How to Build and Maintain a Strong Credit Score

Benjamin Franklin once said, “It takes many good deeds to build a good reputation, and only one bad one to lose it.”

Financially, your reputation boils down to a three-digit number: your credit score. Each credit-related action you take is recorded, tallied, and turned into this increasingly important number.

A good credit score will help you get the best rate on a mortgage and a lot more. Insurers, cell phone providers, and a growing list of other companies base their decisions about working with you and at what rates, in part, on your credit report and/or score. More and more landlords and employers check the same information before renting you a place to live or offering you a job.

Clearly, building and maintaining a strong credit score is important. Here’s how.

Pay Your Bills on Time

Thirty-five percent of your credit score is based on your track record of paying your bills on schedule. Do all that you can to pay your bills on time.

Most credit card companies will send you an e-mail alert a week or so before your next payment is due. Paying your bills on time is so important that you should create multiple reminders. Sign up for the free alerts available to you, and add bill due dates to your calendar as well.

Be Careful About How Much Credit You Use

Thirty percent of your credit score is based on how much you owe. What is especially important is how much of your available credit you are using—your credit utilization—across all of your credit cards and on each individual card.

Using 30 percent of your available credit or less is good; 10 percent or less is ideal. This goes for people who pay their balances in full each month, as you should, not just those who carry a balance. The credit bureaus simply check to see how much credit you are using at some point each month.

Give It Time

Fifteen percent of your credit score is determined by how long you have used credit.

I’m often asked in workshops whether to close old, unused accounts. This is generally not a good idea, but not because doing so will erase your credit history. When you close an account, positive information about the account stays on your report for ten years, negative information for seven years.

The problem with closing an old account has to do with credit utilization. Closing an account lowers your total available credit, which will probably increase your utilization, and that can lower your credit score.

Be Cautious About Opening New Accounts

The amount of credit you have applied for recently impacts 10 percent of your score. Opening new credit card accounts in order to get those 10 percent discounts tends to discount your credit score.

Use Various Types of Credit

Your mix of installment loans, revolving credit, and/or a mortgage is an important part of the final 10 percent of your score. Installment loans are those with a fixed payoff period, such as a vehicle or student loan. Revolving loans are open-ended loans, such as credit cards.

Having some of each type of credit is ideal, at least according to the credit bureaus. However, I don’t recommend financing cars or college. And you do not need to carry a balance on your credit cards in order to earn a high score. You can—and should—pay your balance in full each month.

Review Your Free Credit Reports

Everyone is entitled to one free report each year from each of the three credit bureaus: Experian, Equifax, and TransUnion. Get your reports at Here’s what to look for in each of their major sections:

Credit summary. Toward the top of your Equifax report, under “Accounts,” you will see your credit utilization, or what it calls “Debt to Credit Ratio.” This is the area you can do something about to impact your score the most in the least amount of time.

If you have a high debt to credit ratio, you will raise your score if you can pay down your debt, especially credit card debt. The improvement should show up within 30 days.

Account information. Are there any accounts you don’t recognize? This could be a sign of identity theft. If you see such accounts, contact those creditors directly and let them know the accounts are not yours.

Check to see if there are any late payments noted. For Experian, you want your open account status listed as “Open/Never Late.” For Equifax, “Pays as Agreed.” For Transunion, “Paid or Paying as Agreed.”

If any accounts are listed otherwise, and you believe you have never been late with a payment, contact the creditor. Let them know you believe a mistake has been made and ask if they will change it on your credit file.

Personal information. Check to see that the following information is correct: the spelling of your name, your birth date, current and previous addresses, Social Security Number, and current and past employer information.

If you see any problems on your report, file a dispute. Instructions are on the report.

Review Your Credit Score

Your credit reports are free; your credit score might be free. Many credit card companies now provide free credit scores to their cardholders, including American Express, Discover, and others. There are some Web sites that offer free credit score estimates as well, but I recommend that you find out your FICO score. FICO stands for Fair Isaac Corporation, which is the company that created the credit score and whose scores are still the most widely used.

If you don’t have free access to your FICO score, you can buy it on Fair Isaac’s web site. You’ll have your choice of purchasing your TransUnion, Experian, or Equifax FICO score.  It doesn’t really matter which one you choose; just buy one for $19.95.

Credit scores range from 300 to 850. Unlike cholesterol, the higher the number the better. Ideally, you want your score to be in the mid 700s or higher.

Two keys to a strong credit score

Credit scores have an aura of mystery.  There’s no end to the articles offering this strategy or that for increasing your score.

The truth is, two very basic steps will give you the greatest impact in building and maintaining a good score: pay your bills on time and use a relatively small amount of your available credit.  Focusing on those two practices will go a long way toward keeping your financial reputation—your credit score—strong.

What questions do you have about credit reports or scores?

Are you a member of a church? I’d greatly appreciate it if you’d tell the person in charge of small groups or stewardship about my brand new small group study, Money, Purpose, Joy.  Based on the idea that the purpose of money only becomes clear once you’re clear about the purpose of your life, this video-based study teaches the practical application of seven biblical financial principles. Ultimately, it equips people to use money as a powerful expression of who God made them to be.


8 Responses to How to Build and Maintain a Strong Credit Score

  1. Shalynn April 20, 2012 at 10:47 PM #

    I just have one question i was told that if i dont keep buying or oweing that i can completely lose my credit… Is this true?

    • Matt Bell April 22, 2012 at 10:06 PM #

      Shalynn – You need to be a user of credit in order to establish a credit report. If you’ve used credit in the past and then stopped using credit, I’m not sure that your credit report would ever cease to exist. One other point about owing money. Some people think you need to carry a balance on a credit card in order to have a credit report/score. You do not.

  2. Julia Acuna April 3, 2012 at 10:26 AM #

    My credit score is low. I have had poor credit for years. I just got a good job and I want to get it from the low 500’s to the 700’s. I only have 3 creditors and 1 credit card. I am paying on the credit card on time. I have one installment loan with huge interest (217%). I am planning my budget carefully to pay off this loan as quickly as possible. The other issue is that I owe $56,000 in school loans. This makes my income to debt ratio through the roof. I want to dig my way out and have good credit so that within a year I can buy a car without the huge interest rates. What advice can you give me?

    • Matt Bell April 4, 2012 at 11:07 PM #

      Julia – It’s just going to take time. Paying your bills on time is the biggest factor that determines your credit score, so make sure you do that each and every month.

      The next biggest factor has to do with how much of your available credit you’re using. So, if you’re carrying a balance on your credit card, the faster you reduce that balance the more your score should improve.

      Lastly, get your free credit reports from and go over them with a fine tooth comb, making sure everything is accurate.

      There’s more advice here:

  3. kentjulian March 13, 2012 at 8:51 PM #

    Matt…nice job. As someone who purchases rental real estate, this credit building strategies are all true.

    • Matt Bell March 14, 2012 at 4:24 PM #

      Thanks for the added confirmation, Kent!

  4. Pat March 13, 2012 at 3:04 PM #

    Your articles are helpful but I don’t see practical advice about what to do in the event your credit score is low. What can be done to change it? Is there anything? How can you “Clean Up” your credit report?

    • Matt Bell March 13, 2012 at 3:49 PM #

      Pat – How to improve a score depends on what made the score low. If there is a mistake on your report, like late payments that weren’t actually late, you should contact the creditors and ask them to change how the information was reported to the credit bureaus. If you really did pay late, it’s just going to take some time of paying on time in order to see an improvement.

      If your credit utilization is high, paying down existing balances or charging less each month will help improve your score.

      So, the first step is reading your reports to see what negative information may be impacting your score.

      In general, though, time tends to heal credit score wounds – time spent doing the right things like paying on time and keeping credit utilization low.

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