1. Make Payments On Time
Illustration by Alexander Ho for TIME
Your payment history makes up 35 percent of your score, so this is crucial. “If you’d previously been a sloppy payer you really don’t want to be doing that going forward,” says Sarah Davies, senior vice president of research, analytics and product development at VantageScore. Fortunately, recent activity is given more weight than older transactions, so paying on time if you hadn’t been doing so will start helping your score soon. Remember, some service providers (such as cell phone companies) also report to the credit bureaus, so just paying credit card bills by the due date isn’t enough. Also, watch out if your due date falls over a weekend or a holiday. Credit card issuers can’t count your payment as late if it falls on a day when they’re closed, but many big issuers now process payments every day. If your bank is closed and your card company is not, you could get dinged for a late payment if your bank doesn’t process the payment until the following day.
Next: 2. Don't Have Too Much Debt
2. Don’t Have Too Much Debt
Illustration by Alexander Ho for TIME
How much you owe makes up 30 percent of your score, so this is another biggie. The credit scoring formula looks at two types of debt: installment, which covers debts like a mortgage and a car loan; and revolving, which pretty much means credit cards. Having both kinds is actually good for your score, but having too much revolving debt will burn you. If you have a choice between paying down your car loan or a credit card balance, it’s better for your score to pay the card balance, says Barry Paperno, consumer operations manager at MyFICO.com.
The portion of your available credit that has been used up is called your credit utilization ratio. “The recommended percentage of utilization is 25 percent or less,” Paperno says. Even if you pay in full every month, “you really don’t want to charge more than 25 percent of your limit,” he suggests, because the scoring formula can only see the debt, not your intention to pay it off at the end of the month. The 25 percent rule of thumb holds true both for individual cards and in the aggregate. Having a lot of retail-branded credit cards can get you in trouble here, since they typically have low limits.
Next: 3. Keep Long-Standing Accounts
