A good credit score does more than gauge your reliability as a borrower. More broadly speaking, the stronger your credit score, the better the credit terms you may expect to receive.  This means better interest rates on loans and greater financial flexibility are potential benefits of having good credit.

Simply put, improving your current credit score can be beneficial. 

“Strong credit is crucial because it grants you access to financial opportunities,” offers Lakhbir Lamba, PNC’s Head of Retail Lending. “A strong credit score improves your chances of securing housing and employment, potentially lowers insurance premiums, provides a safety net during emergencies, and sets the stage for long-term financial well-being.”

Even if your credit score isn’t great, don’t be intimidated. You can take simple, easy steps to improve your standing in the eyes of creditors. If you’re just starting on this journey, Lamba has wisdom to share.

“Start small and be patient: Improving your credit score takes consistent effort. Break down your goals into manageable steps and focus on one aspect at a time. Celebrate small victories along the way to stay motivated.”

Let’s get started. With a little time and discipline, you’ll be surprised at how much your score can rise.

What Is A Credit Score?

A credit score is a number that assists users in assessing how well you manage your financial obligations.  One of the most common credit scores is known in financial circles as a FICO® score. This three-digit number, typically between 300 and 850, provides lenders,  other financial institutions and businesses an overview of your credit history. The higher your score, the stronger your credit, and the more options you may have available to borrow money.  There is more than one formula for calculating a credit score. 

The algorithm for determining an individual's score might vary slightly among the three major nationwide consumer credit bureaus—Equifax, Experian, and TransUnion. Each credit bureau assesses your payment history, your total debt, usage of available credit, length of credit history, types of credit, and credit inquiries.[1]

“As the saying goes, knowledge is power,” Lamba continues. “So, learn your credit score by obtaining your credit reports from the three major credit reporting agencies. Review those reports carefully for errors and discrepancies. And be sure to dispute any inaccuracies, so that your credit information is correct.”

Once you’ve laid that crucial groundwork, here are five tips that can help you improve your credit score.

1. Pay Your Bills on Time, Every Time

A lender wants to know that you consistently pay what you owe. This means timely payments are the cornerstone for good credit. Make all loan and bill payments by their due dates, even it means just making the minimum payments each month.

Life happens, and we can all forget from time to time. Lamba suggests a pro tip for keeping track: “Keep payment due dates as ongoing calendar reminders. Or consider setting up automatic bill payments with your financial institution. Those are easy ways to ensure you never miss a payment.”

2. Maintain Low Credit Utilization

An important part of your credit score is based on your debt-to-credit utilization ratio—simply put, how much debt you have compared to how much credit you can access. For example, if you have a $300 balance on a credit card with a $1,000 limit, you'd have a debt-to-credit utilization ratio of 30% on that card.

If you have multiple credit accounts, it’s important to know your total ratio across all those accounts. As an example, let's say you have one credit card with a $1,000 limit and a $300 balance, plus  another card with a $500 limit but no balance. Your credit limit would be $1,500, spread across two cards, so your debt-to-credit utilization ratio would be 20%.

As a general rule, a debt-to-credit utilization ratio under 30% is desirable for maintaining a good credit score.[2] Also, it’s important to avoid maxing out your cards. That signals to creditors that you are facing financial stress. As Lamba explains, “Focus on paying down your debts to lower your credit utilization and improve your creditworthiness.”

3. Consider Whether to Close Unused Credit Accounts

The length of your credit history plays a key role in your credit score — and generally the older your credit accounts, the better. Closing your oldest account could make your credit history look shorter than it really is, which can potentially lower your score.[3] Consider your financial goals: if it makes sense to do so, keep your oldest account open and in good standing so it is an asset to your score.

4. Avoid Too Many Credit Inquiries

Looking to borrow money? Do your homework ahead of time and really be selective before applying. The reason for this is simple. With each application, potential lenders make what's called a “hard inquiry," which means they pull your credit information. Further, hard inquiries stay on your credit report for up to two years. FICO typically considers hard inquiries in a credit score for up to a year.[4] However, multiple hard inquiries even over a short period may have different impacts. As one example, several inquiries by the same creditor may be consolidated.

By the way, if you're concerned about other credit checks — for example, when you request a copy of your credit report — you don't need to worry about your score. These “soft inquiries" typically don't affect your credit, and they are only visible to you when viewing your credit report. 

5. Monitor Your Credit Report.

Sure, we recommended pulling your credit reports at the beginning of your journey. One source is found at https://www.annualcreditreport.com/index.action. But once you raise your credit score, it’s important to safeguard it, too. That means spotting and removing any mistakes that could negatively affect your score.

It's a good idea to check on your credit score and credit history yearly--or before you apply for any loan such as for a vehicle purchase or mortgage. And if you find an error, notify each of the three nationwide credit bureaus — Equifax, TransUnion, and Experian — so they can investigate.

Think of it as your annual checkup, just the way you would a visit to your doctor or dentist. Your financial health could depend on it. Now that you’re on your way to building stronger credit, Lamba has some additional encouragement and advice. 

“Everyone’s financial journey is different. That makes it important to understand your specific circumstances and exercise your best judgment. While boosting credit scores might be straightforward for some, others might need the additional help of a certified financial planner, credit counselor, or other financial professional.

“Improving your credit is a gradual process, and setbacks may occur along the way. Stay motivated, be consistent, and celebrate your progress, no matter how small. Over time, your efforts will pay off, and you'll see positive changes in your creditworthiness and financial well-being.”

Click here to learn about lending solutions at PNC. Whether you're looking to start the home-buying process, pay for school, consolidate your debt or something else, we'll help you find the right solution to achieve your goals.