Improving your credit score: Truth and myths revealed (2024)

Good credit is critical to your overall financial health. Without a good credit score, you can face challenges when trying to obtain loans, especially when you’re applying for a mortgage. Here are some truths and myths about improving your credit score along with tips on how to improve it.

Your credit score is a way to assess how responsible you are financially. It may help lenders determine whether to give you a credit card, it can impact the rate you get on a mortgage, and it can even be a consideration when establishing cable, telephone or water service in a new home.

So, how can you improve your credit score, or maintain your good credit score? We’ve gathered a few truths and myths, with insights from U.S. Bank Client Relationship Specialist Holly Rae Kevelin (NMLS# 520557) and Branch Manager Jason Dean Namyst (NMLS# 1530787) around simple ways to build and maintain good credit:

1. Truth: Late payments can hurt your credit score

Your payment history makes up about 35-40 percent of your credit score, and paying credit card bills late can impair your ability to get more credit or a lower interest rate down the road. If you are accustomed to paying the entire balance of your credit cards monthly, that’s great, but add a layer of security by setting an account alert on your phone and marking your calendar to send your payments in on time. Or, take advantage of automated bill-payment options so you can set the payment up in your account and enable auto-pay when it’s due.

2. Truth: You should always use credit cards responsibly

When calculating your credit score, there’s a heavy focus on your credit behavior. Responsible use of credit cards can improve your credit history. Stay within your means and pay the balances in full monthly whenever possible.

3. Truth: It’s important to stay below your credit card limits

Maxing out your credit cards can raise red flags about your ability to handle debt. Many experts recommend that you avoid using more than 30 percent of your available credit at any given time. For example: If your credit card limit is $1,000, try to avoid carrying a balance of more than $300 from month to month.

4. Myth: You shouldn’t review your credit report

It’s recommended that you review your credit report yearly, at a minimum. Keep in mind: by federal law, you are entitled to one free credit report per year from each of the three credit reporting bureaus.

When thinking about your credit report, it’s important to understand the difference between a hard credit pull and a soft credit pull. “Soft” credit pulls are when you check your own credit, or when creditor checks your credit to confirm you are still creditworthy or to preapprove you for an offer. A “hard” pull is what happens when you apply for a new line of credit. There is no harm in a “soft” credit pull if you’re curious about what information is showing up on your credit history.

Understanding why your credit score is at its current standing is crucial when attempting to improve it. There may be an outstanding loan or debt that is affecting your score and thus, your ability to qualify for a loan. If you find a mistake, contact the credit-reporting agency and discuss it with them. You can check your credit score through a variety of services, or we can help.

5. Truth: Having no credit is worse than having bad credit

Creditors and lenders want to see that you can handle debt. Having multiple open credit lines that are in good shape is key when it comes to your credit score. If you don’t have a credit card, consider opening one with a small limit that you’re sure you can pay off to begin building your credit score. That being said, be careful about opening—or trying to open—multiple accounts in rapid succession, which can actually lower your credit score. If you open a credit card at your new favorite department store, wait a few months (or longer) before applying for additional credit.

6. Myth: I should close credit lines I’m not using

Your credit score is partly based on the age of your credit. Closing your oldest line of credit may actually affect your credit score negatively. If you have a few cards open, be wary about closing an old account that you don’t use. There’s no need to keep a minimum balance on it, but once it’s paid off in full, put it in a drawer and keep the line open. If you’re concerned about paying a yearly fee on a card you’re not using, get in touch with your creditor or bank, they may be able to help you find a way to avoid that fee.

7. Truth: A high credit score can help qualify you for a lower monthly mortgage payment

It’s important to note when you’re applying for any loan, including a mortgage, that the bank will take your credit score into consideration. If you have a high credit score, the bank will be more likely to offer you a better interest rate. A better interest rate can result in a smaller monthly payment.

As you’re working to improve your credit score, be on the lookout for scams. Learn more about how to spot a credit repair scam.

Improving your credit score: Truth and myths revealed (2024)

FAQs

What is the only proven way to improve your credit score? ›

Pay on time.

One of the best things you can do to improve your credit score is to pay your debts on time and in full whenever possible.

Is it true that the only way to improve your credit score is to pay off your entire balance every month? ›

Consistently paying off your credit card on time every month is one step toward improving your credit scores. However, credit scores are calculated at different times, so if your score is calculated on a day you have a high balance, this could affect your score even if you pay off the balance in full the next day.

Does Credit Karma show your true credit score? ›

The credit scores and credit reports you see on Credit Karma come directly from TransUnion and Equifax, two of the three major consumer credit bureaus. They should accurately reflect your credit information as reported by those bureaus — but they may not match other reports and scores out there.

How to push past 750 credit score? ›

6 easy tips to help raise your credit score
  1. Make your payments on time. ...
  2. Set up autopay or calendar reminders. ...
  3. Don't open too many accounts at once. ...
  4. Get credit for paying monthly utility and cell phone bills on time. ...
  5. Request a credit report and dispute any credit report errors. ...
  6. Pay attention to your credit utilization rate.

What is #1 factor in improving your credit score? ›

1. Payment History: 35% Making debt payments on time every month benefits your credit scores more than any other single factor—and just one payment made 30 days late can do significant harm to your scores. An account sent to collections, a foreclosure or a bankruptcy can have even deeper, longer-lasting consequences.

What is the #1 way to build a good credit score? ›

Pay bills on time and in full

In fact, payment history is the most important factor making up your credit score. Your credit score considers whether you make payments on time or late and if you carry a balance month to month or pay it off in full.

What is the credit card trap? ›

The minimum payment mindset

Here's how most people get trapped in credit card debt: You use your card for a purchase you can't afford or want to defer payment, and then you make only the minimum payment that month. Soon, you are in the habit of using your card to purchase things beyond your budget.

Why does your credit score go down if you pay your debt too quickly? ›

Similarly, if you pay off a credit card debt and close the account entirely, your scores could drop. This is because your total available credit is lowered when you close a line of credit, which could result in a higher credit utilization ratio.

How many points will my credit score go up if I pay off a debt? ›

If you're close to maxing out your credit cards, your credit score could jump 10 points or more when you pay off credit card balances completely. If you haven't used most of your available credit, you might only gain a few points when you pay off credit card debt. Yes, even if you pay off the cards entirely.

Why is my FICO score so much higher than Credit Karma? ›

Why is my FICO® score different from my credit score? Your FICO Score is a credit score. But if your FICO score is different from another of your credit scores, it may be that the score you're viewing was calculated using one of the other scoring models that exist.

Is 650 a good credit score? ›

As someone with a 650 credit score, you are firmly in the “fair” territory of credit. You can usually qualify for financial products like a mortgage or car loan, but you will likely pay higher interest rates than someone with a better credit score. The "good" credit range starts at 690.

What credit score is needed to buy a house? ›

The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).

How to get a 900 credit score in 45 days? ›

Here are 10 ways to increase your credit score by 100 points - most often this can be done within 45 days.
  1. Check your credit report. ...
  2. Pay your bills on time. ...
  3. Pay off any collections. ...
  4. Get caught up on past-due bills. ...
  5. Keep balances low on your credit cards. ...
  6. Pay off debt rather than continually transferring it.

What is the average credit score by age? ›

Consider yourself in “good” shape if your credit score is above the average for people in your age group. Given that the average credit score for people aged 18 to 26 is 680, a score between 680 and 690 (the average for people aged 27 to 42) could be considered “good.”

How rare is a 750 credit score? ›

Twenty-four percent have a FICO® Score between 750 and 799, making the "very good" bracket. Data source: FICO (2022). Nearly half of Americans score between 750 and 850, in the very good to exceptional range, while less than 25% of Americans have a score between 300 and 649, the poor to fair credit score range.

What is the trick to increasing your credit score? ›

There are several ways you can improve your credit score, including making on-time payments, paying down balances, avoiding unnecessary debt and more.

How to get a 720 credit score in 6 months? ›

How to Increase Your Credit Score in 6 Months
  1. Pay on time (35% of your score) The most critical part of a good credit score is your payment history. ...
  2. Reduce your debt (30% of your score) ...
  3. Keep cards open over time (15% of your score) ...
  4. Avoid credit applications (10% of your score) ...
  5. Keep a smart mix of credit types open (10%)
May 25, 2023

How to increase credit score by 100 points in 30 days? ›

Here are steps you can take that can have a positive credit score impact more quickly.
  1. Understand What Factors Affect Your Credit Score. ...
  2. Pay Off Credit Card Debt. ...
  3. Become an Authorized User. ...
  4. Get Credit for On-Time Bill Payments. ...
  5. Dispute Credit Report Inaccuracies.
Jul 16, 2024

What gives the most accurate credit score? ›

The primary credit scoring models are FICO® and VantageScore®, and both are equally accurate. Although both are accurate, most lenders are looking at your FICO score when you apply for a loan.

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