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How to Improve Your Credit Score: 8 Tips

Sarah Li Cain9-minute read
December 16, 2021

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Your credit score is a number that shows lenders your risk level – in other words, how likely you are to repay any loans you take out. This three-digit number is used to determine whether you’ll be approved for a loan (including credit cards). The higher the number, the more creditworthy, or less of a risk, you’re perceived to be.

Your credit score is calculated based on your credit history, which comes from the three main bureaus – Equifax®, Experian™ and TransUnion®. They’re the ones that create these reports that will then be used to calculate your score using credit models like FICO® and VantageScore®. Factors include your payment history, credit utilization, length of credit history, credit mix and new credit.

Your credit score is also used in other ways, including by potential landlords to decide whether you’re a worthy tenant, and utility companies to determine rates and deposit amounts. That’s why learning how to improve your credit score is crucial if it isn’t already considered good.

Here are eight tips for raising your credit score.

1. Make All Payments On Time

Credit scoring models take your payment history as one of the most important factors in how risky you are to a lender. In fact, it makes up the lion’s share (35%, to be exact) of your credit score. Making on-time payments shows lenders you’re a trustworthy, responsible borrower. It can also mean you can afford to make these payments. Failing to make payments on time not only triggers potential late fees, but it can negatively impact your credit score.

To ensure you stay on top of your payments, set up autopay (arranged automatic payments from your checking or savings account) or trigger a “bill due” notification to be sent via text or email.

How This Helps Improve Your Credit Score

Making on-time payments will improve your credit score because lenders want to know that you’ll pay back the money they’ve loaned out. Missing even one payment can severely impact your score. After you start making on-time payments, you’ll notice that within a few weeks (or less) your score is going up.

2. Keep Credit Utilization Low

Your credit usage, or the balance you carry against the total limit of all your credit cards, could also negatively impact your score. Also referred to as a credit utilization ratio, your credit usage is expressed as a percentage. To calculate this number, take the total amount on the balance of your credit cards and divide it by your total credit limit.

For instance, if you’re carrying a balance of $2,000 on all your cards and the total limit on all your cards is $20,000, your credit utilization is 10%.

The higher your credit utilization is, the more you’ll be seen as a risk to lenders because they’ll think you’re too reliant on debt. This also means a higher percentage is more likely to negatively impact your score.

How This Helps Improve Your Credit Score

While it’s typically recommended to keep your credit usage under 30%, your credit score will be higher if your credit usage is lower. That’s because your credit utilization affects up 30% of how your credit score will be calculated, so you’ll want to make sure you don’t carry high balances.

Lowering your credit utilization ratio will most likely improve your credit score pretty quickly. In fact, it’s one of the fastest ways to raise it.

3. Strive For A Long Credit History

Creditors want to know you have experience maintaining good credit if you pay your loans and cards on time. Credit scoring models will take certain factors into consideration, such as the age of your oldest account and the average age of all your accounts (when you opened them).

It’s safe to say that the longer your credit history, the bigger the positive impact on your credit score. If you want to improve your credit score fast, you don’t need to necessarily wait until your accounts are older. It could simply mean not canceling your oldest credit cards or other types of credit lines.

How This Helps Improve Your Credit Score

Your credit history affects up to 15% of your credit score. While not the most significant factor, the longer your credit history, the more proof there is to show you’re a responsible borrower. Lengthening the age of your credit accounts is a slow and steady race.

4. Keep A Diverse Mix Of Credit

Keeping different types of credit accounts also factors into your credit score, making up 10% of it.

A lack of credit mix won’t necessarily negatively impact your credit score, but the more variety you have, the better it’ll look to lenders. Don’t go and open different accounts right now just to improve your credit mix, but do consider doing simple things like opening a new credit card if you don’t have one, or shopping around for lenders when it’s time to buy a new car.

How This Helps Improve Your Credit Score

Having a having a variety of different forms of credit (including car loans, credit cards and student loans) shows lenders that you’re able to manage different types of loans and provides a better snapshot of your finances. In other words, it’s a deeper insight into whether you can pay back the debt lenders are considering extending to you.

Keep in mind, using this method to improve your credit score may take longer than other ways like making on-time payments or lowering credit utilization ratio. Plus, it might not raise your score by a significant amount.

5. Spread Out Credit Card Applications

While you might be tempted to see if you qualify for that sterling credit card account, applying for too many cards in a short period of time could make it look like you’re short on money. In addition, the more accounts you have open, the more tempted you might be to put unnecessary purchases on those cards and rack up a balance.

Bottom line – only apply for credit cards you’ll use and need.

How This Helps Improve Your Credit Score

New credit makes up the final 10% of your credit score. Spreading out credit card applications will help to improve your credit score because it shows that you’re not struggling with your finances and in need of a loan to help you out. These hard inquiries will stay on your credit report for up to 2 years, though their impact will fade over a period of time.

That being said, your credit score may not go up by a lot if you stagger your applications, especially if you already have a high number.

6. Take Advantage Of The 30-Day Preapproval Window

Credit scoring models make exceptions when you apply for certain types of loans. For example, if you’re trying to get preapproved for a mortgage or a car loan, you can make multiple applications that will be considered one hard inquiry. Lenders know borrowers want to shop around for the best rates, especially when making expensive purchases. Keep in mind that this is only the case if you do all this within a certain timeframe, typically about 30 days.

How This Helps Improve Your Credit Score

When it comes to financing for a car or a home, you’ll want to apply for these loans within the same time frame. If you’re getting a preapproval for a car loan, try to apply to all the lenders within 30 days. Doing so will reduce the impact these hard inquiries will have on your score.

Similarly, if you’re in the market for a mortgage and hard pulls from different mortgage lenders happen within a 30-day window, it’ll only count as a single inquiry.

7. Take Advantage Of Alternative Credit Data

It can be difficult to establish or repair your credit because you’ll need to complete a combination of the above actions to raise it. In many cases, you may need credit to establish credit. Things like getting approved for a credit card or loan will help prove you can make on-time payments.

However, there are alternative ways of establishing credit. Companies like Experian may allow you to get credit for on-time payments you make to certain internet or utility accounts. According to the credit bureau, you may see your score go up relatively quickly.

How This Helps Improve Your Credit Score

If you’re a renter, you could ask your landlord if they’re open to reporting your rent payments to the credit bureaus. This could potentially help boost your score. This could be especially helpful if you don’t have a long credit history simply because of your age or because you’re new to the country.

Some scoring models and lenders might allow you to use nontraditional data (such as utility, mortgage or rent payments as well as information about your bank account) to help improve your score. Besides credit, these reports factor in how you handle your money. For this to happen, you’ll have to request for your landlord or the utility company to report your payments to the consumer bureaus.

8. Check Your Credit Report For Errors

A mistake on your report could ding your credit. Common errors on your credit report include the same account listed multiple times, the wrong balance or mistakes on the status of your accounts.

You can request a free annual credit score from all three reporting agencies as allowed by federal law. Additionally, you can request a free weekly credit score. This displays your credit data from TransUnion and allows real-time monitoring of the changes made to your credit record.

If you see something inaccurate or notice missing information from your report, contact the credit reporting agency to dispute the error. Despite what you may have heard before, checking your own credit report has no impact on your score.

How This Helps Improve Your Credit Score

Mistakes can happen, and any negative information on your credit will have an impact on your score. That’s why any inaccurate information should be disputed as soon as possible. Doing so can have a significant impact on your score, almost immediately.

How Long Does It Take To Improve Your Credit Score?

The process of improving your score depends on the type of issues you’re dealing with in your credit history. Let’s take a look at different credit events and how they impact your credit score.

Credit Event Maximum Score Impact Recovery Time
Setting up a new account 10% 3 months
Closing an account A little more than 10% 3 months
Maxing out a credit card Around 30% 3 months
Missing a payment or defaulting on an account Around 50% A little over a year
Bankruptcy Can lower your score by as much as 90% 7 - 10 years

Although these are guidelines for the maximum impact of negative events, it’s worth noting that not everyone is affected in the same way. If you have a longer history of good credit, a single negative event won’t affect you as adversely as it would if you had a short history filled with negative credit issues.

It’s also important to note that these things tend to run along an upward curve over time, meaning that even if the event still shows up on your credit report, it’ll have less of an impact as you do positive things like pay down your debts and pay your bills on time.

You’ll notice that recovering from bankruptcy takes significantly longer compared to other types of credit events. Bankruptcy is considered a major negative event by all creditors and lenders. The impact on your score doesn’t go away until the bankruptcy is removed from your report. For a Chapter 13 debt reorganization bankruptcy, this could be in as few as 7 years. In a Chapter 7 bankruptcy, this is 10 years.

A Final Thought On Improving Credit

If you damaged your credit in the past, the good news is that you can improve it over time. As you dispute errors, pay down debt, make on-time loan repayments and avoid opening new credit accounts, you improve and repair your credit. It may take months or even years to bounce back, but if you plan on buying a new home, car or other big-budget item, it’s worth the time and effort.

RocketHQSM has partnered with CardRatings for our coverage of credit card products. RocketHQ and CardRatings may receive a commission from card issuers.

Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

Sarah Li Cain

Sarah Li Cain is a freelance personal finance, credit and real estate writer who works with Fintech startups and Fortune 500 financial services companies to educate consumers through her writing. She’s also a candidate for the Accredited Financial Counselor designation and the host of Beyond The Dollar, where she and her guests have deep and honest conversations on how money affects our well-being.