Home > Credit Score > How to Improve Your Credit Score By Labor Day

Comments 5 Comments

It’s summer, and now hardly feels like the time to “work” on anything. But some things — like boosting your credit score — can be worth some extra motivation. And if you’re looking to finance a large purchase after Labor Day, now’s the time to work on your score.

1. Know Your Weaknesses

First step: If your score is not where you want it to be, make sure you understand why. The biggest factor in scoring is on-time payments, which accounts for about 35% of your score. So if late payments have been a problem, your first move should be to make sure you pay on time going forward. Automated payments are one way to do this. If the idea scares you because you are afraid that an unusually expensive purchase could leave you without enough funds in your bank account, consider automating what is normally your minimum payment (or slightly higher, to accommodate an occasionally large purchase). That way, you avoid paying late and safeguard your score. A single late payment can cause your scores to drop significantly, so paying on time should be a priority.

2. Pay Down Debt

Second priority should be whittling away at those high credit card balances. Ideally, you want to avoid having a balance that is more than 20%-25% or so of your credit limit, and those with the best credit scores use less then 10% of their limits. If you are using 50% of the limit of one card, and 5% of two others, consider trying to reduce the balance with the high “debt usage” ratio (the one at 50% of the limit) first. (Other ways to get lower credit utilization is to ask your card issuer for a higher credit limit or to apply for an additional card. But you should be aware that applying for new credit can cause a small, temporary dip in your score.)

The good news about reducing balances is that you won’t have to wait long to see improvement in your scores. While the effect of late payments can linger for years, once you’ve gotten rid of a high balance, the fact that it was up there in the past shouldn’t hurt you since credit scores are calculated based on the information in your credit reports at the time the score is requested. You have two or perhaps three billing cycles before Labor Day. If your balances are typically higher than 30% of your credit limit, focus on moving the needle to below 30%. If you’re already there, shoot for less than 10%.

3. Don’t Rush to Apply for New Credit

Your credit age also figures into your score, so be cautious about opening new credit, which can reduce the average age of all your accounts. Account mix (whether you have more than one kind of credit — i.e. credit cards and a car loan) and account inquiries (as when you apply for credit) also count, but each factor affects only about 10% of your score, so your efforts are best focused on making sure you’re paying on time and that you are keeping your balances low.

Monitor your progress carefully. There are thousands of scores, and monitoring the same score month to month is the way to see how you’re doing. You can check two of your credit scores for free every month on Credit.com to track your progress.

More on Credit Reports & Credit Scores:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Harry Black

    Does the high balance apply to credit cards only or does it also apply to an account such has a car loan which my balance is $20,000?. I have a $500 credit card but I only spend $50 every month. Thanks Gerri

    • http://www.credit.com/ Credit.com Credit Experts

      The high balance applies only to a revolving balance (one that you can re-use once it has been paid). It does not apply to installment loans, such as a car loan or mortgage.

  • Glenn

    My monthly payments are always on time and have been consistantly for more than 24 months. My debt is low….no more than 7-9 % utilization of 110k credit available. I can’t get my score out of the high 600’s. What am I doing wrong?

    • http://www.credit.com/ Credit.com Credit Experts

      It is hard to say. Aside from those two things, credit age, credit mix and credit inquiries all affect your score. You can check Credit.com’s free credit report card with “grades” on the factors affecting your credit and a personalized action plan for improvement to see what you might do and where your perceived weaknesses are. It’s also smart to check your free annual credit reportsat AnnualCreditReport.com. Mistakes in your credit reports can lower your score. So, if you see errors there, dispute them.

  • heavyw8t

    Point 3 hit on something a lot of people (including me) don’t or didn’t understand. I was under the incorrect impression that age of credit meant “When did yo first start getting credit” and did not understand until it was too late that it is the average age, so that 15 year oldest account is cut to 7 1/2 when a new account is added today. As I applied for more credit cards to have a higher amount of available credit (thus showing a lower percentage of utilization) it dropped my average age. I found out soon enough to stop applying. Great column.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team