How to Improve a Credit Score in 5 Simple Steps

Your credit score is one of the most important aspects of your financial life. Knowing how to improve a credit score, especially if it's less than stellar, can open the door to all sorts of opportunities not just for using your credit but with many other aspects of your life. Below, you'll find three easy ways to get your credit score up to the level you want, but first, let's take a look at how important your credit score is.

Why your credit score matters
Obviously, credit scores matter a lot when it comes to accessing your credit. If you can figure out how to improve your credit score, it can help you get the mortgage loan you need to buy a house, the auto loan to buy a new car or truck, or the credit cards you want to manage your expenses and take advantage of lucrative credit card rewards.

But credit scores pop up in other areas as well. If you want to rent an apartment, your landlord will often access your credit score. In applying for insurance, many insurers offer people different rates depending on their credit score. Increasingly, employers have turned to credit reports and score information to evaluate job candidates.

Fortunately, understanding how to improve your credit score is a lot simpler than you might think. Here are three guidelines for you to start with:

Step 1: Check your credit report for errors.
To improve your score, you first need to know what information it's based on. Going to will give you access to a free copy of your credit report from each of the three major credit bureaus. Other websites also offer free credit reports, but they often come with added subscriptions or as part of a trial offer. Only the website is government-mandated to give you your credit information.

If you find errors on your report, getting them corrected can improve your credit score. For more guidance on how to dispute an error on your credit report, look to this guide from the Federal Trade Commission.

Step 2: Get your payment history in shape.
A healthy payment history is the biggest contributor to your credit score, so catching up on missed payments and committing to paying your bills on time can have a huge impact on your credit score in the long run. If you've had trouble making payments on time in the past, fixing this won't make your credit score problems disappear immediately. But as those problems get further into the past, they have less of an impact, and you'll see your credit score improve steadily.

Step 3: Get your credit card balances down.
One element of your credit score compares how much debt you have outstanding to how much you have available on credit card limits. If you're maxed out on your cards, it'll hurt your score. The solution: Pay down your balances, and your available credit will go up, boosting your score.

Step 4: Hang on to your older credit cards.
The length of your credit history matters for scoring purposes, so getting rid of old cards in favor of newer ones can reduce your score. Even if you prefer using a newer card, keep older accounts open and use them occasionally to keep them active. Over time, that will give you a longer history and help improve that part of the credit score calculation.

Step 5: Know the tricks.
A number of things that seem like they should improve credit scores actually don't. For instance, closing credit card accounts seems like a smart move, but by reducing your available credit, it can actually do more harm than good. Similarly, opening multiple accounts in a short period of time may boost your available credit, but it sends the wrong message to potential creditors, as it makes you look desperate to get credit from any available source.

Get smart about your credit
Focusing on how to improve credit scores is a great way to boost your chances of getting a loan, landing a job, or finding a place to live. With these simple steps, you can get on the path to a better credit score right away.

For more information on credit scores, be sure to look at this guide from, which is the consumer division of the company that is responsible for the popular FICO credit score.

Making the right financial decisions today makes a world of difference in your golden years, but with most people chronically under-saving for retirement, it's clear not enough is being done. Don't make the same mistakes as the masses. Learn about The Shocking Can't-Miss Truth about Your Retirement. It won't cost you a thing, but don't wait, because your free report won't be available forever.

The article How to Improve a Credit Score in 5 Simple Steps originally appeared on

Fool contributor Dan Caplinger appreciates your comments. You can follow him on Twitter @DanCaplinger. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.