Taking Control of Your Credit Score

We’ve all been there—checking our credit score and feeling a little nervous about what it says. Whether you’re trying to buy a house, take out a loan, or even apply for a new credit card, your credit score can feel like it’s holding you back. But here’s the truth: it’s never too late to take control of your credit score, and the sooner you start, the more empowered you’ll feel. So if you’re concerned your credit needs a little TLC, now is a fantastic time to take charge of your credit history and ensure everything is in top shape.

Many people might not realize that credit scores don’t just come from credit cards and loans—there’s also the impact of things like tax debt. If you’re dealing with something like Indiana tax debt relief or other tax-related issues, it’s even more crucial to monitor your credit closely. Tax debt, when not handled properly, can show up on your credit report and impact your score. But don’t worry—whether you’re handling tax debts or simply aiming to improve your overall credit standing, taking control is entirely possible. Let’s walk through some practical steps you can take to reclaim your credit.

1. Understand Your Credit Score

The first step in taking control of your credit score is understanding how it works. Your credit score is a three-digit number that reflects your financial behavior. It’s based on information from your credit report, which includes details like your payment history, the amount of debt you owe, the length of your credit history, the types of credit you use, and any recent credit inquiries.

Credit scores typically range from 300 to 850, and the higher your score, the better your financial standing is in the eyes of lenders. Generally, a score over 700 is considered good, while a score below 600 can be seen as a red flag for lenders. If you’re unsure about your score, you can check it for free once a year at AnnualCreditReport.com or through other services offered by your bank or credit card provider.

2. Get Your Credit Report and Check for Errors

One of the most important things you can do to take control of your credit is to check your credit report for errors. Mistakes on your report—like a late payment that wasn’t your fault, incorrect balances, or accounts that don’t belong to you—can hurt your score. In fact, many people don’t realize that inaccuracies on their credit reports are more common than you might think. By reviewing your report, you can spot these errors and take steps to get them corrected.

To get a copy of your credit report, visit AnnualCreditReport.com, which allows you to request a free report from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Once you have your report, review it carefully. Look for any unfamiliar accounts, payments that have been reported incorrectly, or other discrepancies. If you spot something wrong, file a dispute with the credit bureau that issued the report. Correcting these errors could give your credit score a nice boost.

3. Pay Your Bills on Time

The number one factor that impacts your credit score is your payment history. If you have a history of late payments, especially on credit cards, loans, or bills, it can drag your score down. The good news is that this is one of the easiest things to fix—simply pay your bills on time.

Start by organizing your bills and setting up a payment schedule. If you tend to forget due dates, consider using automatic payments for things like utilities, credit cards, and loans. This way, you ensure that payments are made on time, every time. If automatic payments aren’t an option, set reminders for yourself a few days before each bill is due. Even one missed payment can hurt your score, so consistency is key.

4. Reduce Your Credit Card Debt

Another key factor in your credit score is how much of your available credit you’re using, also known as your credit utilization ratio. This is the ratio between the total amount of credit you have available and the amount you’re using. A good rule of thumb is to keep your utilization under 30%. For example, if you have a credit limit of $10,000, try not to carry a balance of more than $3,000.

If you’re carrying high balances, it can drag your credit score down, even if you’re making on-time payments. Consider paying down your credit card debt by tackling the cards with the highest interest rates first. You could also transfer balances to a card with a lower interest rate or look into consolidating your credit card debt. Reducing your debt not only helps improve your credit score but also reduces the amount of interest you’ll pay in the long run.

5. Don’t Close Old Accounts

While it might seem like a good idea to close old, unused credit accounts to prevent temptation, it can actually hurt your credit score. Older accounts help lengthen your credit history, which is an important factor in your credit score calculation. The longer your credit history, the better it looks to lenders.

Instead of closing old accounts, try to use them sparingly to keep them active. Even if you don’t need the credit, you can make small purchases and pay them off immediately. This shows that you can responsibly manage credit and helps keep your credit history intact. If you’re concerned about potential annual fees, look for credit cards with no annual fees or see if your issuer will waive them.

6. Diversify Your Credit Mix

Your credit score can also benefit from having a diverse mix of credit types, such as credit cards, auto loans, mortgages, and installment loans. A healthy mix of different credit types shows lenders that you can manage various kinds of debt responsibly.

If you’re only using one type of credit, consider expanding your credit mix carefully. For example, if you only have credit cards, you might want to look into a small installment loan to help build your credit profile. But be cautious—only open new credit accounts when you really need them, and always make sure you can handle the payments.

7. Avoid Opening Too Many New Accounts

Every time you apply for new credit, a hard inquiry is made on your credit report. Too many hard inquiries in a short period can hurt your credit score, as it suggests you may be taking on too much new debt. Be mindful of how often you apply for new credit cards, loans, or lines of credit.

Instead of applying for multiple credit accounts, focus on managing the credit you already have. If you need a new credit card, consider one that offers benefits like cashback or rewards, but avoid signing up for too many cards at once. Also, remember that opening a new account lowers your average account age, which can hurt your score in the short term.

8. Be Patient

Improving your credit score won’t happen overnight, but with time and consistent effort, you’ll start to see positive changes. It’s important to remember that credit scores fluctuate, so if you don’t see immediate results, don’t get discouraged. Keep working on the habits that improve your credit—like paying bills on time, reducing debt, and checking your credit report—and your score will reflect those efforts in time.