Thursday, June 27, 2013

Ways to Raise and Lower Your Credit Score

This is what you could look like if you have a bad credit score.
photo credit: miguelavg via photopin cc

Read this if: 

1) You want to know how your financial actions affect your credit score. 


I've talked on Money Matters about the basics of credit scores (also known as FICO scores). They range from 300 something to 800, and generally anything below 600 is considered "bad" credit. I want to talk to you guys about some ways to raise and lower your score.

Base Score

Your credit score doesn't really exist until you have been handling credit for at least 6 months. Checking accounts, saving accounts, and cash don't count towards your credit score because those things have nothing to do with credit. 

Once you have had a significant credit history, you'll get a credit score that reflects your financial behavior until that time. Then, good stuff you do raises your credit score and bad stuff you do lowers it. You want your score to be as high as possible because 1) it'll make your life a lot easier later on, and 2) the ladies will swoon when you tell them you are rocking a 680. I don't think men swoon. 

Lower It 

There are basically two things that will lower your score: not paying on time and not being able to pay. Those sound pretty general, but when you think about it, every bad financial situation comes down to not giving someone enough money, not giving it to them on time, or BOTH. D: 

As you get the hang of things, as you start to use your credit score more, I think you'll want to read more about what lowers your score. If you're just starting out, just avoid doing the two things I listed and I think you will be fine. 

Raise It 

Pay on time and in full. Pay on time and in full. Pay on time and in full. Please. 

Also, spend as little as you can manage in general, but especially on your credit card. Most of us do not have very high credit limits, and here is why that matters: 

There is something called the debt utilization ratio, which is the ratio of used credit to how much total credit you have. For example: Let's say I have five credit cards. (I don't.) My total credit limit combined from all five cards is $8000, so if I spend $2000 in one month, my debt utilization ratio is 25%. After I pay off my credit card bills, the ratio goes back down to zero. I want to keep the ratio as low as possible because the ratio is factored into my credit score, and lower ratios are seen as more responsible. 


Plan of Action: 

1) Keep these things in mind as you handle your credit. You don't want to be in a bad position when you are applying for a loan to get that first car or house. (I don't recommend a loan for a car, but that will be another post.) 


I meant to ask this earlier, but I'd be really interested to know: When was the first time someone talked to you about credit scores (if ever)? Let me know in the comments. 

As always, contact me with questions or suggestions! You can either comment directly on the post or send me an email to 


  1. "I don't think men swoon"

    Joan, this made my morning.

  2. Yay! Thanks for reading, Tim! :D