Aiming for a Better Credit Score
It is easy to promise yourself that you will lose weight, eat better or exercise more in the coming year. Sticking with those resolutions, however, is much harder. Financial resolutions tend to be more realistic, and building a stronger three-digit FICO credit score is one goal that is both manageable and worthwhile.
Improving your credit score does not require complicated strategies or drastic changes. Committing to smarter credit habits in the new year is a resolution you can realistically maintain, and the payoff can be significant.
Why your credit score matters
Your credit score plays a major role in your financial life. The higher your three-digit score, the more likely you are to qualify for mortgage loans and other forms of financing at lower interest rates.
Over time, those lower rates can save you a substantial amount of money. A strong credit score can also help you qualify for credit cards that offer better rewards and lower interest rates.
A smart target is a credit score of at least 740. According to FICO, scores between 740 and 799 are considered “very good,” while scores of 800 and higher are labeled “exceptional.” These are the ranges that typically unlock the most favorable loan terms and credit card offers.
Paying your bills on time
One of the most effective ways to improve your credit score is also one of the simplest. Paying your bills on time every month has a powerful impact on your credit profile.
Lenders report payments on mortgages, auto loans, student loans, personal loans and minimum monthly credit card payments to the three major credit bureaus — Equifax, Experian and TransUnion.
Consistently making these payments by their due dates helps your credit score steadily improve. Late payments, on the other hand, can do serious damage.
If a payment is more than 30 days overdue, it can be reported as late and cause your credit score to drop dramatically. In some cases, a single late payment can lower a score by as much as 100 points.
Reducing your credit card balances
How much of your available credit you use matters just as much as whether you pay on time. This factor is known as your credit utilization ratio, and lower is always better. Making it a priority to pay down credit card balances can significantly improve your credit score.
The healthiest approach is to charge only what you can afford to pay off in full each month. Avoid carrying balances from one billing cycle to the next whenever possible. The less credit you rely on compared to what is available to you, the stronger your credit profile becomes.
Keeping old credit accounts open
It can be tempting to close credit card accounts that you no longer use, especially once they are paid off. While that may seem like a responsible move, it can actually hurt your credit score. Closing accounts reduces your total available credit, which can increase your credit utilization ratio if you carry balances on other cards.
When available credit decreases, the debt you still have represents a larger percentage of your total credit limit. That higher ratio can negatively affect your score. Even if you rarely use an older card, keeping it open can help maintain a healthier credit profile.
The ideal scenario is to avoid carrying balances at all. If you do carry debt from month to month, leaving older credit accounts open can help protect your credit score by keeping your available credit higher and your utilization lower.
©2026