How can I improve my credit health?

Credit Karma has plenty of tools to help you learn more about the factors that can influence your credit scores. Here are five tips to improve your credit health.

If you’re looking to build your credit, check out our guide to building credit.

Pay your bills on time

This can be one of the most important factors in your credit history. The likelihood that you’ll pay back your debts is generally a high-impact factor. Doing so on time, every time, helps prove that you’re reliable and can boost your overall credit health.

Late or missed payments can significantly harm your credit scores. If you have trouble keeping track of your bills, consider setting up automatic payments or payment reminders.

Pay down your credit card debt

Your credit utilization ratio compares the amount of debt you owe to the amount of credit you have at your disposal. Lenders want to make sure you’re not borrowing more than you can afford to pay back, so keeping your credit utilization low (typically below 30%) on each credit line can help your scores.

Diversify your credit mix

Your credit mix refers to the different kinds of accounts included in your credit reports. While it probably won’t make or break your credit scores, lenders typically like to see a mix of revolving credit accounts (i.e. credit cards) and installment loans, such as mortgages, auto loans and student loans.

Try not to apply for too many new credit cards at the same time

Every time you apply for a credit card or loan it generates what’s known as a hard inquiry, which may have a negative effect on your credit scores.

Multiple hard inquiries in a short period of time may set off a red flag for lenders, as it suggests you may be scrambling for cash or getting ready to add on a significant amount of debt. This doesn’t mean you should never apply for new credit, just consider spreading out your applications.

However, if you’re shopping for an auto loan or mortgage, some credit scoring models may allow for some level of shopping around by treating multiple inquiries within a short time period as a single inquiry. Learn more about rate shopping here.

Think carefully before closing old credit cards

The length of your credit history can be a significant factor impacting credit scores. Some credit scoring models may consider only the average age of all your accounts, while others may also factor in the age of your oldest open account.

You risk shortening the length of your credit history by opening too many new credit cards at the same time or by closing your oldest credit cards. Paying off a loan is something to celebrate, but keep in mind that your length of credit history can also be affected when a loan is fully paid off and closed.