The way a credit score is calculated may seem to be a mystery. In reality, it’s pretty straightforward. However, the burden of a low credit score can be complex, and it can significantly lower your standard of living and ability to confidently work and thrive. 

What Elements Make Up Your Credit Score?

The general breakdown of a FICO credit score places the most weight on your payment history (35%), which calculates how consistent you are with payments, including any missed payments. Amounts owed (30%) is the second-highest factor in your credit score, followed by how long your credit history goes back (15%). New credit (10%) looks at any new lines of credit you’ve opened as well as any hard inquiries lenders make when you apply for credit, and mixed credit (10%) takes into account the different types of loans and credit you have—the more diverse your portfolio is, the better. Knowing all the elements that make up your credit score can help you tackle your financial health. So, how can you improve your credit score?

Raising Your Credit Score

The first step to improve your credit is to make payments on time. Your credit score can take a hit from just one missed payment. It’s important to note that lenders cannot mark you in default unless you are at least 30 days late—but that can drop you 100 points. While easier said than done sometimes, pay as soon as you can. Once your account is up to date, you can talk to your lenders and ask them to remove the late mark as an act of goodwill.

You should also access your free credit report from the three credit reporting agencies: Experian, Equifax, and TransUnion. If you find any errors, you can dispute them with your lenders and, if found to be legitimate, have them removed, which may bring up your credit score.

Your mix of credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans are also all considered. While you don’t have to have one of each, diversity can help your credit score by as much as 10%.

With 65% of your score dependent on paying back your debt in full and on time, getting into a debt management plan can help get you on the right path. With a debt management plan, credit counselors can work with lenders to lower your interest rates and consolidate your loans into one affordable monthly payment. Over time as you pay back your debt consistently, your credit score will increase, putting you back in the green—financially and in life.