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The #1 Way to Improve Your Credit Score

3 Minute Read

We know a simple way to improve your credit score.

Here it is: After you’ve worked your way through the debt snowball and become debt-free, your FICO score drops. And drops. And drops some more.

Why? Because you’re out of debt. That’s the result of not having any debts to pay. It won’t be long until the score is gone.


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Now, you may not think of that as "improving" your score. Doesn’t improving something mean it goes up? In most cases, yes.

But that’s not the case here for one reason: Your credit bureau report score does not mean that you are winning with money. Not even close. It’s just a measure of how good you are at spending with debt. So the number-one way to improve your "I love debt" score is to get out of debt!

Take a look at how your credit score is calculated:

  • 35% of the score is based on your payment history.
  • 30% is based on your debt level.
  • 15% is the length of time you’re in debt.
  • 10% is new debt.
  • 10% is the type of debt.

You don’t see anything in there about how much money is in your bank account. There’s no mention of your monthly budget or any cash you have saved for emergencies and retirement. The score is just about how much debt you have, what kind, how long you’ve had it, and how you’ve paid on it. Anyone can borrow money and end up with a good credit score.

It’s nothing special.

To put it another way, let’s say you inherited $10 million from a long-lost relative. Would that help your money situation? Absolutely! But your credit score wouldn’t change a bit. Not even one point!

As you stay away from borrowing money, your credit score will gradually shrink. That makes some people nervous, but don’t let it bug you. Staying away from debt means you are finding other ways to pay for stuff and saying no to what you can’t afford. As a result, your wealth will grow through saving and investing.

Over time, growing your wealth and eliminating your debt will mean you have a lot of money and not a lot of bills. By then, your FICO score will be just about gone. But who cares? You’ll have serious cash stocked up. And it’s a lot better to have a high bank account balance than a high credit score!

Wouldn’t it be awesome not to worry about your credit score? Doing a budget is where you start to make that happen. Check out our free EveryDollar Guide to Budgeting, the most comprehensive content we’ve compiled on the subject to date.

This guide includes practical budgeting advice you can immediately apply. It’s time to improve your credit score—by getting rid of it!

So how do you live life without a credit score? Here are your top three questions answered.

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