Man checking credit score on laptop
Man checking credit score on laptop

how to improve your credit score: a guide from first financial bank 

Your credit score impacts your life in more ways than you think. The good news is you can improve your score by understanding how your credit score works.

What is a credit score?

Lenders use your credit score, also known as your FICO score, to decide how likely you are to repay your debts to them on time and fully. A healthy credit score opens doors to great benefits like better interest rates and access to better credit related products from lenders. Your credit score can also help you when you are looking for an apartment to rent, applying for insurance, utilities and even getting a cell phone. Below are how credit score ranges are typically considered.

  • 300-579: Very Poor
  • 580-659: Poor
  • 660-699: Fair
  • 700-739: Good
  • 740-799: Very Good
  • 800-850: Exceptional

Like a cake, your credit score gets created using a few key ingredients:

  1. Payment history – accounts for 35% of your FICO score
  2. Amounts owed – accounts for 30% of your FICO score
  3. Length of credit history – accounts for 15% of your FICO score
  4. Mix of credit types – accounts for 10% of your FICO score
  5. Recent credit applications – accounts for 10% of your FICO score

Understanding how to manage and improve these ingredients is key to developing a healthy credit score. No matter what your financial situation is, you can take steps toward making your credit score better and we’re here to help with an easy plan to get ahead.

Woman sitting at kitchen table drinking coffee and paying bills

Make minimum payments

Your payment history is one of the most important factors in your credit score. Because of that making at least your minimum payments on time every month is very important. Paying on time is a key part of your credit score and consistent on time payments will raise your score over time. If you can pay more than the minimum payment you can reduce your debt faster, but no matter what you should try to make your minimum payment on time every month. You can even set up automatic payments through your card or loan to make sure you don’t miss your payment date each month.

Avoid increasing your credit card debt

We’ve all been there. You have an unexpected bill come up and you don’t have the cash to pay for it. So, you use your credit card to keep things going smoothly. But over time, this strategy can lead to your credit card balance growing larger. The amount of money you owe on your credit cards can negatively impact your score. The ideal maximum amount of balance to have on your credit cards is less than 30% of your credit limit. That means if you have a $1,000 limit, you should try to avoid carrying more than $300 dollars of balance on your card at any given time.1 Utilizing less than 30% of your available credit shows credit reporting companies that your finances are in good shape and that you haven’t overextended yourself.

Don't close old accounts

It can be tempting to close out old credit accounts, especially if you have had trouble managing the cards in the past, but you should try to keep older accounts open and active. Your credit history impacts your credit score and keeping old accounts open helps your score increase. Closing your older lines of credit can cause your score to decrease because your credit history won’t be as long.

One way to keep your older accounts active is to occasionally buy gas or groceries on a card you don’t use as frequently. This prevents the line of credit from being closed for inactivity and will keep your credit history as long as possible.

Avoid applying for a lot of new credit in a short period

When you apply for a credit card or a loan, the bank you applied at checks your credit score. This type of check is called a hard inquiry and it lowers your credit score in the short term. Additionally, opening multiple new lines of credit in a short amount of time makes lenders worried about your financial situation.

Do your best to avoid opening a lot of credit cards and applying for loans within a short period of time if you are trying to build your credit score. If you are experiencing issues with managing the balance on your existing credit accounts or have maxed out credit cards, it is better to focus on paying off your current accounts instead of opening new credit cards.

Check your credit report

Did you know you are entitled to your credit report from each of the three major reporting agencies (Experian, TransUnion, Equifax) once every 12 months? Knowing what is on your report lets you make sure there’s nothing incorrect damaging your score and you can see areas you can improve. There are a variety of sources to receive your credit report online, but the government recommends Annual Credit Report.

You can request all three reports at once, but it is a good idea to request one report at a time over the course of the year. That way you can consistently check your report throughout the year and stay on top of any potential issues. Knowing your credit report is a powerful tool in improving your credit score and helps you monitor for identity theft.

Consider a budget

If you are consistently experiencing issues with managing credit card and personal loan debt, you should consider identifying the cause. For most people the cause is spending more than they make in a month and not tracking where their money goes. One way to address this is to make a budget and stick to it. A lot of people dread the word “budgeting” and feel like if they budget, there’s no room for fun. Budgeting doesn’t have to be a bad word. When you create your budget it is important to leave room for whatever brings you happiness. Treating yourself throughout the process makes the budget more likely to stick around long enough to become a habit. After a few months sticking to your budget becomes second nature and you won’t even notice that you are doing it.

Own your credit score

All it takes is knowing what goes into your score and how you can improve the things you can control. If you keep building healthy financial habits and understand what impacts your credit score, you’ll improve over time.


The information on this page is accurate as of June 2021 and is subject to change. First Financial Bank is not affiliated with any third-parties or third-party websites mentioned above. Any reference to any person, organization, activity, product, and/or service does not constitute or imply an endorsement. By clicking on a third-party link, you acknowledge you are leaving First Financial Bank is not responsible for the content or security of any linked web page. Member FDIC / Equal Housing Lender.


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