A good credit score is fundamental to your personal financial health. When you approach lenders, they will rely on your credit score to determine what loan programs are accessible to you and on what terms. Having a high credit score means you are a disciplined borrower, thus entitled to low-interest rates, exclusive rewards, and other perks. On the flip side, a low credit score comes with a high cost of loan packages. Even if you already have a good credit score, you should still aim to improve it.


The Benefits of Having a High Credit Score

Most people rely heavily on credit to start a small business, buy a home or car, send children to college, and spend on day-to-day consumer purchases among others. If you are already managing different credit accounts, your credit score would be a direct reflection of how well you manage those accounts.

Having a high credit score gives you the following benefits that mean big savings for you. Think of these as incentives to make you improve your score even more.

Better Chance of Getting Approved

While having a high credit score doesn’t always guarantee approval when you apply for credit or loan, you can still apply with confidence.

Higher Credit Limits 

If your credit score and income capacity are both ideal, you will not have a hard time getting approved for higher limits.

Easier Approval for Rental Homes and Apartments

A high credit score saves you the time and trouble of looking for a place to live because landlords would easily approve you as their tenant.

Better Car Insurance Rates

Insurance companies offset the insurance risk that comes with a bad credit score by using high premiums. But with a high score, you pay significantly less than what others typically would.

Not Having to Pay Security Deposits

Think $100 to $200 savings on security deposits when applying for utility or cell phone plans. You might even get an additional discount on phone purchase prices by signing a contract.


What Factors Affect Credit Score Calculation?

To be successful in your strategies of improving your score, you need to keep in mind the factors that greatly impact how your score is calculated.

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Payment History

About 35% of how your score is calculated is all about your payment history. When managing your credits, make sure timely payments are at the top of your priority.

Used Credit vs. Available Credit 

If you have a habit of maxing out your revolving credit with unnecessary spending, then you need to make some adjustments. All scoring models consider your credit utilization rate as the 2nd most important factor in determining your credit score. As a general rule, a good credit utilization rate is 30% of your total credit limit.

Type of Credit Used

It is quite challenging to handle different types of credit accounts – mortgage loans, auto loans, installment plans, student loans, and credit cards – but having these in your credit mix will demonstrate how well you can keep and manage them at the same time.

Length of Credit History

If as a borrower you have committed faulty credit behaviors that affected your credit score, know that there is also merit in fixing those errors. A good length of credit history can show how well you get back on properly handling your credits after some mistakes in the past.

Hard Inquiries

According to FICO, hard inquiries can cause your credit score to dip temporarily by at least less than 5 points. So for every hard inquiry you make, more points are taken out of your score. This is because hard inquiries are considered by scoring models as application for a new loan. So even if you did try to inquire for a mortgage, for example, but eventually didn’t pursue it, the hard inquiry will still create a dent in your score.


How Long Does it Take to Rebuild a Credit Score?

There is no guarantee or specific time on how long it takes to rebuild your credit score. This is because any negative information submitted to update or evaluate your score stays on your record for quite a while. Depending on the damage you have done on your credit, your recovery time may take longer than expected.

Some factors that determine how long it takes to rebuild your credit score include:

  • The type of negative information on your report: These are the types of negative reports businesses submit as records to update your credit score. Some of these are late payments, charge-offs, bills sent to collection agencies, hard inquiries, closed accounts, foreclosure, and bankruptcy among others. Each of these types has a corresponding number of years that stay on your report that could be as short as 2 years or as long as 10 yrs.
  • Amount of negative marks that are on your credit report: Even small mistakes committed one after the other will also affect your credit report.
  • The age of negative information: Age of past and even recent reports also affect how your score is evaluated.
  • Credit standing before your score dropped: You may be given some scoring consideration when a sudden drop in your credit score doesn’t always reflect a lack of discipline on your part, but just an unforeseen financial event.


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How to Improve Your Credit Score?

While it’s not exactly determined just how long your credit score can recover, studies show that your score can rebound in as short as 2 months when you continue to take positive actions such as:

Paying Your Bills on Time

You can improve your credit by paying on time and keeping a record of these payments.

Paying off Debts

The more you advance your payment, the more revolving credit you will have on your account. This will result in lower credit utilization rate on your record.

Avoid Hard Inquiries

Remember that even if it’s just temporary, hard inquiries drag your credit score almost immediately.


The strategies on how you can improve your credit score are really simple but require a lot of discipline to do. Start by being mindful of the credit mistakes that you might be unaware of, and avoid them at all cost. Raising your credit score takes time, but the sooner you develop a good credit practice, the faster your score will go up.


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