HOW TO: Build Your Credit Score

Credit ScoreYour credit score is an indication of how you handle your financial commitments.  Most Americans have a debt-to-credit ratio that is too high! Your score helps lenders decide whether or not to loan you money.  The higher your score, the lower risk you are to lenders, and therefore often the cost to borrow money is lower.  Your score consists of your track record of payments, how much you owe, how long you’ve had established credit, whether you’re taking on/requesting new credit and the types of credit accounts you have opened.  Here are a few of the main ways to build your credit score.

PAY ON TIME – Pay all of your bills on time, every time. Payment history affects about 35% of your score, so if you have a habit of not paying on time…it will really hurt you.

KEEP YOUR BALANCE LOW, LIMITS HIGH – Keep your credit card balances low compared to the limit of your credit card. A benchmark to aim for is keeping your balance at or below 25% of your total credit limit.

  • TIP: Pay your bill before the STATEMENT date, not the due date.  The statement date is the balance that will be reported to the bureaus, so paying some of your balance before the statement date can help lower your utilization rate (which is a factor in calculating your credit score).
  • TIP:  If you have a month or two where you are charging up your account, think about doing periodic payments throughout the month instead of one big payment before it’s due.  This will cut the amount of credit you are using at any one time.  Before doing this, make sure your credit card company & bank don’t have a limit on the amount of payments you can make within the month.

building-creditMIX IT UP – Responsibly manage different types of debt: car loan, major credit cards, mortgage and student loans.

AGE MATTERS – Keep older credit card accounts open and avoid opening multiple new accounts. New accounts lower your average account age, which is a factor in scoring your credit.  So instead of getting rid of your OLDEST credit card, KEEP IT to avoid having your account age shortened.

These are just a few of the main ways to build your credit score.  Other ways can include keeping most of your charges on one or two go-to cards instead of having small balances on multiple cards and limiting sources of hard inquiries (i.e. renting a car, getting TV or high-speed internet, etc.). If you want more professional advice on how to get your credit score up, feel free to call us at 952.920.5100 or email One of our loan officers would be delighted to assist you.