FDIC-Insured - Backed by the full faith and credit of the U.S. Government
5 min read
Good credit matters. So does building your credit score. With great credit, you may also be able to lower your insurance costs, access more options for loans and credit cards, and land better interest rates.
But how do you actually improve your credit score?
Understanding credit score calculation can be tricky, but building your credit is something that anyone can do. The following information can help you understand best practices for improving your credit score.
There are plenty of credit score improvement strategies, but the number one thing you can do to improve your credit score is to pay your bills on time. It’s an essential for every type of credit you might have, and if you make late payments you can quickly find yourself in two types of trouble:
Fees. When you’re late with a payment, you can get hit with late fees, additional interest or even penalty APRs. If you don’t pay your bills on time, the extra costs can add up quickly.
Bad credit score. Paying on time plays a big role in your credit health, depending on how recent the late payments are, how severe the debt is, and how frequently you pay late.
Focus on bringing any past-due accounts current and making on-time payments going forward. Make a plan to check due dates, consider autopay options, and set reminders to ensure you pay on time.
Your credit limit is the maximum amount you can charge to your card. Your credit used is your card’s outstanding balance — the amount you’ve charged but haven’t paid off, as well as any interest incurred. But how much should you charge to keep your credit healthy?
Using too much credit can hurt your scores and can be a red flag for lenders. As a rule you should use 30% or less of your credit limit and always try to pay off your monthly balance. If you’re already above that, or don’t pay your balances monthly, work toward paying your balance down and only spending what you can afford to pay off every month.
The less of your available credit you use, the higher your score is likely to be.
Carrying too much debt can damage your credit and make interest payments feel like a permanent part of life, but a few simple strategies can help you pay down your balances.
A certified credit counselor can review your financial situation, help you make a budget, and coordinate repayment options with creditors. Some counselors charge fees so be sure to check first.
If you’re carrying high-interest debt, look into a consolidation loan or balance transfer card that offers a lower interest rate.
This article outlines some considerations that can help you make your decision:
You can also use our Debt Consolidation Calculator to find options based on your needs.
Certain types of debt can have negative consequences if you consolidate, so be sure to check with your bank before you make your decision.
To bring down your debt – and the money you spend on interest – commit to making the minimum payment every month, and use any remaining cash to pay down your highest interest rate. This approach is called the debt avalanche method, and it can save you interest fees as you bring down debt.
Responsible credit card use is one way to increase your credit score you don’t need a card to improve your credit history.
Other types of lending accounts – like a car loan, mortgage, HELOC, or student loan – are also forms of credit, and in most cases, the way you use those accounts affects your credit score.
Last, payments for your cell phone or utilities normally are not included in your credit history. Signing up for a service like Experian Boost® can help you get credit for bills you are already paying, like rent or insurance, that can increase your credit score.
Fees and results may vary, so be sure to look into the details before you sign up.
What if you do want a credit card, but you don’t qualify for one just yet? A secured credit card is backed by a cash deposit, typically equal to the amount of your credit limit, and they offer many of the benefits of a traditional credit card.
A secured credit card can be a great option for building your credit — especially if you’re new to credit or are trying to rebuild after some financial mistakes.
Building great credit may take time, but the path you take doesn’t have to be complicated. By following a few simple rules consistently, you can makeover your relationship with debt. When you do, you’ll pave the way to a financially healthy future.
For more information on financial wellness and tips for building your credit score, wherever you are on your financial journey, visit our Financial Education Center.
Interested in learning more about building your credit score? Fill out this form to have a banker contact you.
*Field Required
You are leaving our site
Please note that:
Such Third-Party Website's owner/operator may be regulated by governmental entities and laws that are different than those that regulate M&T.
Equal Housing Lender. Member FDIC. Bank NMLS #381076. ©2023 M&T Bank. All rights reserved.