credit score

How to Improve Your Credit Score

Making debt payments on time and not opening too many accounts are among the things you can do to boost your number.

My 26-year-old daughter recently checked her credit score through Equifax and was surprised that it was just 708. She thought it would be higher -- she has one credit card that she always pays by the deadline, and she generally charges around $700 or less of the $2,500 limit. The only other debt she has is student loans. What can she do to improve her score?

One reason her score was different than expected is because she received a proprietary score from Equifax, rather than the more-common FICO score. Both scores take information from your credit report and distill it into a single number that measures your credit risk. But they use different calculations and have different score ranges -- the Equifax Credit Score ranges from 280 to 850, and the FICO score ranges from 300 to 850. For more information about different kinds of credit scores, see How to Get Your Credit Score for Free and Conflicting Credit Scores.

Using the same credit report, we helped your daughter get her FICO score, which was 731 -- putting her in the “very good” category. “A 731 is a normal FICO score for someone with only a couple of years of credit experience on record,” says Craig Watts, of FICO. “As long as she continues paying her student loans and credit card account on time, and remains conservative about opening new credit accounts, her score should continue to rise slowly,” Watts says. The length of your credit history accounts for about 15% of your FICO score, but the positive impact of having a longer credit history is gradual.

She might be able to boost her score even faster by asking her bank to increase her credit limit, says John Ulzheimer, president of consumer education at Almost one-third of your FICO score is based on the amount owed, including your “credit utilization ratio,” which is the amount of your available credit limit that you’ve used. Charging $700 on a card with a $2,500 limit gives her a utilization ratio of 28%. It’s usually a good idea to try to keep that ratio to 25% or less -- and the lower the better. “The average utilization ratio for consumers with scores of 760 and above is 7%,” says Ulzheimer. If her bank raised her credit limit to $10,000, for example, she could still charge $700 per month and have the low 7% utilization ratio.

One common misconception is that paying your balance in full each month can help your utilization ratio. That’s not the case. The number used in the calculation is the balance on your monthly statement, whether or not you pay the bill in full by the deadline. “If it shows up on your statement, it shows up on your credit report,” says Ulzheimer.

But he also puts this information in perspective. “Don’t get so hung up on the number unless you’re in the process of buying a home and need every point on the interest rate,” he says. “In that case, you might want to pay off all balances and leave the card on the shelf for a month.”

For more information about improving your credit score, see our Do You Know the Score on Your Credit? quiz.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked

The Berkshire Hathaway Portfolio: All 41 Warren Buffett Stocks Ranked

The Berkshire Hathaway portfolio is a diverse set of blue chips, and increasingly, lesser-known growth bets. Here's a look at every stock picked by Wa…
November 16, 2021
Should You Take an Extra Big RMD This Year?
required minimum distributions (RMDs)

Should You Take an Extra Big RMD This Year?

Sometimes only taking the minimum IRA distribution can be a costly mistake. When deciding how much to withdraw this year, you need to consider the big…
November 23, 2021


Think Twice Before You Close a Credit Card
Smart Buying

Think Twice Before You Close a Credit Card

Even if you’re no longer using it, closing an account could ding your credit score.
June 24, 2021
Protect Yourself Against New ID-Theft Schemes

Protect Yourself Against New ID-Theft Schemes

Crooks are using more-sophisticated tricks to steal your data. It's time to improve your armor.
May 27, 2021
How to Fix Your Credit Reports
Coronavirus and Your Money

How to Fix Your Credit Reports

Before you apply for a mortgage or car loan, check your credit files for errors that could derail your plans.
May 24, 2021
Freeze Your Credit in 3 Steps
credit & debt

Freeze Your Credit in 3 Steps

Freezing your accounts at the three major credit bureaus is the best way to prevent thieves from opening new credit accounts in your name.
May 17, 2021