Tips to Improve Your Credit Score

What is a credit score and is it important?

A credit score is a three-digit number based on your bill paying history and accumulated debt.
Ultimately, you want a high credit score, as it is an indicator of financial strength and creditworthiness.

The truth is your credit score carries a lot of weight.  If you want to buy a car, a home or borrow money for personal reasons, financial institutions will base their approval on those three very important digits. A high credit score will not only get you approved, it will earn better interest rates and offer larger limits than if your credit score is low.

While having a low credit score isn’t the end of the world, it leaves a lot of opportunities on the table. It can set you up to be rejected on a loan, limit your negotiating power and hamper your financial freedom. It can also be a factor in determining car insurance premiums, interfere with your ability to rent an apartment and cause you to have to pay higher deposits on cell phones, utilities and cable TV services.

The good news, however, is that there are things you can do to improve your credit score. By following these tips, you can stack the odds in your favor in a relatively short amount of time.

Review Your Credit Report

Request free copies of your credit report from all three of the major credit bureaus: Equifax, Experian and TransUnion. Each credit report should be similar but may not be exactly the same.

Look for inaccuracies and dispute any errors. Per the FTC, 5% of consumers will find a mistake on at least one of their credit reports.

The federally authorized site,, will provide you with complete copies of your credit report. It can be accessed directly from our website under Tools & Resources, Loan Resources or you may click HERE.

Pay All Your Bills Before They Are Due

Since your credit score is determined by your bill paying history, it is critical to pay all your bills before they are due. Don’t take a chance on being late, ever!

Online bill pay is a great way to ensure your bills are paid on time. Set up alerts or enroll in automatic payments. Remember, late fees are the enemy. 

Check into our EZ Online Bill Pay and Mobile App option, which is free with any Missouri Central Credit Union checking account:

Get Rid of Debt

A word to familiarize yourself with is credit utilization. This is the ratio of how much available credit you have vs. how much of your available credit you are utilizing. In essence, it is your borrowing power. It indicates how easily you can pay back a loan, if you are overextended and if you have any wiggle room.  

Reducing debt will increase your borrowing power and make you a better candidate to potential lenders. To improve your credit score, it is recommended that you keep your credit utilization at 30% or below.

Make Maxed Out Credit Cards a Priority

If you have several bills to pay and are unsure of which to tackle first, go for the maxed out credit cards. The closer your outstanding balance is to your credit threshold, the less available credit you have. By paying down a maxed out credit card, you open up available credit, reduce active debt and improve your credit utilization.

Keep Accounts Open

Do not close accounts as they are paid off. Keeping them open increases your available line of credit, thus improving your credit utilization.

In addition, credit age plays into your overall credit score. The longer your accounts have been open and the longer you have successfully managed payments, the better it will look to potential lenders.

A general rule is to have three available credit sources that are in good standing.

Be cautious about opening new lines of credit. For every loan or credit card application, a hard inquiry is reported against your credit. Too many of inquiries can lower your score.

Pay Extra on Credit Cards and Current Loans

Making multiple payments and/or paying extra will go towards reducing debt. This strategy will not only reduce debt and keep your payments fashionably on time, you will pay off your balance sooner.


Pay Bills that Have Gone to Collections

Even if you are past the annoying phone calls and threats from bill collectors, ignoring bills that are already in collections won’t make them go away. Pay them in full once you have the money to take care of the balance in its entirety. Don’t make partial payments on a bill already in collections. Doing so could put you at risk of starting the seven year timeframe all over again.

Mix it Up

Having different types of loans is also considered favorable to your credit score. Try incorporating more than one type into your mix. Different varieties include auto loans, mortgages, student loans, installment loans and revolving accounts.

If you think you need to add a credit card to your credit portfolio, we offer a variety of Visa® Credit Cards. As we mentioned earlier, a hard inquiry will be reported due to a credit card application, however, if the credit card will be helpful in the long run, you might want to consider adding another credit card to your repertoire.  

Avoid Credit Score Fiascos

While late payments, collections and maxed out credit cards don’t do your credit score any favors, there are certain things that will turn your credit score upside down. Do your very best to avoid car repossessions, property liens and Chapter 13 bankruptcy.

These fiasco type items will stay on your credit report for seven years. 

Don’t be Too Hard on Yourself

Being diligent is the name of the game when it comes to improving your credit score. It won’t happen overnight but it will happen. Be patient and be proud of yourself for sticking to it!

Credit Score Recap

In summary, improving your credit score is possible. Within the available range of 300-850, shoot for a 720 and higher. Apply the tips above and implement some of your own. Keep in mind the five factors that affect your score: payment history (35%), available credit (30%), credit age (15%), credit types (10%), and inquiries to your credit 10%).

Stay the course. We’re rooting for you!