Improve Your Credit Score in 5 Simple Steps

January 9, 2014

credit scoreImproving your credit score can be simple if you know what steps to follow. If you have poor credit, bad credit, or simply want to improve your credit score, there are specific steps you can take to make it happen. Your credit score is computed mainly using:

  • Payment history
  • Type of credit you have
  • Length of your credit history
  • Your outstanding balances
  • New credit you’ve established

Each of these items is weighted differently, but tweaking all of them can play a role in increasing your credit score. If you can take these steps you should see your credit score improve.

1. Make payments on time and pay down your balances.

The biggest contributor to your credit score is your payment history. This means that if you do nothing else, you have to make your payments on time. Find a payment system that works for you and make sure your payments are received on or before the due dates.

It also helps to pay down the balances of your outstanding debt. This doesn’t mean paying off the debt completely. It’s about your ability to manage your debt, so making payments that reduce your outstanding balances also raises your credit score.

2. Leave your credit accounts open.

The longer your relationships with creditors or lenders, the better off your credit score is. Do not fall into the trap of closing unused accounts or completely paying off credit and loan accounts thinking it will increase your credit score. Leave your credit accounts open, if you don’t use them.

The longer your credit relationships are, the higher your credit score. It’s important to note that you also have to have a good relationship – a good payment history – combined with the longevity of your relationship with the creditor.

3. Diversify the types of credit.

Again, your credit score is an evaluation of your ability to manage your credit, so another way to give your credit score a boost is to diversify the types of credit and loans you have. A good mixture of credit cards, mortgages, car loans, and student loans – a variety of credit – illustrates your ability to manage various types of credit. If you only have one type of loan, apply for different types of credit to diversify your mix.

This doesn’t mean run out and start applying for various types of loans, but apply where appropriate. For example, when you buy your furniture, apply for the furniture store credit account instead of buying it with your credit card or paying cash. You can then simply pay off your store card with your cash.

4. Clean up your bad credit.

Review your credit report at least once a year. Look for negative items such as late payments, collection accounts and discharges – all items that drag down your credit score. If these items appear on your credit report and they are accurate, make arrangements with the creditors to pay off this bad debt.

If these items appear on your credit report but are inaccurate, dispute the items with the credit agencies to have these items removed. Over time, getting rid of these negative marks on your credit report increases your credit score.

5. Create new credit.

As much as your credit score depends on long-term credit history, it loves new credit too. Applying for new credit once in awhile also gives your credit score a boost. Combine your application for new credit with diversifying your mix of credit and you can accomplish two goals at once.

Credit scores can seem complex at times but since they’re determined by a formula that means there’s a formula you can follow to help improve your credit score.

Before you make any changes, get your free credit report so you can see where your score stands today. Then start working on these five steps and you should see your credit score increase over time.

Can you think of additional ways to improve your credit score? Leave a comment!

This article was originally published May 16th, 2009.


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Kristie Lorette is a personal finance writer who spent over eight years working in the real estate, mortgage and credit industries.

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9 Responses to Improve Your Credit Score in 5 Simple Steps

  • Doable Finance

    Items 3 and 5 may turn out to be detrimental to your financial health. Any time you open a new account, the lender checks your credit score. By default, just checking it will lower your credit score by at least 75 points.

    It is highly advised to have no more than 2 credit cards. The store card is very tempting because it might give you discount the first time you use it. But the store does not just give it to you. It checks your credit score and that automatically lowers your score by at least 75 points.

    Item 2 is also objectionable. If you have a credit card and you don’t use it for longer period of time, that hurts your credit score as well. By how much? Depends on how you have previously used it.

    It takes time to improve your credit score. Follow the basic mantra of “Spend less than you make” and you will be on the path of worry-free financial life. I said on the path of.

    Your credit gets ruined by being careless with your credit and it can happen in a shorter period of time. To improve it will take more than you can wait.

    I use two cards – MC and Amex. MC for shopping and AMEX for gas and travel.

  • deb

    I just wanted to know if it is possible for a collection agency to remove a debt from your credit report completely, once you have paid the debts owed?



  • Nick

    Wow! Some of these tips seem very counter intuitive. I never would have realized that getting more credit and more diverse credit are good things for your credit score. I am just learning about credit and i found another article that discusses the 5 ways to damage your credit score I thought that the contrast between the two articles was interesting. Thanks for the advice 🙂

  • Kristie

    Thank you for your response. I am a former mortgage and credit specialist for Merrill Lynch. During my six year career, I helped thousands of clients with the credit and debt side of their balance sheet. So to answer your question, yes, I have studied the formula and know a great deal about it.

    Obviously, you have not, so please let me know if you have any further questions or concerns,

  • bb

    Man, number 3 and 5 are stupid. Have you studied enough about the formula?


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