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How to Build a Good Credit Score

A bad credit score can cost you thousands of dollars in extra expenses, from higher insurance premi-ums to increased utility and rental deposits, so it’s definitely beneficial to build a good credit score. It’s not difficult to do especially if you are just beginning your career and foray into the credit market.

Good Credit Score

Credit scores rate your potential risk for repaying a debt. They are derived from 6 categories, each of which is weighted differently. These categories are explained in the next section. Here is a breakdown of each score and its accompanying letter grade:

  • 901 to 990 points = A
  • 801 to 900 points = B
  • 701 to 800 points = C
  • 601 to 700 points = D
  • 501 to 600 points = F

Credit Score Components

Pay careful attention to improving each of these credit score components and you can significantly in-crease your credit score. While you cannot remove bad credit information until it legally expires, you can minimize its damage to your credit score with good financial habits.

  • Payment history = 32 percent
  • Utilization of available credit = 23 percent
  • Amount of debt = 15 percent
  • Types of credit = 13 percent
  • New credit = 10 percent
  • Available credit = 7 percent

Timely Payments

Timely payments on all of your bills are essential since they represent 32 percent of your credit score. Many types of businesses can report late payments or delinquencies with the credit bureaus, not just credit card companies. These include medical and dental offices, hospitals, landlords, utility companies, loan companies, schools, and anyone else who extends credit to you. They stay on your credit report for 7 years from the date of last payment.


These tips are time-honored ways to live a financially responsible life rather than paycheck-to-paycheck.

  • A budget helps you to spend less than you earn so you can build financial security and earn a good credit score.
  • Pay more than the minimum amount due on your credit cards. If possible, pay the balance in full each month.
  • Limit credit card purchases to what you can actually afford.
  • Pull your free credit reports every year to check for errors.