How can a consumer improve their credit score over time?

Making timely payments and reducing outstanding debt are crucial actions a consumer can take to improve their credit score over time. Credit scores are significantly influenced by payment history, which accounts for a substantial portion of the overall score. When a consumer consistently pays their bills on time, it demonstrates responsible credit behavior and can enhance their score.

Additionally, reducing outstanding debt, particularly credit card balances, contributes to a lower credit utilization ratio. This ratio measures how much of the available credit is being used, and a lower ratio is generally viewed favorably by credit reporting agencies. By keeping this ratio beneath 30% of available credit, or even lower if possible, consumers can positively impact their scores.

In contrast, applying for multiple credit cards can lead to hard inquiries on the consumer's credit report, which may temporarily lower their score. Taking out personal loans without a solid plan for repayment can also increase debt levels, potentially harming the credit score. Lastly, frequently closing old accounts can shorten the credit history length, which is another factor that affects credit scores negatively. Retaining older accounts can help maintain a longer credit history, which is beneficial for a credit score.