Improving your credit score: Truth and myths revealed

March 15, 2023

Good credit is critical to your overall financial health. Without a good credit score, you can face challenges when trying to obtain loans, especially when you’re applying for a mortgage. Here are some truths and myths about improving your credit score along with tips on how to improve it.

Your credit score is a way to assess how responsible you are financially. It may help lenders determine whether to give you a credit card, it can impact the rate you get on a mortgage, and it can even be a consideration when establishing cable, telephone or water service in a new home.

So, how can you improve your credit score, or maintain your good credit score? We’ve gathered a few truths and myths, with insights from U.S. Bank Client Relationship Specialist Holly Rae Kevelin (NMLS# 520557) and Branch Manager Jason Dean Namyst (NMLS# 1530787) around simple ways to build and maintain good credit:


1. Truth: Late payments can hurt your credit score

Your payment history makes up about 35-40 percent of your credit score, and paying credit card bills late can impair your ability to get more credit or a lower interest rate down the road. If you are accustomed to paying the entire balance of your credit cards monthly, that’s great, but add a layer of security by setting an account alert on your phone and marking your calendar to send your payments in on time. Or, take advantage of automated bill-payment options so you can set the payment up in your account and enable auto-pay when it’s due.


2. Truth: You should always use credit cards responsibly

When calculating your credit score, there’s a heavy focus on your credit behavior. Responsible use of credit cards can improve your credit history. Stay within your means and pay the balances in full monthly whenever possible.


3. Truth: It’s important to stay below your credit card limits

Maxing out your credit cards can raise red flags about your ability to handle debt. Many experts recommend that you avoid using more than 30 percent of your available credit at any given time. For example: If your credit card limit is $1,000, try to avoid carrying a balance of more than $300 from month to month.


4. Myth: You shouldn’t review your credit report

It’s recommended that you review your credit report yearly, at a minimum. Keep in mind: by federal law, you are entitled to one free credit report per year from each of the three credit reporting bureaus.

When thinking about your credit report, it’s important to understand the difference between a hard credit pull and a soft credit pull. “Soft” credit pulls are when you check your own credit, or when creditor checks your credit to confirm you are still creditworthy or to preapprove you for an offer. A “hard” pull is what happens when you apply for a new line of credit. There is no harm in a “soft” credit pull if you’re curious about what information is showing up on your credit history.

Understanding why your credit score is at its current standing is crucial when attempting to improve it. There may be an outstanding loan or debt that is affecting your score and thus, your ability to qualify for a loan. If you find a mistake, contact the credit-reporting agency and discuss it with them. You can check your credit score through a variety of services, or we can help.


5. Truth: Having no credit is worse than having bad credit

Creditors and lenders want to see that you can handle debt. Having multiple open credit lines that are in good shape is key when it comes to your credit score. If you don’t have a credit card, consider opening one with a small limit that you’re sure you can pay off to begin building your credit score. That being said, be careful about opening—or trying to open—multiple accounts in rapid succession, which can actually lower your credit score. If you open a credit card at your new favorite department store, wait a few months (or longer) before applying for additional credit.


6. Myth: I should close credit lines I’m not using

Your credit score is partly based on the age of your credit. Closing your oldest line of credit may actually affect your credit score negatively. If you have a few cards open, be wary about closing an old account that you don’t use. There’s no need to keep a minimum balance on it, but once it’s paid off in full, put it in a drawer and keep the line open. If you’re concerned about paying a yearly fee on a card you’re not using, get in touch with your creditor or bank, they may be able to help you find a way to avoid that fee.


7. Truth: A high credit score can help qualify you for a lower monthly mortgage payment

It’s important to note when you’re applying for any loan, including a mortgage, that the bank will take your credit score into consideration. If you have a high credit score, the bank will be more likely to offer you a better interest rate. A better interest rate can result in a smaller monthly payment.


As you’re working to improve your credit score, be on the lookout for scams. Learn more about how to spot a credit repair scam.

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Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.