9 ways to improve your credit score

Be strategic with your debt and you’ll bump up your score

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Having good credit is essential. You need it to secure a place to live, obtain loans or credit cards and qualify for favorable interest rates. In some cases, your credit score may even impact your ability to get a job or the insurance rates you pay.

Improving your credit score is an important goal, regardless of how high or low your current score is. And there are probably at least a few strategies for improving your score that you haven’t pursued yet.


Key insights

  • There are short- and long-term tactics to build a solid credit score.
  • Reducing your utilization ratio is the quickest way to improve your credit score.
  • Make all payments on time to maintain a positive payment history, which is the largest factor in your credit score.
  • Resist applying for new credit unless absolutely necessary.

Review your credit reports for errors

A study by the Federal Trade Commission found that one in four consumers caught errors in their credit reports that may affect their credit scores. That’s why the first step to improving your credit is getting copies of your credit reports and reviewing them for errors.

Federal law requires the three major credit bureaus (Equifax, Experian and TransUnion) to provide consumers with one free credit report annually. You can get a copy of your credit report from each of them all at once, or you can spread them out throughout the year. Go to AnnualCreditReport.com to request your credit reports for free.

Examples of errors to look for include:

  • A closed account marked as open
  • A collection agency pursuing a paid-off debt
  • Someone else’s account listed on your credit report

If you spot an error, you have the right to dispute it with the credit bureaus.

Each major credit bureau allows consumers to dispute errors in their credit report via an online portal, by phone or by mail. When disputing an error, identify the specific information you’d like to dispute and explain why it’s inaccurately represented in your credit report. If you have documentation to support your dispute, include it in your submission to the credit bureau.

Upon receiving the dispute, the credit bureau will contact the creditor to investigate the information in question. The information will be removed or updated within 30 days if it is indeed found to be inaccurate.

» MORE: How to check your credit score

Pay your bills on time

Payment history is the single most important credit score factor for both FICO and VantageScore, the two major providers of credit scores to the financial industry. Your payment history makes up 35% of your FICO score and 41% of your VantageScore.

Your payment history makes up 35% of your FICO score and 41% of your VantageScore.

Many people are accustomed to paying their bills manually each month. But if you forget a payment, you may be hit with late fees and negative marks on your credit. To avoid late payments, consider signing up for automated bill payments. Another option is to set reminders in your calendar or smartphone.

Also, remember that the minimum payment due for revolving credit products is typically just a fraction of what you owe. Minimum payments for credit cards, for instance, are mostly made up of interest, with very little going toward the principal, so your balance may not go down by much even if you’re making all your minimum payments on time. Ideally, you should pay off your credit cards in full each month. If that’s unrealistic, pay as much as possible to minimize the interest you accrue over time.

Lower your utilization ratio

Your utilization ratio is the ratio of your balances on revolving credit products, like credit cards or lines of credit, to your credit limits on those products.

Your utilization ratio counts as 20% to 30% of your credit score, depending on the scoring model used. A lower ratio generally means a higher score.

Your utilization ratio counts as 20% to 30% of your credit score, depending on the scoring model used. A lower ratio generally means a higher score.

You should try to always keep utilization under 30%; under 10% is even better. For example, if you have a credit card with a $10,000 limit, try to keep your balance below $1,000. Responsible use of your credit limit shows lenders you won’t max out your card just because you have available credit to spend.

There are two ways to reduce your credit utilization: pay down your balance or increase your credit limit. If you increase your credit limit, avoid using the added amount.

Keep in mind that your utilization ratio is usually based on the balance reported on your credit card statement each month. This is why your utilization ratio typically isn’t zero, even if you pay off your credit cards in full every time. To give your credit score an extra boost, pay your credit card balance down before the statement closes.

Keep old accounts open

Having older credit accounts shows that you can use credit responsibly over long periods of time. For this reason, you should keep your oldest accounts open for as long as possible.

Your credit score includes a calculation of the average age of your accounts, and it counts as 15% to 20% of your credit score.

Your credit score includes a calculation of the average age of your accounts, and it counts as 15% to 20% of your credit score.

Young consumers and those just getting started with credit will have a lower average account age. Older consumers who have been using credit for years typically have a longer average age.

Opening one or more new accounts in a short time frame can reduce your average age of accounts quickly.

You may be tempted to close an unused account, especially if it has an annual fee. Instead of closing the account, contact your bank and ask if the product can be converted to one that doesn’t have an annual fee. This maintains the benefit of the account’s age but eliminates unnecessary expenses from your budget.

Limit hard inquiries

Every time you formally apply for credit, your credit score drops by about five points or so. This is known as a hard inquiry. Soft inquiries are pre-qualifications or preapprovals that do not affect your credit score.

New credit applications are a small part of your credit score, but it may concern lenders to see too many hard inquiries.

New credit applications are 10% to 11% of your credit score, which is a relatively small factor. However, lenders worry about your financial condition if they see too many hard inquiries listed in your credit report during a short period of time. While hard credit inquiries stay on your credit report for up to two years, they usually only affect your credit score for up to one year.

Nonetheless, if you want to improve your credit score as much as possible, resist applying for new credit products, even if the product offers a big welcome bonus. There will be plenty of time to take advantage of those offers after you reach your credit score goals. The exception to this rule is if you’re applying for a consolidation loan or balance transfer credit card to improve your financial situation.

Piggyback as an authorized user

It is possible to build your credit by taking advantage of someone else’s positive credit habits. By becoming an authorized user on another account, you can benefit from that account’s payment history, account age and utilization ratio. Authorized users are additional account holders that have access to some or all of a credit card’s credit line.

Most banks do not conduct a hard credit inquiry on authorized users, so becoming an authorized user is an excellent option for consumers who have trouble getting access to credit independently due to limited credit history or negative marks on their reports.

Authorized user cards also enable you to quickly reduce your credit utilization ratio. By becoming an authorized user on a credit card with a high credit limit and a low balance, your overall utilization ratio can improve dramatically and bump up your credit score.

Get a boost from other bills

Unfortunately, a number of the bills you pay each month likely can’t be paid on credit, and therefore they won’t positively affect your credit score. But in recent years, new services have popped up that allow you to get credit for a wider scope of positive payment history.

Experian Boost tracks your payment history with common monthly bills like rent, utilities, telecom and streaming services, and records those payments to your Experian credit file. Your FICO score is then recalculated to reflect the newly-added payment history. The feature is included as part of a free Experian membership.

Some landlords and third-party services report your monthly rent payments to credit bureaus as well. While some report to the credit bureaus for free, most charge a one-time or monthly fee for the service.

Contact your creditors and negotiate

If you're having trouble making your monthly debt payments, you may benefit from reaching out to your creditors and explaining your situation to them. In light of financial hardship, many creditors might be willing to reduce your interest rate, extend your loan term or grant a payment deferral period. These adjustments can either make your monthly payment more manageable or give you time to get back on better financial footing, allowing you to gradually improve your payment history and your credit score.

Approaching a credit counseling agency might also be a wise choice if you’re struggling to keep up with your monthly payments and are in danger of defaulting on your debts. A credit counselor can help you review your finances and create a workable budget that includes your debt obligations. Counselors can also establish a debt management plan with your creditors that might reduce your interest rates and fees.

» MORE: How to negotiate credit card debt

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    FAQ

    How long does it take to improve your credit?

    There are both short- and long-term steps that you can take toward improving credit. Negative items often take years to fall off your credit report. The quickest way to improve your score is to reduce your credit utilization ratio by paying down your revolving credit balances or increasing your credit limits.

    What is considered a good credit score?

    A good credit score is 670 to 739 with FICO and 661 to 780 with VantageScore. If your credit score falls below these ranges, you should take steps to improve your credit. Make all payments on time, pay down credit card balances and avoid applying for new credit products.

    How do you check your credit score?

    There are numerous ways to check your credit score, including some that are free. Many financial institutions include a free credit score online and/or with your monthly account statement. Websites like Credit Karma and Credit Sesame also offer free credit scores. Alternatively, you can get your credit score from myFICO or from VantageScore’s partners.

    Is your credit score affected when you check it?

    No, checking your own credit will not affect your credit score. This is known as a “soft inquiry” and cannot be seen by prospective lenders. It is wise to check your credit score every month or two as you work to improve your credit.

    Why is my credit score different on different sites?

    Credit scores vary for many reasons. FICO and VantageScore have multiple types of credit scores based on different industries, like mortgages or auto loans. Additionally, they have different versions used by different creditors. The most recent versions are FICO Score 10 and VantageScore 4.0.

    Bottom line

    Some of the steps you can take to improve your credit score can be completed quickly; others will only yield results over time. Correcting errors on your credit reports, requesting a credit limit increase and paying down revolving balances with a debt consolidation product are relatively quick fixes that can give a fast boost to your score. But practicing responsible financial habits is key to maintaining a strong score in the long run.

    Most importantly, make all your minimum payments on time. Or better yet, pay off your revolving balances in full each month to keep your utilization low and your payment history spotless.


    Article sources
    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
    1. Federal Trade Commission, " In FTC Study, Five Percent of Consumers Had Errors on Their Credit Reports That Could Result in Less Favorable Terms for Loans ." Accessed March 30, 2023.
    2. Federal Trade Commission, " Free Credit Reports ." Accessed March 30, 2023.
    3. Equifax, " How long will it take to complete an investigation after I dispute information on my Equifax credit report? " Accessed March 30, 2023.
    4. FICO, " What's in my FICO Scores? " Accessed March 30, 2023.
    5. VantageScore Solutions, " The Complete Guide to Your VantageScore ." Accessed March 26, 2023.
    6. Experian, " What Is a Good Credit Score? " Accessed March 30, 2023.
    7. Experian, " What is a Credit Utilization Rate? " Accessed March 30, 2023.
    8. Equifax, " Understanding Hard Inquiries on Your Credit Report ." Accessed March 30, 2023.
    9. Chase, " Can being an authorized user build your credit? " Accessed March 30, 2023.
    10. Experian, " What Is Experian Boost? " Accessed March 30, 2023.
    11. Freddie Mac, " How to get your rent reported to credit bureaus ." Accessed March 30, 2023.
    12. Equifax, " Will Checking Your Credit Hurt Credit Scores? " Accessed March 30, 2023.
    13. FICO, " FICO Scores Versions ." Accessed March 30, 2023.
    14. VantageScore Solutions, " The VantageScore Model ." Accessed March 30, 2023.
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