How to improve your credit score

Pay your bills on time.

No matter what kind of debt you owe, your payment history will affect the bulk of how good—or bad—your credit score is. That’s why paying your bills on time is so important. Your credit company views late payments as an indicator that you might forget to pay other bills down the road and are therefore at risk of defaulting on a loan in the future. With that in mind, they want to make sure they’re protecting themselves (and their investment) by only lending money to people who are consistent borrowers with good habits.

Pay off debt, and do it fast.

Pay off your debt and do it fast.

Sure, you could pay off your balance at the minimum rate of 2% a month, but that little figure is just a trap—a debt treadmill that will keep you in the red for ages. So instead let’s get on with paying this thing off.

Step one: pay more than the minimum amount each month. There’s no room to negotiate here; this is essential if you want to see any progress in improving your credit score. If it seems impossible, start with half of the minimum payment and work up from there—but don’t stop until you’re paying more!

Step two: find out which card has the highest interest rate and focus on that first. Don’t be tempted to chip away at the smallest balances first; if they have low interest rates they won’t be doing much damage to your credit score, so save them for last.

Now that you know where you stand and what kind of plan needs to be put into place, all that's left is execution! Get ready for some serious belt tightening:

Don't close unused cards.

While it may be tempting to cancel your cards if you've paid them off, it's better to leave them open. You won't boost your credit score by closing a card that you've paid off, but you could hurt it: the average age of your credit accounts will go down if you close an account. If keeping track of all those accounts is overwhelming, stash the physical cards in a safe place and keep fewer active cards around in your wallet. Of course, this tip comes with one caveat: if you have annual fees on old cards and decide it isn't worth keeping that card open anymore, don't hesitate to cancel!

Just because you have no debt doesn't mean you have good credit.

Just because you don't owe money doesn't mean you have good credit. You need to use credit to build up a history of responsible borrowing. (There's no other way to show lenders that you are a responsible borrower.)

You can do this in any number of ways. You may need or want a car or home loan, or you may simply want the best rewards on your credit card. Either way, having a high credit score is important and can save you money if you use it wisely.

Use your credit every so often.

As long as you pay off your balance promptly, using a credit card to make small purchases is a great way to keep your utilisation low and show lenders that you can handle credit responsibly. Buying groceries, clothes, or accessories is fine; just make sure that you pay off the balance immediately.

You should also use your credit card for big purchases — but because they're so much more expensive than everyday items like lattes and cell phone cases, it will take longer before you can afford to pay them off in full. For that reason, it's best not to use your card for things like holidays abroad, furniture sets, or even new PCs.

Instead of putting big-ticket items on your credit card, save up cash until you have enough to cover them outright. Or if you have several months before the purchase date and would rather not spend all of that time sitting on several thousand dollars' worth of dollar bills in a shoebox under your bed (it's safer than banks!), open a savings account at the same bank where you hold your checking account so that transferring money between the two is easy. That way when it comes time for the purchase, you'll be able to hand over cold hard cash rather than swipe an arranged piece of plastic with an enigmatically unintelligible name like "Mastercard."

Building up a good credit score doesn't happen overnight, but it's an important part of financial health.

Your credit score is an important number. It’s like your blood alcohol level, but instead of being used by the police to determine whether you should get in a car or not, it’s used by lenders when deciding whether you’re financially responsible enough to borrow money from them.

It could take years to build up a good credit score, so don't be disappointed if you're sitting at 500 and feel like everything is hopelessly out of reach. Like losing weight and learning that the British royal family are actually lizards, improving your credit score is a slow-burn process.

A poor credit score can hurt your chances of getting approved for loans and can even affect things like apartment rentals and phone contracts.

Still looking for a loan?

Loan Options predictive AI can match you with the best loans for using your circumstances, without impacting your credit score. Chat with our team about how you can improve your credit score so you never have to stress about getting the finances you need.

Match a Loan
Loan Option