12 Ways To Improve Your Credit Score
Is your credit score not exactly where you want it to be? We're sharing twelve steps to take to improve your score. Not even sure where to start? We break down exactly what credit score is, and how it’s calculated, in this blog post. Once you have that lingo down, read on for the steps you can take to improve your credit score.
1. Review your credit report
As you may, or may not know, your credit report is a detailed summary of your specific credit history as prepared by credit bureaus. They include your personal information as well as details on the lines of credit you have. It contains data from public records such as bankruptcies and a list of entities that have asked to see your credit report. You can and should get a free credit report once every year. It’s a great way to monitor your credit score and make sure there are no errors. If you do find an error you’ll want to reach out to that credit bureau immediately to dispute that information on the report. Fixing an error can almost immediately have an impact on improving your score. Another side piece of advice on this is that you’ll want to carefully protect your personal information. Having any of that get into the wrong hands can easily put you at risk of identity theft and erroneous activity on your credit report.
2. Use less than 30% of your credit at any given time
Given the way that credit scores are calculated, you’ll definitely want to have lines of credit open and available to you, but you don’t want to use too much of it. As a rule of thumb you’ll want to stick with using 30% or less at any given time. Use anymore and you’ll run the risk of having that negatively impact your score. If you find that you need to spend more than 30% of what you have available for your monthly expenses look towards getting another credit card or otherwise opening another new line of credit so that the total sum of your expenses now becomes a smaller portion of your overall credit limit.
3. Build good financial habits
This one is an oldie but a goodie. When it comes to finance it’s simply a matter of fact that proper budgeting is extremely important to managing your financial well-being. When you spend more than you have and start falling behind on payments, it’s a slippery slope that can quickly get out of hand to dramatically bring down your credit score. This is probably the cause for most people’s woes when it comes to unsatisfactory credit scores. Make sure you have a defined budget and stick to it religiously. If you splurge here and there, don’t hang it over yourself too much but you definitely don’t want to make it a habit. If you find that you struggle to pay your bills on time simply because you can’t remember, you may want to look into setting up automatic bill payments.
4. Catch up on past due accounts
So maybe the point above made it to your radar just a little too late and you already have some debt. Well you’re going to want to work on catching up on those payments as soon as possible. These debts could be the reason your credit is being dragged down so the sooner you can get rid of them, the sooner you can expect to see your score rise. We actually have a previous post that touches on the best ways to pay off debt. If you want you can check that out here.
5. Avoid having too many requests for new credit
We understand that in advice #2 we told you to look into new lines of credit if your expenses exceed 30% of what you have available. However that is only if you need the additional line of credit so that you’re not using more of it than is recommended and potentially bringing down your score. Generally you’ll want to avoid asking for new lines of credit too often because applications for new credit are considered hard inquiries and can have temporary negative impacts on your score. They will eventually go back up so long as you don’t continue applying for new credit and therefore if you do ever need to apply make sure you do so all within a short period of time. Applying too often for credit over an extended period of time can definitely have a negative impact on your overall credit score which if you’re reading this is obviously something you’ll want to avoid.
6. Keep all accounts open
So maybe you have multiple credit cards. Maybe you have so many that you actually don’t even use some of them anymore. Well that’s fine. Just keep them anyway. Why? Well keeping an account open has no negative impact on your credit score. However if you close an account, that unfortunately may. So in order to avoid any drop in your credit just keep all your accounts open.
7. Get a credit builder loan
Credit builder loans are designed to help people who have little or no credit history build credit. As such they do not require good credit for approval and can be a great way to start adding positive history to your credit report. They give you the opportunity to show that you can handle making payments consistently on-time. However do keep in mind though that if you fall behind on payments for this loan, it actually will have the opposite effect so be sure you’re ready for the responsibility before making the commitment on this one.
8. Get a secured credit card
A secured credit card is different from your typical credit card in that it is backed by a cash deposit. This deposit acts as collateral on the account providing the card issuer with some security in case the card holder can’t make their payments. Although they work differently from traditional credit cards, as long as you’re making your payments they can still help improve your credit because the activity is reported to the credit bureaus.
9. Join an account as an authorized user
If you’re struggling to open an account of your own, there’s always the option of joining someone else’s account as an authorized user. Granted they will need to trust you because any payments you’re unable to make will fall on them as a shared responsibility but it can definitely be a great way to build your credit if done right. An authorized user has permission to make purchases on the other’s credit card but is not liable for the payments. The payment arrangements are typically made between the cardholders and authorized users.
10. Look into Experian Boost
Experian now has a new option called Experian Boost that lets you add on-time phone, utility and streaming payments to your credit report to very quickly boost your credit score. It states on their website that on average their users saw a credit score increase of 13 points. This of course is only relevant if the credit bureau you need your report from is Experian. If you need your score increased for the other bureaus like Equifax or TransUnion this unfortunately isn’t really going to be relevant.
11. Look towards a credit repair company
A credit repair company is an organization that can help you understand and repair your credit. They have the experience and knowledge necessary to tackle credit issues that could be difficult to resolve on your own. These companies know what to look for, are well informed on the processes needed to fix inaccuracies, and are informed on what the clients are legally entitled to request from credit bureaus and creditors. They can make it easy to action on anything you may have missed on your own to bring your credit score back up but be careful who you work with because this space is full of scams which can actually leave you worse off than you were when you started. As such you should definitely do your due diligence on the company you’re choosing to work with to ensure that you’re not becoming another victim.
12. Have patience
This is more a virtue than a piece of advice but it’s still helpful nonetheless. Unfortunately depending on what’s bringing down your credit score, the only thing you can do is play the waiting game. Different activities stay on your record for various lengths of time. Soft credit report inquiries for example have no impact on your credit score while hard inquiries remain on your report for up to 2 years. Other items such as delinquent payments or foreclosures can last on your record for up to 7 years. As such if you’re dealing with these issues, the best option you may have is simply to wait.
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