How to Improve Your Credit Score in Four Easy Steps

Sometimes in your life you need to carry debt, but you can take a few easy steps to improve your credit scores quickly.

U.S. Money Reserve
8 min readAug 31, 2023

by Sherry Hao, Controller, U.S. Money Reserve

As the economy struggles along, questions about inflation and a worldwide recession persist, and geopolitical uncertainty rattles the globe, Americans are increasingly feeling the effects on their pocketbooks. Rates continue to rise, and inflation, while somewhat controlled, is still ticking upward. You may increasingly rely on credit cards to keep up with basics like groceries and transportation. While it’s okay to rely on credit and carry some debt for short periods of time, in the long term, debt can really add up and impact your credit scores. Here are four easy steps that can help you improve your credit scores over time and get you back on track, regardless of what’s happening in the global and local economies.

What Is a Credit Score? What Does It Do?

According to LendingTree, consumer credit card debt jumped by 15% in 2023 partly because of inflation and the rising cost of everything from food to fuel. A study by Nerdwallet in January 2023 showed that the average American carries around $7,486 in credit card debt month to month. LendingTree also reported that the average APR on that debt is hovering right around 19%. That’s a considerable chunk of change, considering that Americans paid down most of their credit card debt during the pandemic. LendingTree says that around 40% of Americans with a credit card carried debt from month to month in 2021.

While these numbers give you a pretty good idea of what is going on with the average American consumer, it’s important to understand how these numbers relate to your own day-to-day finances. That’s where your credit scores come in.

Your credit scores are created by the major credit bureaus, including Experian, Equifax, and TransUnion, to help other lenders determine how creditworthy you might be. These firms gather financial information from lenders all over the globe to create a single score (per credit bureau) that represents how creditworthy you might be as a borrower. Each bureau uses its own methods to determine the score, and each bureau has different ranges that represent how good or bad your credit might be. Other lenders and companies use the various scores to determine how likely you are to repay your debts on time. To balance against default, lenders tend to charge higher interest rates if you have a lower credit score or rating. Generally, the lower your credit scores, the less likely you are to get great rates on everything from home and car loans to credit card offers.

Credit scores tend to range anywhere from 350 to 990, with the lower end of that range representing very poor credit (scores under 500). Excellent scores generally range from 700 and up.

These ranges can vary based on where you get your scores from and whether a given score is a FICO score or a Vantage score. Think of these as two different “brands” of credit score. FICO scores range from 350 to 800, while Vantage scores range from 501 to 990. There are also some differences between FICO and Vantage scores in how each company uses data to create the scores. For example, in order to have a FICO credit score, you must have at least six months of credit history. Vantage does not require this. In addition to Vantage and FICO, several other companies offer credit scoring using different formulas. Still, the Vantage and FICO credit scores are the most common types of credit scores you’ll see.

Your credit scores can be affected when you carry a balance from month to month or only partially pay off your debts. You can also get dinged by credit agencies for being late on payments or for not paying at all. As more Americans struggle to make ends meet in the face of rising inflation, more of us will begin carrying an increasing balance on our credit cards, and, as a result, credit scores will decline, making it harder for the average person to get competitive or low-interest rates on any money they may borrow.

According to FICO’s most recent data released in October of last year, the average American has a credit score of 716. Around 59% of Americans have a FICO score that ranges between 700 and 850.

From a macro perspective, credit scores and the amount of debt Americans carry have wide-reaching impacts on the economy here in the U.S. and worldwide. If people are racking up debt quickly and cannot pay it off (because, as the HR firm SHRM reported, most employers were only planning to increase salaries around 4.6% in 2023, which is well behind the current inflation rate of 6.4% as of the most recent January data), their credit scores will most certainly decline, making it more challenging to borrow money at affordable rates. It can become a difficult cycle to escape, especially as goods and services become more expensive.

To pull your credit scores and find out more about where exactly you stand in terms of creditworthiness, you can head to any of the major credit bureau sites, input your information, and find your credit scores. Each year you should pull your credit report by visiting and taking a close look at what shows up on it to ensure that there are no errors on your report. When you pull your report, you can also opt to get your credit scores from one or all of the credit bureaus. Sometimes you may have to pay a fee to access your credit scores, but it’s worth it. Knowing your scores can do a lot of good, especially if you’re considering opening a new credit card, purchasing or leasing a vehicle, buying or renting a home or apartment, or even applying for a job. Your credit scores and creditworthiness can have wide-reaching effects on your life in ways you may not expect, so knowing all you can about your scores and what is contained in your credit report is absolutely crucial to staying financially healthy in the long term.

What Impacts Your Credit Scores?

A wide variety of situations affect your credit scores, but credit bureaus usually look at the same core factors, regardless of which credit bureau is scoring. Here are the key factors that impact your credit scores.

  1. Payment history: This is one of the most crucial factors that can affect your credit scores. According to Wells Fargo, payment history accounts for roughly 35% of your overall score. Late or missed payments can significantly lower your credit scores.
  2. Credit utilization: This is a ratio of how much credit you use to your available credit. In general, credit utilization accounts for 30% of your overall credit score. The amount of credit you use on open accounts (especially the closer you get to your credit limit on an account) indicates that you may be a higher risk for lenders. Being a high-risk borrower can lower your credit score. You can read more about credit utilization at Bankrate.
  3. Length of credit history: This refers to the length of time that you have had credit accounts and makes up around 15% of your overall credit score. The longer your credit history, the more favorable you may be as a borrower, depending on whether or not you have made payments on time and managed your credit utilization wisely.
  4. Credit mix: This refers to the types of credit accounts you may have, such as credit cards, loans, or mortgages. Mix accounts for 10% of your overall credit score.
  5. New credit: New credit includes recent credit inquiries or the opening of new credit accounts and makes up 10% of your overall credit score. Opening too many new credit accounts in a short period of time can lower your credit scores.

If you’d like to learn more about some of the subtleties of these five factors that affect your credit scores, you can check out this blog post at Experian.

How to Improve Your Credit Scores in Four Easy Steps

Now that you have a good idea of what a credit score is, how to get it, what it can affect, and how a credit score is weighted, you need to know what steps you can take to improve your scores.

Pay All Your Bills on Time.

The most crucial step to improve your credit scores is paying your bills on time. Everything from your power, gas, water, and trash bills to your credit card, mortgage payments, rent payments, insurance, and car payments can impact your credit scores, so staying on top of your deadlines for payment is crucial. Late payments and delinquencies (when you fail to pay at all) can significantly reduce credit scores. If you have a history of missed payments, these can stay on your credit report for up to seven years. One of the best ways to ensure that you pay your bills on time is to set up automatic payments, especially for car payments, mortgage payments, or other regular monthly payments. Setting these up can help you avoid late payments or delinquencies in the long run and bolster your credit payment history to raise your credit scores.

Reduce Your Credit Utilization.

You need to keep your credit utilization ratio low to improve your credit scores. Ideally, you should aim to keep your credit utilization below 30% of your available credit limit. For example, if a credit card has a $10,000 limit, your month-to-month balance should not exceed $3,000. Paying off credit card balances or increasing the credit limit can lower your credit utilization ratios and significantly improve your credit scores.

Build Your Credit History.

The length of your credit history is another essential factor that affects your credit scores. It is beneficial to keep credit accounts open, especially if they have a long credit history. Closing credit accounts once you pay them off, for example, can reduce the average length of your credit history, lowering your credit scores. However, if a credit account has an annual fee and is no longer being used, it may be better to close it, but assess your credit history before closing accounts willy-nilly. You want to be measured in your approach to closing accounts because it can impact the total amount of available credit you have.

Maintain a Mix of Types of Credit Accounts.

Having a mix of credit accounts, such as credit cards, loans, and mortgages, which are all different types of credit accounts, can improve credit scores. Credit cards, for example, are revolving credit accounts, while car loans and mortgages are closed-end credit accounts. They are both necessary to your credit scores as they show lenders that you can manage various types of credit in a responsible way. At the same time, it is essential to apply for credit accounts (either loans or credit cards) only when you need them and avoid applying for too many credit accounts in a very short period, because hard inquiries (those that banks and lenders use to determine whether or not you are creditworthy for a loan or credit card), can negatively impact your credit scores.

The Bottom Line on Improving Your Credit Score in Four Easy Steps

Now that you have a grasp of what a credit score is, how it’s determined, and what you need to pay attention to maintain the highest credit scores possible, you should be set up to manage your personal finances in a responsible and intelligent way. Following these steps can go a long way toward helping you improve your credit scores quickly and efficiently and supporting your long-term financial goals.