Are You Ready to Improve Your Credit?

Getting a higher credit score doesn’t have to be complicated or confusing. Once you understand how your credit score is calculated and, more importantly, how your daily decisions make it go up or down, you’ll be on your way to increasing your credit knowledge, confidence, and ultimately, your credit score.

But there’s no quick fix. Building and maintaining your credit score won’t happen overnight, but it will happen if you practice patience, take time to expand your credit knowledge, and stick to your plan for success. To increase your creditworthiness—a lender’s willingness to trust whether you will pay your debts, such as a credit card, auto loan, or mortgage—here are five steps you can take.

1. Learn what influences your credit score. Five major factors play a role in determining your credit score: Credit Mix (the types of credit you have, such as credit cards, student loans, and car loans), Amounts Owed (how much of your available credit you are repaying), Credit Length (the age of your credit accounts), Payment History (your track record of making payments on time), and New Credit (how much new credit you are applying for).

2. Pay your bills on time. Even if it’s just a few days past the due date, late payments will hurt your credit score. To help avoid this situation, set up automatic payments with your bank or credit union and credit card company, so your payments are always on time.

3. Lower your credit utilization rate. Using too much of your available credit can lower your credit score. A good rule of thumb: keep your total credit utilization less than 30%. For example, say you have a retail credit card with a limit of $1,000 and two bank credit cards with limits of $500 each. That means you should aim to keep your total utilization below $600 across all three accounts.

4. Check your credit reports at least every year. Credit experts recommend reviewing your Experian®, Equifax®, and TransUnion® credit reports every 12 months to check for errors. While negative credit information, such as repossessions and bankruptcies, stay on your credit report for seven or more years, you may spot and dispute errors or signs of identity theft or credit card fraud, both of which can negatively impact your credit score.

5. Close accounts with caution. If you pay off an account or have an old account that you no longer use, think twice about closing it. Depending on how much available credit you have, this action can increase your credit utilization, lowering your credit score.

Changing your credit score is a journey. By following these steps, you can get to your destination of improvement. To learn more about how to achieve your financial goals with ProtectMyID®, visit AAA.com/IDTheft. Think of ProtectMyID as roadside assistance for your identity. With a suite of credit features such as Credit Monitoring, VantageScore® Tracker, Score Variance Alerts, and Experian CreditLock, with ProtectMyID, you’re in control of your credit.