🔴Payment history is the top factor that impacts a person's credit score

🔴 A good credit score allows you to get the best possible interest rates

🔴One credit expert offers tips on how to bump up your credit score

Have you checked your credit score lately? Are you in good shape heading into the holiday shopping season or could your score use some resuscitation?

What is a good credit score?

Credit scores depend on the credit scoring models used because each one weighs information differently, said Christina Roman, Consumer Education Advocacy Manager at Experian.

She said it’s important for consumers to focus on the information in their credit reports because that’s what actually makes up a person’s credit score.

According to the common credit scoring models a good credit score is somewhere in the high 600s and exceptional is 850, Roman said.

The high 700s is the sweet spot because she said that will get you the best possible interest rates on credit cards, home loans, and car loans.

Christina Roman, Experian
Christina Roman, Experian

What should people look for in their credit reports?

One thing to focus on is what the lender is reporting about you to the credit bureau, Roman explained.

They will report to the credit bureau when a person opens a loan or a credit card, how much the person took out in a loan, what is their monthly payment, and whether are they making the monthly payment on time.

If someone opens a credit card, the lender will tell the credit bureau what is the limit that they made available to the person, how much is available to that person, whether payments are being made on time, as well as how much of the allowed credit is being utilized each month. All of this information is reported and stored in the credit report, she said.

“Your payment history is the number one factor impacting your credit score. So, a late payment or a missed payment, and by late, I mean you missed an entire billing cycle. When it gets reported to the credit bureaus, it will remain on your credit report for seven years. That is going to have a significant impact on you,” Roman said.

You want to make sure that you are being reported as an on-time payer and that you’re not using too much of the available credit, she added.


What are the perks of having a good credit score?

Having a good credit score allows a person to be approved for the best possible interest rates for credit cards, be approved for credit cards that offer things like rewards points, cash back, and miles, and be approved for the best possible rates on home and auto loans.

“When we’re in a little bit of a higher interest rate environment than we’re used to, you want to have to have the best possible score to get the lowest interest rate,” Roman said.

Additionally, credit scores can impact things that don’t even involve loans like renting an apartment, or signing up for utilities. If you sign up for a utility, a credit check will be run. Roman said that will determine if you have to pay a deposit to use those services. It will impact applying for a telephone contract.

Credit scores can impact so many aspects of a person’s financial life, which is why it’s so important to pay attention to your credit, she said.

credit cards (Huntstock, ThinkStock)
Huntstock, ThinkStock

Will checking my credit report lower my score?

No. Checking your credit report or score will have a negative impact on you is one of the most common misconceptions, and it’s completely false, Roman said.

In fact, check your credit report often, at least once a month, even once a year. It’s important to check the report as often as possible, especially if you’re planning to make a big purchase, she said.

Experian, for example, is one credit bureau that provides customers with a free credit score, a free FICO score, and a free credit report monthly. This gives people the opportunity to not only check in on their credit report but also comes with alerts to let them know that certain behaviors are either hurting or helping them. It also helps to spot identity theft which is important, and common during the holiday shopping season. If someone opens an account in their name, they’ll get an alert as soon as it’s reported to the credit bureau.

SpiffyJ, Getty Images
SpiffyJ, Getty Images

What are tips to improve credit scores?

First, monitor your credit report, Roman said. Get an idea of what’s in your credit report that’s affecting your credit score. Anytime you access your credit score, you’ll get a list of factors that either benefit or hurt your score. That will give you actionable items that you can take to improve that credit score.

If you’re carrying a ton of debt, Roman suggested paying off that debt as consistently as possible. Only charge what you can reasonably afford to pay off every single month. But, if you do have a lot of debt, you want to start to bring that down.

Make payments on time every single month. Know those due dates so you’re not late. It’s best to sign up for automatic payment so the money comes out of your account every single month automatically, and therefore you never miss a payment.

Make sure you have a budget in place that you can live within so you’re not relying on credit to pay for monthly expenses.

In 2019, Experian launched “Experian Boost” which allows consumers to use positive payments to bills that they’re paying every month, such as utility and streaming bills to positively increase their credit scores.

The Experian Smart Money Digital Checking Account and Debit Card which allows consumers to have Experian Boost embedded in it. So, while they’re paying for their utilities or gas, they can boost their credit score, Roman said.

credit report

What if I can only make minimum payments on credit cards?

Even if you can only make a minimum payment on a credit card, it’s good that a payment is still being made, Roman said. However, only paying the minimum, makes it difficult to get ahead and pay cards off.

She suggested cutting areas in your spending to maybe free up money to put more down on cards each month.

There are also two pay-off plans to take advantage of, Roman said.


The Snowball Method: With this, if all someone can make is minimum payments across all credit cards, then focus on one credit card that you can pay a little bit more towards, all while making minimum payments on the other cards. “Start with the smallest balance. Focus on that until you pay that off, while still making those minimum payments on those other cards. You start to build momentum. Then you go to the next smallest balance and you pay that off. You keep going until you eventually pay off all your debt,” Roman said. While this is happening, it’s important to make any charges on the cards that were just paid off. Put them away somewhere so you’re not tempted to use them.


The Avalanche Method: This is where you tackle the highest-interest credit cards which can save you money over time because you’ll save on interest. While tackling the highest-interest credit scores, you continue to make minimum payments on other cards. That way you’re meeting all the requirements to be reported as current to the credit bureaus, and you won’t be negatively impacting your credit score. Once you pay off the highest-interest credit card, then move on to the next highest-interest credit card, and so on. “This will save you money over time and allow you to pay off your debt,” Roman said.

Just making a few smart changes can boost your credit score, and save you money in the process.

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