Money Smarts Blog

Having a good credit score opens the door to a whole new world (did you also hear Aladdin in your head when you read that?). In a world with good credit, you can:

• Qualify for lower rates on credit cards
• Get better rates on car insurance
• Get approved for higher credit limits
• Have more housing options … and more

But what is “good” credit?

According to Equifax, credit scores ranging from 580-669 are considered fair, 670-739 are good, 740-799 are very good and 800 and above are considered excellent. Recently, my credit score was still “good” based on this definition, but not quite good enough to qualify for a home equity loan. I was just three points shy but knew I could get there.

Here’s how I boosted my score from 677 to 714 in just two months (with handy tips you can use, too).

Set up a free Experian account

As soon as I heard of this free credit monitoring service, I was in. Once I signed up, I got an updated credit report every 30 days, real-time alerts, and access to an interactive FICO Score Tracker. This way, I could track the five main categories of my credit score:

• Payment history (35%)
• Amount of debt (30%)
• Length of credit history (15%)
• Amount of new credit (10%)
• Credit mix (10%)

Reduce debt

For two months, I made the conscious decision to forego saving (temporarily) so I could put all my extra income toward paying off my outstanding credit card debts — and pull my nearly 40% credit utilization rate down in the process.

For example, I had a total of $10,000 in credit available on three cards, and a balance of $2,000 each on two of those cards for a total of $4,000. I was using 40% of the credit available to me (experts recommend sticking around 30%). By reigning in my spending and paying off some of that credit card debt, I was able to decrease my usage to 28%, which worked in my favor by boosting my overall credit score!

Make payments on time — every time

Remember those five categories I pointed out above that impact your overall credit score? Payment history makes up the biggest slice. Fortunately, I’ve always been punctual about paying my bills, so I’ve never been hit with past due notices. Making your monthly payments on time (even if it’s not paid in full) can help increase your score, while missing payments will obviously bring your score down (not to mention tack on late fees). Consider setting up autopay if this is an area where you struggle.

Remember, fixing your credit score is a marathon, not a sprint. That’s why I’m taking you through the year with my personal tips and expert recommendations on rebuilding your credit in this four-part series. The sooner you prioritize your finances, the sooner you’ll reap the benefits.