Credit Score Savvy: Improving Your Payment History

Do one thing: Do you have automatic payments set up to pay your monthly bills? If not, pencil in some time, log onto your online financial accounts, and make this happen. Need help? Call your credit union or bank – or visit a local branch – and ask for help setting up these transactions. 

While building and maintaining the three-digit number we call our credit score can seem complicated, there are a few simple steps to take each month to ensure you stay on a path to a solid score and improved financial health. 

With a range of 300 to 850, credit scores for U.S. adults have risen in recent years with the average FICO score at 715 in 2023, according to Experian data. Another popular scoring measurement, VantageScore, which is used by SavvyMoney, reported an average credit score of 701 for adults with credit files in December 2023. (Because those are averages, that means some people will have higher scores, of course, while others will have lower ones.)

The Higher The Better

Keeping track of your score is important because – as the old business adage goes – what gets measured gets improved. Higher scores bring lots of perks to our financial lives, including lower rates on home loans and other big-ticket items. Lower rates can translate into thousands of dollars in savings over the life of a mortgage or car loan.

How Scores are Used

While not everyone may realize it, credit scores are now used to help determine everything from whether you’ll qualify for a new job to the size of your deposit on an apartment lease to the rate you’ll pay for car insurance in many states. Because consumers with lower credit scores have been shown to represent more of a financial risk — not just to lenders but to landlords and insurers — they often end up paying more for their policies and not qualifying as renters.  

That’s why it’s so important to make sure you are building or maintaining a solid score every single month. Even one late payment can lower your score by dozens of points.

Strategies for Strong Scores 

Margaret Poe, head of consumer credit education at TransUnion, offers these strategies for best managing the important pieces of your credit score. 

1. Review Your Credit Reports

Regularly check your credit reports and take notice of the dates. For your credit cards, the account information provided in a TransUnion credit report, Poe says, will list when the account was last updated. 

2. Phone Your Account Holders

Lenders tend to report your account information at least once a month, Poe says. If you want to know specifically when they do that, you can call your credit card issuer and ask when they report your balances. 

3. Concentrate on Credit Utilization

Your credit utilization, a highly important credit score factor, is partially based on the reported balances of your credit card accounts, Poe says. Paying your credit card balances down before being reported can result in a lower credit utilization ratio, which, in turn, can help your credit score. 

4. Pay On Time (or early) Every Time 

Because your payment history is one of the other most important factors in your credit score, making payments on time is non-negotiable.  Setting up automatic payments for monthly bills can help you stay on top of important due dates.  Email alerts can also help. 

5. Make Micropayments

You don’t need to wait until your payment due date or when the balance is reported to credit reporting agencies to send money. Most credit card issuers allow payments at any time – or even multiple times a month. If you know that you’re getting close to using more of your credit than is advised at any one time, making an additional payment is recommended.

6. Keep it Close to 10%

You may have heard the popular advice to keep your credit utilization at  30% or less. Poe notes that even lower is better. That means using the smallest amount of credit possible, typically just 10% of your total available credit or less at any time. 

7. Practice Healthy Habits

Understanding the factors that go into your credit score can help you achieve your credit goals, Poe says. “Building healthy credit is a marathon, not a sprint,’ Poe says. “Having patience with the process and with yourself, knowing that it’s normal to make mistakes, can help you establish healthy expectations as you monitor your credit reports.”

With reporting by Casandra Andrews