March is National Credit Education Month — and Time to Master the Art of Your Credit Score

Pop quiz: What month is centered around: a) a saintly Irish leprechaun, b) a lesson in fully understanding your credit score, and c) green beer? 

If you answered “March,” you’re in luck! If you didn’t, don’t worry. It’s the perfect time to start sharpening your pencils, busting out your favorite highlighter, and studying up on how to improve your credit rating in celebration of National Credit Education Month.

What is National Credit Education Month?

National Credit Education Month, which is observed throughout the month of March each year, is an ideal time to learn more about what actually goes into your credit score and why it’s so important to stay on top of it. And one of the best ways to observe National Credit Education Month is by working toward smart credit habits such as routinely checking and improving said credit score, making on-time credit card payments, and flexing your money management skills. 

Steps to Improve Your Credit 

Financial literacy is about applying a variety of financial skills—e.g., budgeting, investing, and financial management—to support a range of personal goals, such as saving for retirement or future education, starting a business, or managing debt responsibly. Learning how to build good credit at an early age makes it easier to maintain healthy credit habits throughout your life.

A key aspect of responsible debt management is improving your credit score. In honor of National Credit Education Month, here are seven ways to do just that: 

• Start by Asking the Right Credit Questions 

A great way to begin a lesson in credit education is by answering a few foundational questions: 

• How long does it take to build credit?

If you’re dealing with poor credit, a few positive changes in your credit management habits could lead to an improved credit score in as little as a month. But to build up your credit score from scratch, you’ll need to have at least one credit account that’s been open for six months or more and is reporting activity to the major credit bureaus (Equifax, Experian, and TransUnion). From there, a FICO® Score can be generated. Since FICO Scores are used in more than 90% of U.S. lending decisions, they’re a vital part of building credit and being favorably perceived by lenders. 

• What is the average credit score?

According to the standard FICO Score ranges, today’s credit scores range from 300 to 850, with the average U.S. credit score reaching a record high of 710 in 2020. 

• How can I raise my credit score? 

There’s no lucky charm you can grab to raise your credit score overnight (wouldn’t that be magical?), but by proactively managing your credit, you have a better chance of consistently improving your credit score over time. Tactics like tracking your credit usage on an app, determining exactly what you owe, signing up for autopay options so you never miss a payment, negotiating lower interest rates, doubling up monthly payments, and asking for a credit limit increase can all help raise your credit score.

• Why did my credit score drop?

A drop in credit score can be caused by a combination of factors. Payment history is one of the single biggest determinants of credit score, but other factors include applying for a new line of credit like a mortgage, credit card or loan; an increase in the credit utilization ratio a decreased line of credit; a major financial event like foreclosure or bankruptcy; or inaccurate information on the credit file. 

• Pull up a Free Credit Report

Actively monitoring your credit report is one of the best ways to take control of your credit situation and start improving it. By keeping an eye on credit in real-time, you’re more likely to be immediately aware of potential red flags like missing/late payments or inaccurate/fraudulent activity on your accounts. In fact, 1 in 5 Americans have an error on their credit report that could result in less favorable terms for future loans, so it might be a good idea to regularly monitor your credit report to be safe. 

You can access one free copy of your credit report directly from each of the three nationwide credit reporting companies (Experian, Equifax or TransUnion) once every 12 months or use AnnualCreditReport.com to request all three, for free, on a weekly basis (until April 2021). You can also print and mail a free annual credit report request.   

• Fully Understand Your Monthly Bill Payments

Without a fully functioning budget to track your spending habits and savings, it might be easy to miss the breakdown of your monthly bill payments. This could result in a completely avoidable missed payment dinging your credit file and dropping your credit score. Keeping a simple list of accounts and their due dates, setting reminders in your calendar or signing up for autopay options can all be helpful ways to make bill payments on time. 

• Shoot for 30% Credit Utilization or Less

Credit utilization ratios come in two different forms: per-card and overall. A per-card credit utilization ratio measures how much credit you’re using compared to the credit limit on that card. Overall credit utilization is the amount of revolving credit you’re using divided by the total amount of credit you have available across all accounts. 

Essentially, your credit utilization ratio is the amount you owe divided by how much you’re able to borrow. 

Keeping your overall credit utilization under 30%, most experts agree, is a good rule of thumb for improving your credit score. The lower the credit utilization ratio, the better. 

• Limit Hard Inquiries on Your File

When it comes to learning how to build your credit, limiting hard inquiries is another important part of the lesson. Every time you apply for a new line of credit, a hard inquiry hits your account. Credit scoring models and lenders take these inquiries into consideration because they increase the risk you pose as a borrower. 

Hard inquiries can linger on your credit report for up to two years, but they usually result in a temporary drop in credit score that bounces back within a few months. Improving your credit score by using some of the other tactics on this list is one of the best ways to cushion the blow of hard inquiries when they can’t be avoided. 

• Maximize Your “Credit Age” 

Your “credit age” is the average age of all your open credit accounts. Typically, the longer an account has been open, active and without delinquent payments, the more positive an impact it will have on your credit score. So, how can you maximize your credit age? Skip the wrinkle cream and stick to longevity. Having more accounts open and active, with no late payments, for longer periods of time, is a step in the right direction.  

• Track Your Credit With an App 

Using technology to your advantage is one of the very best ways to crush credit card debt faster and improve your credit score. 

With Tally†, you can pursue a payoff strategy that’s directly aligned with your financial goals, so you can reach them faster and reduce financial stress in the process.

​​†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.