With a new year upon us, the idea of improving your financial life is probably top of mind. There are several areas of your financial situation that you can focus on and make better—your credit score is a big one!

Before we get into how to increase your credit score, let’s start by defining what your credit score is. Your credit score, also known as your FICO score, is a numerical value ranging from 300-850. It helps money lenders determine how “risky” of a borrower you are—essentially, how likely or unlikely you are to pay loaned money back on time. The higher your score (700-720 is considered good, 720-850 is considered great), the more likely you will qualify for substantial loans, lower interest rates, higher credit limits, etc. This is a big deal when you’re applying for a loan or preparing for a major expense like a home!

Five major factors contribute to credit scores:

  • 35% payment history (paying on time)
  • 30% credit utilization (how much you owe against the credit line available)
  • 15% length of credit history (how long you have had the credit line open)
  • 10% types of credit (how many different types of credit lines you have—e.g. mortgage, car, student loan, credit cards, etc.)
  • 10% new credit (whether you’ve applied for a new loan or other credit recently)

Knowing these factors and how they impact your score will help on your journey to improving your credit.

Here are five small ways to increase your credit score:

1. Pay your credit cards on time and in full each month.

There are many ways to build credit, and credit cards are one avenue—however, if improperly utilized, they can be a pitfall on your credit score. A common misperception with credit cards is that they’re ‘free money;’ however, that isn’t the case, and taking that mindset may lead to racking up a significant credit card bill that you can’t afford to pay back.

To avoid this, credit card users should only charge what they can afford, and commit to making payments on time, and in full, each month.

2. Set up auto-pay on all your recurring debts.

Paying debts on time accounts for 35% of your credit score, so to ensure you never miss a payment, set up autopay for credit cards, student loan debt, etc.

While missing one debt payment or paying late may not seem like a big deal, it can hurt credit score, so it’s important to keep a close eye on bill due dates, simplifying the process with automation where you can.

3. Reduce the outstanding balance on your debts.

Since credit utilization is the second largest factor in your credit score calculation, it’s best to strive to pay your balances in full each month.

If you’re struggling to make ends meet or cannot pay in full every month, the next best option is to pay the minimum monthly amount—in this case, you will accrue interest on the remaining balance. However, at least you will still be making contributions towards debt repayment, as those add up in the long run!

A good rule of thumb in debt repayment is to start with debts that have the highest interest rate while paying minimums on the rest. To help, apps like Mint (and its personalized feature Mintsights) provides users with suggestions based on their financial history to help save money and pay down debt faster.

4. Keep your credit lines open for the length of history.

Credit history accounts for 15% of your credit score calculation so a general reminder is to not close lines of credit.

For example, even if you have a credit card kicking around for, let’s say 10 years, that you aren’t actively using, it’s wise to keep that line of credit open as it will lengthen your credit history. You can simply keep the credit card in your safe, but I’d recommend using it at least once a year to make sure the credit card company doesn’t cancel the card due to inactivity.

5. Stay motivated and celebrate the small wins regularly.

Following a year where financial circumstances were more uncertain than ever, any small step in bettering our financial situation is worth celebrating. Whether it’s a commitment to break down credit card debts each month, or an effort to automate your payments to ensure timely debt repayment, celebrating those everyday financial goals helps you stay motivated and work towards a better financial future.

Apps like Mint can help you to see your full financial profile while empowering you to make progress on your financial goals, such as giving you insight on key trends in your spending and saving to help you assess and adjust against your progress.

Remember every day you can decide how you show up in your financial life. If improving your credit score is top of mind this year, take the small steps needed to make it happen for yourself.

You can do it, and I believe in you!