Ways to raise your credit score and why it matters

With a new year often comes new financial goals. Many experts suggest raising your credit score may be a worthy goal to have.

Much like your blood pressure or cholesterol level suggests your physical health, a high credit score indicates positive financial health. A high number means your bank account is healthy.

Although it can be uncomfortable to talk about, Nerd Wallet’s credit card expert Sarah Rathner says getting your score as high as possible should be at the forefront of everyone’s mind.

“Having good or excellent credit literally opens so many doors in your life,” Rathner said.

The closer your credit score is to 850, the better your opportunities are. 850 is the best possible credit score you can have.

The number one way to raise your credit score? Simply pay your bills on time every month. That doesn’t just include your credit card bill. Even your utility bill and rent can be reflected on your credit report.

Rathner says not only will you save money and avoid late fees, but your score can drop up to 100 points if you’re more than 30 days late paying your bills. “They say in business, ‘it takes years to get a customer and a second to lose one.’ It’s kind of like that with your credit score, it can take months to raise your score, and just one late payment to drop it back down to where you started,” said Rathner.

Another tactic is not to spend more than 30% of your available limit across your credit cards. For example, if you have a credit card with a $10,000 limit, try to cut your spending to $3,000 at a time. Better still is keeping your debt below 10%.

“If you have a lot of debt relative to how much money you earn, that can hurt you. Not only it can hurt you in terms of your credit score, but when you’re trying to borrow money, taking out a loan to buy a car to buy a house,” Rathner said. “Lenders look to see how much debt you have relative to your income because they want to make sure you’re not already in over your head before they decide to lend you more money.”

Having a credit card for an extended period of time can also help increase your credit score. So, if you happen to pay off your card with a small limit, Rathner says not to close or cancel it. Instead, put a small monthly bill on it and pay it off.

Now, Rathner understands that they may sound overwhelming and may take some time, but she says it will help in the long run. “Be patient. It can take a few months to see the positive results come through on your credit score. So stay the course. And don’t get discouraged because what you’re doing has meaning, and it will make your life easier,” said Rathner.

Another reason to raise your credit score might be to get a job. Some employers check your credit score when you apply.