Pay all your bills on time, every time.

Paying your bills on time is the most important factor in your credit score. If you pay late, it will hurt your credit score; if you don’t pay at all, it will destroy it.

If you have a choice between two different ways of paying the same bill (i.e., online vs. phone), choose the way that results in a more timely payment.

Pay off credit cards each month.

With the exception of a few cards with no annual fee, paying off your credit card bills in full each month is the most important thing you can do to raise your credit score. If you can’t afford to pay off your cards each month, then consider using a personal loan or opening an online savings account instead so that you are not carrying any debt.

If you do find yourself in this position and need some help getting back on track financially, check out our article on how to create a budget that works for your lifestyle.

Keep balances low on credit cards and other “revolving credit.”

• Keep balances low on credit cards and other “revolving credit.”

While this may seem obvious, it’s one of the most important factors in your credit score. The higher your utilization ratio is, the lower your score will be. For example, if you have $20,000 in credit card debt that is being paid off at the rate of $1,000 per month and carry no other revolving debts (like car loans or student loans), then you could see a drop in your credit score when taking out another loan for something like a home or even another car.

Apply for and open new credit accounts only as needed.

You should only apply for new credit cards when you need them.

It’s not uncommon to get an offer in the mail that seems too good to be true. A low-interest rate, a signup bonus or rewards points—these can all make it tempting to open up a new card when you don’t really need one. But if you plan on keeping your finances in order and improving your credit score, this isn’t the best idea.

Opening a new account will lower your average age of accounts (which is tracked by most banks), which may temporarily lower your score while it adjusts its algorithm accordingly. This means applying for more than one card at once could actually do more harm than good since it would take longer for these changes to be reflected on your report.

Don’t close unused credit accounts.

Don’t close unused credit accounts.

Let’s say you’ve got a credit card with $10,000 in outstanding debt, with a $7,500 limit and an interest rate of 13%. If you pay off the balance and shut down that account, it will hurt your overall credit score because each time an account is closed or goes negative it can lower the average age of your cards (which is another factor in calculating your score).

However… If you do happen to have one or more accounts with a zero balance (or even better—a positive amount), don’t let them go! These accounts can help boost your utilization ratio percentage by increasing how much of your available balance you use up. They’ll also reduce the number of recent inquiries on record—and the fewer new inquiries there are on file within a certain timeframe (such as six months), generally speaking, the better off you’ll be when calculating your FICO score.

Remember to pay your bills on time, maintain low balances and don’t open up more accounts than you need.

• Pay all your bills on time, every time.
• Pay off credit cards each month.
• Keep balances low on credit cards and other revolving credit (such as lines of credit).
• Apply for and open new credit accounts only as needed.
• Don’t close unused credit accounts that you have already opened, unless it is necessary or you no longer use them at all