Maintaining a good credit score is beneficial for many reasons. While some may want to apply for a new loan or secure a rewards credit card, having a good credit score is also essential for maintaining financial wellbeing. It saves borrowers money. It provides more opportunities. Yet, it can be hard to know what to do to raise a credit score.

The first step is to be aggressive. While it is important to use credit to build a credit score, it is also important to make wise decisions to keep the amount owed low. There are three big components to achieving this.

Step 1:  Become a Good Credit Risk

The most important step for any borrower is to maintain a reputation for being a good risk. That means the borrower is viewed, in the eyes of the lender, as a low risk for defaulting on the loan or failing to make on-time payments. When viewed as a low risk, lenders are more willing to extend new lines of credit to borrowers. That is what helps to open doors and opportunities for borrowers.

How is it possible to be a good credit risk, though? Here are some steps to consider.

#1: Always Make Payments on Time

There is no bigger problem for lenders than late payments. These are recorded by the credit bureaus every month. One late payment can make it very hard for a borrower to prove they are a reliable borrower. One of the easiest ways to ensure every payment is made on time is to set up auto payments. Nearly all lenders allow this. It takes only a few minutes to do and payment is made every month on time.

#2: Limit the Number of Accounts Opened at One Time

Lenders want to know that borrowers are using credit wisely. They look for signs and indications that a person may be in desperate need of credit. For example, if a borrower applies for several credit cards within a few short weeks or months, that can indicate the person is desperate for credit, making them a higher risk to the lender. It may be best, then, to open or apply for no more than one credit card or another credit account every few months or just a couple per year.

#3: Use Various Types of Credit

Credit reporting agencies and FICO like to see borrowers use numerous types of credit. There are many types of credit available to use. Secured credit, which includes options such as mortgages and car loans, are some of the best options for borrowers who have established credit scores.

For those that do not, it may be possible to begin creating credit with a secured credit card. These require borrowers to first make a deposit to the lender. They can then use up to the value of the deposit continuously. Some of these lenders will then report payments and balances to credit reporting agencies. This can help a new borrower get established.

In addition to this, other forms of credit are helpful as well. This may include utilities and cell phone bills. While not true forms of credit, they do allow borrowers to demonstrate their ability to make payments on time each month. In addition to this, store credit cards can create more of a variety of loans for borrowers as well.

Step 2: Keep Existing Debt Low

One of the keys to increasing a credit score is to keep the amount of debt owed as low as possible. Lower debt means there is less risk to lenders. It also makes it more manageable for a person who is applying for new credit.

The more debt a person has, the harder it can be to manage financial health. The lower the credit use, the more responsible a borrower looks to lenders. It is not always easy to reduce debt owed especially when a person has a lot of it. Yet, several strategies may help borrowers to do just that.

#1: Pay Off Balance in Full Each Month

Whenever possible, use credit, but pay down the amount of credit used each month. For example, if a consumer has a credit card that he or she uses each month to pay for gas, they should pay off the entire balance at the end of the month. This shows lenders the borrower is responsible.

One key opportunity is to make this payment in full within the grace period. This is the first few days of the month following the end of the month. For example, there may be a 15 day grace period on a loan. If payment is made within that 15 days after the end of the month, there is no interest applied to the balance. That means a consumer is not paying anything extra to borrow money. It is important to know the grace period of all accounts.

#2: Pay Down Credit Cards with a Balance

For consumers who have credit cards that carry debt, there are solutions available to help them, too. The worst step to take is to make the minimum payment only. This will extend the length of the debt owed, adding up the number of finance charges and interest a person will need to pay on the borrowed amount.

Paying as much as possible each month towards the debt will help to drop the balance as low as possible. It is ideal to pay off the balance to get it below 30 percent of the available credit limit. For example, on a credit card with a $1,000 credit limit, that means keeping the balance below $300 can help to maintain an acceptable rate.

#3: Increase Available Credit Without Driving Up Balances

Another way to increase this debt to credit limit ratio is to increase the credit limit available. By boosting the amount of available credit, that can add more space to this ratio. In the above example, by increasing that available credit limit to $1,500, that means borrowers now have more available credit to spend.

The key here is not to drive up those balances. By increasing the credit limit, it is possible to create a higher level of credit availability and extend that range. However, using up that amount of money will only worsen the financial health of the borrower.

To request a credit line increase, check the online access portal for the account. It is also possible to call the lender to make a formal request. Do this only once a year, at most, to minimize the risk of lenders viewing it as applying for too much credit.

#4: Create a Budget to Manage

Another key aspect of improving credit scores is to use credit wisely consistently. To do that, and to avoid overspending using credit, work on a budget. By having a budget, consumers know how much money they need to make each month and put aside to cover all of their bills. Do this based on just the income that is coming in.

A cash-based budget should cover all of the expenses the borrower has including his or her rent or mortgage payment, insurance, and spending money. If a person does not bring in enough to cover these aspects, they may be tempted to use credit. Instead, work to reduce expenses or increase income. That helps to make credit cards less necessary to use each month.

Step 3: Stay Up to Date on Your Score

Knowledge is very important when it comes to building a credit score. What is helpful here is to always have a good idea of what is happening with a credit score consistently. Knowing what it is and where it is headed is important for every borrower. If a borrower does not have that insight, they cannot make wise decisions for themselves. Here is how to do that.

#1: Check Credit Report Often

Consumers can check their credit report one time a year for free from each of the three credit bureaus. Many lenders provide access to credit reports, too. Throughout the year, visit the approved site for accessing these credit reports; AnnualCreditReport.com. There, provide information and gain access to the credit file from one of the three credit reporting agencies: TransUnion, Equifax, and Experian.

This report will not contain a score. It will breakdown key information from lenders and all other reporting organizations. Look it over. Notice if everything is accurate. Ensure all personal data is accurate as well. This data is very important. If there are missing or fraudulent accounts listed, it is critical to remove them. It is possible to dispute this information following the instructions provided on the site.

#2: Use a Credit Monitoring Service

To get free access to a credit score, individuals should use a credit monitoring service. There are many options available, but there should never be a reason to pay for one. Free services that offer access to credit scores should always be verified. However, most will provide key information about the credit report and credit score to use.

Credit monitoring services can be very helpful in tracking credit scores each month. Some update all three credit bureaus while others just focus on one or two. In all cases, the goal is to look for trends in change. A credit score that is increasing means debts are being paid on time over the long term and responsible activity is happening.

For those who notice their score is falling, it may be time to take a closer look at why this is happening. Some of the credit monitoring agencies will provide a breakdown and offer insight into what is happening and why. This can prove to be very valuable information for consumers to use to improve their scores.

#3: Use Lender Credit Scoring Tools

Another way to monitor changes in credit scores is to use lender’s accounts. Many credit card lenders, for example, provide consumers with free access to their credit score. This does not harm the score and does not create a hard inquiry on the account. However, it does provide the consumer with access to their credit score.

There is also a benefit to doing this. If a consumer with a credit card requests that the lender provide them with access to their credit score, that shows the lender the consumer is making wise financial decisions. He or she is responsible. Most of the time, this is a free service. It does not drop your credit score in any way. It does not have to be used, but it can provide important information and demonstrate solid financial savviness by borrowers.

#4: Dispute Credit Errors

What if the information on a credit report is not accurate? As noted, credit reporting agencies will have very specific steps to take to dispute this information. The reporting agencies must either prove the information is accurate or they must remove the information from the account.

While inaccurate personal information is critical to check, it is also important to look at other factors such as missing payments. If there is an account with a high balance that is no longer that high, request that it be corrected. Keep in mind it can take up to 60 days for credit reports to be updated with payment information.

#5: Check for Outdated Information

Finally, look for outdated information on credit files and reports. Hard inquiries should remain on the report for up to two years. Judgments and bankruptcies can remain there for up to 10 years. If information is outdated, request that the credit reporting agency remove it. Otherwise, that data is not up to date and could be reflecting negatively.

What is most important is for consumers to be aggressive in managing their credit report to ensure their credit score is accurate. There is no better way to do this than with good data and access to insights.