Pay bills on time, every time: Credit card issuers often experience 30-day late payments to bureaus, and even a single slip (as we’ve seen) hurts your score for years.

• Bring past-due accounts current asap: Catching up on a delinquent account signals you’re regaining control. Many lenders will then report you as current going forward.

• Use reminders: Calendar alerts or budgeting apps can notify you a week before due dates, allowing you to make payments on time without missing any deadlines. 

To determine your credit utilization rate, you need to calculate the percentage of your available revolving credit that you're currently using. Divide your total credit card balance by the credit limit. Multiply the result by 100%. 

This is a significant factor in determining your credit score. For example, Experian suggests keeping your credit utilization rate at 30% or lower. For lenders, the lower, the better. It implies you are managing your debt responsibly and not over-relying on credit.

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If you want to lower your credit utilization rate, consider:

• Paying down revolving balances first: Use the card with the highest utilization to get the fastest score bump.

• Requesting credit limit increases: A higher limit instantly lowers your utilization, as long as you don’t increase spending. 

• Spreading out balances: If card A is at 90% and card B is at 10%, consider requesting a balance transfer or a small personal loan to even them out and lower your overall ratio.

Older accounts and a longer average age both help. Even unused cards can positively impact your profile—just watch out for issuer-closed accounts.

To optimize the length of your credit history, you can:

• Keep old accounts open: Closed accounts remain on your credit score report for up to 10 years. If you’ve had some financial issues and are trying to raise your credit score, it might be best to avoid closing your accounts and make all payments on time. 

• Use inactive cards occasionally: Charge a small recurring expense, such as a streaming subscription or a coffee shop tab, every few months to prevent the issuer from shutting down the card due to inactivity. 

• Become an authorized user on a trusted, older account: A parent or partner’s decade-old card, with a perfect history and low utilization, can add instant age to your file.

• Monitor for involuntary closures: Issuers sometimes close inactive cards without notice. A quick quarterly login and micro-purchase keep the line open.

Lenders like to see that you can handle both types of debt: revolving credit, which includes credit cards and lines of credit with a limit that allows you to borrow, repay, and reborrow. And installment credit, which refers to loans that have a fixed amount and a set repayment schedule (such as student, auto, personal, or mortgage loans).

This demonstrates your ability to make regular fixed payments and manage a variable balance without exceeding your limit.

To build a healthy credit mix, consider the following:

• Add an installment loan only (or student loan) if you really need funds: Do you need a reliable car to commute to work or extra tuition money to complete your degree? An auto or student loan will naturally broaden your mix. Avoid opening a loan solely for credit points. 

• Become an authorized user on a trusted loved one’s card. Their on-time history and high limit get added to your credit file, which can be beneficial if you’re new to credit.

• Get a secured credit card if your file is thin. You place a refundable deposit (typically $200-$500) that serves as your limit. Pay on time for 6 to 12 months, and many issuers will upgrade your account to a regular unsecured card and refund your deposit.

Each time a lender performs a hard inquiry—for example, when you formally apply for a card or loan—your score can dip 2-5 points. One or two hits aren’t a big deal, but a cluster of inquiries in a short period makes you look credit-hungry and can shave off 20-plus points.

So, to protect your score while still getting the credit you need, consider:

• Spacing out applications: Try not to open more than one credit account every six months.

• Monitoring your reports for unauthorized pulls: Fraudulent or mistaken inquiries also cost points. Check all three bureaus at least annually and dispute any you didn’t authorize.

• Planning credit moves around big goals: Mortgages and car loans weigh your entire file. Fewer recent inquiries mean better terms. If a major purchase is coming, pause new card applications for 6-12 months beforehand.

A single wrongly reported late payment or a fraudulently opened account can drag you down. Catch and correct errors fast by:

• Freezing or alerting on identity theft: If you spot unknown accounts or inquiries, place a fraud alert or security freeze to block new lines of credit in your name.

• Disputing errors right away: Under the Fair Credit Reporting Act, bureaus have 30–45 days to investigate disputes. File online or by certified mail and include a clear description of the error, supporting documents (payment receipts, police report, and payoff letters), and a request for deletion or correction.

• Verifying employment information: Employers often use HRIS systems to report employment verification data that creditors may check. Ensure your work history is accurately reflected in these records, as discrepancies could raise red flags during credit reviews.

• Pulling all three credit reports at least once a year: Set a calendar reminder to stagger them—one bureau every four months (Equifax, Experian, and TransUnion)—for year-round coverage, or pull all three at once before a major loan application.

Keeping tabs on your credit reports requires consistency and attention to detail. Using financial reporting software can simplify this monitoring process, helping you catch and address errors before they impact your financial opportunities.

Special Considerations: Financial Hardship and Disability Benefits

If you’re facing health challenges that impact your ability to work, it’s important to know what qualifies for disability benefits to help you maintain financial stability. With timely disability payments, you can meet your financial obligations, preventing missed payments that would otherwise damage your credit score. 

Make sure to communicate with creditors if you have any temporary difficulties while waiting for benefit determinations, as many offer hardship programs specifically designed for these situations. 

Next Steps

A great credit score isn’t built overnight. You have to make sure that you make payments on time, keep card balances below their limits, and avoid closing old accounts. 

With consistency, your score will rise. And that opens doors to better credit cards, lower interest rates on loans, and financial freedom for your next big goal, whether it’s a bachelor’s degree, your first apartment, or a new business venture. Start today by automating your minimum payments and scheduling a free credit-report check—then watch those three digits climb.

Author bio: Kristina Iavarone

Kristina is a content writer and editor at uSERP, with a passion for building long-lasting relationships with B2B and B2C clients through content and SEO efforts. Her work has appeared in Medical News Today, Healthline, and GetYourGuide, and when she’s not working, she’s either at a café or exploring new places with her husband. Connect with her on LinkedIn