So, you’ve toiled and toiled to improve your credit score and it doesn’t seem to be helping. You’ve made more money. Made bigger payments. Still the score just crawls up. Wanna know the thing that will improve your credit score the most? Of course you do. I did.
30-40% of your FICO Credit Score is comprised of your payment history. The longer you make your payments on time, the better you do. 30-40%! All you need to do is make your payments on time.
I guess I was a little surprised by that. I had always assumed that having no debt would help, and I still assume that it does help immensly, but having debt and paying it on time is better. Of course, if you have no debt, you may not need to have credit either. But who are we trying to kid? Nearly everyone has some debt and so we also need credit. And the better it is, the better the rate on the credit. And that saves us money.
Bonus: The #2 way to improve your credit is “Capacity is King”. Having a low ratio of debt to credit available makes up nearly 20% of the FICO score. So having a $15,000 credit card with $1500 used is much better than only having a $3000 card with $1500 used. Having that unused “Capacity” is a sign to creditors that you aren’t a wild spender and can be trusted to not take advantage of your credit and become a bankruptcy risk.