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How to Improve Your Credit Score

We know a simple way to improve your credit score that might surprise you: Pay off your debt, don’t add any new debt, and let your credit score go extinct. It’s time to improve your credit score by getting rid of it.

But don’t worry—having absolutely no credit score is a good thing!

Intrigued? We’ll break it down . . .

What Is a Credit Score?

A credit score is a three-digit number that tells banks and lenders how likely someone is to repay debt. A high score, usually 800 or above, is considered “exceptional” by most credit monitoring agencies. And a much lower score, typically 579 or below, is considered “poor” and will sometimes prevent someone from being able to borrow money.1

What you need to know is that this number is really just a measure of how comfortable someone is with taking on mountains (and mountains) of debt.

We like to call it the “I love debt score.” And for good reason. Just take a look at how this score is calculated and you’ll understand why.

How Is a Credit Score Calculated?

It might not be as complicated as doing long division—the old-fashioned way with pen and scratch paper—but calculating your credit score does involve a couple of important factors worth noting. According to FICO, there are five things that can impact your score:

  • Payment history (35%)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • New credit (10%)
  • Credit mix (10%)2

There’s absolutely nothing about a credit score that indicates you are good at handling your finances (like balancing a checkbook or investing in mutual funds). What it really does is monitor how comfortable you are with taking on debt to pay for things over the course of your life.

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If you happen to have a credit score north of 800, creditors may treat you like royalty and roll out the red carpet at the drop of a hat. But here’s the catch: Your “superior” score in no way, shape or form indicates you are good at handling money. It just means that you are good at borrowing lots of money!

How Do I Improve My Credit Score?

Here are a few things that can improve a credit score:

  • Paying your bills on time
  • Paying off debt
  • Carrying a balance that is less than the credit limit
  • Disputing inaccuracies

But we’ve said it before, and we’ll say it again: The best way to “improve your score” is by ditching your credit altogether. Peace out, credit score—you’ve been dumped! Your financial success depends on the numbers in your bank account, not the numbers on your credit report.

The only way to truly improve your credit score is by paying off debt and committing to a debt-free lifestyle today. As you build up your own financial security, you might see that “all-important” number start to dwindle. But don’t freak out . . . that’s actually when you know you can celebrate. And once those numbers vanish completely, that means you’ve made it. Welcome to your new life of debt freedom and financial security.

But listen closely: While the numbers on your report will lose all meaning, you’ll still want to keep an eye on your credit. Unless you’ve got all your cash buried in the backyard, identity theft and debit card fraud can still catch you off guard. Grab a free copy of your report every year from one of the three major credit reporting agencies—Equifax, Experian and TransUnion—to check for any suspicious activity.3  

So instead of wondering how you might be able to increase your score by a few points or worrying about identity theft, start focusing on building wealth and securing your financial stability for the future of your dreams.

How Do I Build Wealth Without a Credit Score?

Rather than fixating on the things you can’t do without a credit score, think about the things that you can do when you’re free of monthly payments and carry zero debt. Have you always wanted to take a backpacking trip in the south of France? Have you ever wanted to invest in the stock market so you can retire the way you want? Or have you given a thought to saving for your kid’s college education?

Well, when you’re not sending a third (or more) of your paycheck to creditors for all the loans you took out, you’re free to do whatever you please with your income—and that includes investing for the future and giving generously.

Ready to Live Without a Credit Score?

Alright, so by now you know our advice on how to improve your credit score. Spoiler: It doesn’t involve opening up another credit card account or taking out a risky loan on a brand-spanking-new automobile. If you’re looking to improve your credit score, the best thing you can do is pay down all your debts and say goodbye to it altogether.

Ditching your credit score is just one step on the journey toward financial peace. Unsure of how or where to begin? Check out our Getting Started Assessment. We’ll help you figure out where you are with money now so you can get to where you want to be: managing your money like a pro!  

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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Answer a few questions, and we'll create a plan tailored just for you. It only takes three minutes!
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