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Credit Score

How To Improve Your Credit Score In 2 Steps

Wondering how to improve your credit score so you can get better mortgage rates? No problem – we’ve got you covered. But before we get into how you can improve your score, let’s talk about what your credit score represents. This will help explain why the two steps work.

What is Your Credit Score?

At a high level, your credit score is a number that helps quantify how well you manage your money. Even though money is a complex topic, the credit score was created to help lenders make better judgements regarding who should get a loan and what kind of loan should be offered.

As you might imagine, this means a lot of things can get factored into your credit score. For example, if you’ve had credit lines open for a decade or two, that can be seen as a good thing. It means you’re used to having credit and have done well enough to not get the account closed or canceled.

Likewise, how many times a potential lender does a credit inquiry is also factored in. If it looks like you’re asking for new credit every month or so, that is seen as a bad sign. That might imply are down on your luck and relying on credit cards for living expenses, even though you can’t pay the full bill.

Now that we’ve summarized what your score represents, let’s discuss how to improve it.

Step #1: Boost Your Credit Score by Paying Bills on Time

The single most important factor on your credit score comes down to this: do you always pay your bills on time?

Keep in mind this doesn’t mean you need to pay the full balance on time – just the minimum payment required. This is liberating because it means you don’t need to pay everything down at once. You just need to prove that you’re able to pay the minimum regularly.

The minimum payment will vary by account and loan. For example, right now a lot of student loans don’t require payment until after September 30 due to everything happening with COVID. Likewise some credit cards require zero payments for a certain period of time, such as a year.

But generally your loans will have a minimum payment required each month. Make sure you do everything you can to pay all of these bills. That’s the single best thing you can do to increase your credit score.

Step #2 to Increase Credit Score: Lower Debt Balances

The second most important thing to do is lower your overall debt. This will improve your credit utilization ratio, which is basically your current debt divided by your credit limits.

For example, if your credit limit is $10,000 and your card has a rotating balance of $5,000, your ratio is $5,000/$10,000 = 50%.

Creditors like to see low numbers here, since it means you have access to credit but don’t need it right now. Try to lower your credit utilization ratio to be under 30% for the best increase to your score. The best way to do that is pay off your current debts.

Do whatever it takes – get a side hustle or sell some extra stuff you don’t need. It will be worth it when it helps you get into the home of your dreams.


Do you have any other questions about how to boost your credit score, or the home mortgage process in general? Give us a call at 844-6-VA-LOAN and we’ll help any way we can.

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