How to Maintain Good Credit: 9 Steps (with Pictures) (2024)

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Co-authored byMichael R. Lewis

Last Updated: October 10, 2022References

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   Review your credit score. Before you can improve your credit score, you will need to access it. You can check your credit score by accessing your FICO score at MyFICO.com or by contacting one of the credit reporting agencies (TransUnion, Experian, and Equifax). Any score report obtained from a credit reporting agency will contain all three of their scores, so you only need one. Alternately, you can get you credit score for free from a website like Creditkarma.com, Creditsesame.com, or Credit.com.^[1]

   • Most credit scores range from 301-850, with 301 being the lowest and 850 the highest. Scores above 750 are considered excellent, scores between 700 and 749 are good, and scores between 650 and 699 are fair.
   • Anything below 650 is considered poor or bad credit.^[2]
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   Know what your credit score means. When a lender requests your credit score, the credit bureau providing the score applies a complex algorithm to all of the data in your credit history that the bureau has access to and creates a personalized credit "score" based on your data. Despite the complexity of the credit score formulas, each one uses the same five factors to assess your creditworthiness. If you know your score is low, you should determine which of these categories are likely bringing your score down.

   • Payment history - whether or not the payments in your credit history were made on time. Your payment history score may be low if you have been late on payments in the last several months or have accounts in collections.
   • Amounts owed - the ratio of the amount of outstanding credit in your name to the total approved credit in your name. If you have used close to the amount you were approved for on your credit cards, this will lower your score.
   • Length of credit history - score based on how far back your credit history goes. Credit bureaus have access to data from ten years prior to the last use of every line of credit in your name. If you don't have a lot of credit history this score will be low, but it will not be weighted as heavily.
   • Types of debt owed - the mix of debt outstanding in your name. The score considers whether you have all of your debt in credit cards, or whether your debt is balanced between college loans, a mortgage, and a small line of credit. If the only type of debt you owe is credit card debt or multiple auto loans, that may negatively impact your score.
   • New credit - the amount of new credit you have been approved for and accepted. The more you borrow in a short period of time, the lower this part of your score. ^[3]
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   Improve the credit score factors that you can. The first step to boosting your score is to make all of your payments on time. Because payment history is generally the largest portion of a credit score, you can improve your score by improving your payment history. You can also improve other areas of your credit score, like amounts owed and types of credit, by reducing your overall credit balance and taking out credit a little at a time.

   • If you miss a payment, make it as soon as possible. Your score reflects the number of days a payment is late, so even if you're late, still prioritize getting your payment in, or contacting your creditor. If you find yourself missing payments frequently, set up calendar alerts, email reminders, or automatic withdrawals to pay your credit bills.
   • If you have a high outstanding credit balance, either use savings to pay off some debt or stop using credit cards until you can pay down your balance. Unless you're in an emergency situation, you should aim to use less than 1/3 of the total credit you are approved for. Reducing the percentage of your approved credit you have outstanding can boost your credit score in just a few months.
   • If you just took out a new line of credit, give yourself a 1-2 month cushion until you open another line.
   • If you are brand new to the credit scene, your credit score may be just below average. You shouldn't worry about your credit score as a new borrower, other than to remember to make payments on time and not to borrow everything you get approved for.
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   Know when to ask for help. Everyone has bumps in the road, and if you truly can't pay your bills, there are steps you can take to preserve your credit history. Some creditors won't send your account to collections if you agree to make smaller payments or apply for a deferral. A credit counselor can help you consolidate your debt into one line with a reduced monthly payment. Working with a credit counselor now to find a solution may save both your future finances and credit score.

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   Don't use all your credit. As a rule of thumb, aim to have an outstanding balance of less than one-third of the amount you were approved for on credit cards. As you use a higher percentage of your approved credit lines, this part of your credit score declines. Because the approved credit limit is generally based on your income, owing a large portion of the amount may indicate you are nearing your spending limit and are a risky borrower.^[4]

   • Use a budget to guide your spending and make sure you don't overuse your credit. Approval limits are often calculated using very long term payback schedules, (think 5 to 15+ years), so you should not plan to spend as much on a credit card as you are approved for.
   • Keep a savings account for emergencies. Your credit score takes a hit if you have to do a bunch of borrowing at one time. While sometimes this is inevitable, having some savings to prevent using too much credit can keep your credit score in good order.
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   Take out credit slowly.^[5] The new credit portion of your credit score considers the amount of your total credit that was recently borrowed. The logic underlying the scoring method is that the more money you've borrowed recently, the more risky you are as a borrower. This is based on statistics that show borrowers who need to borrow a lot of money in a short time often have a harder time paying that money back. ^[6]

   • Plan your borrowing in advance. If you need new furniture and a larger vehicle for an arriving baby, stagger your purchases by a few months. Leaving lengths of time between opening new lines of credit shows that you haven't hit dire straights, and that you aren't a risky borrower.
   • When taking out a new line of credit, remember that both the amount you are approved for, as well as the amount you actually borrow, both affect your credit score. Generally having been approved for a large amount will not hurt your score, unless you spend a high percentage of the approved amount.
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   Diversify your debt. It is better for your credit score that you have a mix of different kinds of debts, like a mortgage, auto loan, school loan, and a credit card, than a lot of debt in just one kind of credit line. This is especially true for credit cards. If you have successfully made payments over a period of time on several different types of credit, your score will improve.

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   Keep using the same accounts. Your credit report goes all the way back to the earliest transaction associated with any card you have used in the last ten years, and the longer your credit history the better for your score. This doesn't mean you shouldn't ever open new accounts, just hold on to accounts that look good on your history.

   • If you have had a card since you were 18, keep using it every once in a while. The fact you have paid off your debts consistently over a long period of time will boost your score.
   • A common misconception is that canceling credit cards is good for your credit score. Canceling a card may actually lower your credit score temporarily, as it reduces the ratio between your total outstanding debt and total approved debt. Canceling a card may be a smart way to curb your spending, but it will not boost your score.
   • If you miss payments, default, or incur penalties on a line of credit, you should consider closing that line once you pay it off. It will take a long time, but 10 years after you pay off the card all of the associated history will no longer be considered part of your credit history.

   See Also

   Understanding the Importance of Financial Wellness
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   Don't obsess over your credit score. Credit scores are only one of many factors that lenders consider if and when you apply for loans. Just as important if not more are your employment status, income, and the amount of any down payment. If you have a poor credit score, you should work on improving the things that you can, but also focus on developing a budget and using credit less. Credit scores are generally a good indicator of your financial position; if you are having a hard time getting approved for credit, your best bet is not to borrow.

   • Your credit will go up and down in small increments as your credit history, length, and substance changes. Most small changes will not affect your ability to borrow money, and you shouldn't worry too much about your score. If you are following the steps above, you've done what you can and you should be able to relax.
   • Worry less about mortgages than credit cards and short term loans. Because housing loans are backed by collateral, they look less risky on your credit report. More risky are credit cards and other unsecured loans that are not attached to a single item.

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