The Top 5 Tips for Improving Your Credit Score

Your credit score is one of the most important numbers in your financial life. It ranges from 300 to 850 and determines whether or not you can get loans, credit cards, mortgages, and even rent. You can get better loan terms, lower interest rates, and better credit card rewards if you have a higher credit score. On the other hand, a bad score can mean higher costs or even being denied.

In this full guide, we’ll talk about the following:

Why credit scores are important
The top five ways to raise your score
How to take each tip one step at a time
Things to avoid
Questions that people often ask to help you understand things better
Links to reliable sources for more information

Why Your Credit Score Is Important: Rates on Loans and Mortgages

Your credit score shows lenders how likely you are to pay back the money they lend you. A higher score usually means lower interest rates, which can save you a lot of money over the life of a loan. FICO says that even a difference of 20 to 40 points can save you a lot of money on your monthly mortgage payments over 30 years.¹

Pros and cons of credit cards

You usually need a score of 700 or higher to get premium credit cards that don’t charge interest for the first year, give you cash back on groceries, or give you travel rewards.² You have a better chance of getting approved and getting a better sign-up bonus if you get a higher score.

Insurance Premiums

Many insurance companies use credit scores to help them decide how much to charge for auto and homeowners insurance. If you have a bad score, your premiums could go up by as much as 50%.³

Housing and Work

Employers and landlords may look at credit reports as part of background checks. It might be easier to get a job or rent an apartment if you have good credit.⁴

The 5 best ways to raise your credit score

These are the five best things you can do to raise your credit score. If you stick to them, you’ll see results in three to six months.

1. Always pay your bills on time. Why it matters

The most important thing that makes up your FICO® Score is how well you pay your bills. It makes up 35% of it.⁵ Your score could drop by 100 points or more if you miss a payment, depending on how bad it is and how long it’s been going on.

What to Do

Set up payments to happen automatically. Connect your credit cards, rent, and utilities to your checking account or debit card.
Set reminders on your calendar. If you can’t set up automatic payments, send yourself an email or call a week before the payment is due.
Start with the least amount. If you don’t have enough money, always pay the minimum amount to avoid getting a late payment flag.
Pay your bills that are late. Please pay off any bills that are due as soon as you can. Every payment on time helps rebuild.

Not paying small bills, like utility bills, is something to avoid.

Stopping autopay without putting something else in its place.

2. Don’t use more than 30% of your credit limit.

Why It Matters

30% of your score is based on your credit utilization, which is the ratio of your balances to your credit limits.Experts say that using it responsibly means keeping it below 30% and, if you can, below 10%.

What to Do

Keep track of how much you use it every month. To see what your current balances are, log into each credit card portal.
Ask for higher limits. If you have a higher limit but the same balance, you will use less. That means you can use 10% of your money if your balance is $500 and your limit is $5,000.
Pay in more than one way. Not only by the due date, but also before the statement closing dates.
Put your money in different places. If you have balances, put them on more than one card so that one card doesn’t have too much.

Don’t close cards that you don’t use. This lowers your overall credit limit and can make your utilization go up.

Getting a lot of money before buying something big without thinking about how to pay it back.

3. Change the types of credit you have

Why It Matters

Your credit mix makes up 10% of your score.Lenders want to know that you are responsible with the loans and credit cards you have.

What to Do

You might want to think about getting a small loan for yourself. If you only have credit cards, a small installment loan of $2,000 can help you build your credit.
Use cards that are safe. A secured credit card can help people with bad credit build a history of on-time payments.
Don’t open a lot of accounts all at once. When you apply, there is a hard inquiry that lowers your score for a short time.

Things to Stay Away From: Moving balances around with new cards can lead to a lot of questions.

Taking on too much credit; only take on credit that you can pay back.

4. Look at your credit report often and let the credit bureaus know if you find any mistakes.

One in five consumer credit reports has errors that are bad enough to change the scores⁸. Regular checks can find:

Accounts that are closed and reported as delinquent are examples of wrong account statuses.
Same entries
Creating fake accounts or stealing someone’s identity

What to Do

You can get free reports once a year. You can get reports from Equifax, Experian, and TransUnion at AnnualCreditReport.com.⁹
Look at each line. Check your account information, balances, and any questions you may have.
Disagree with errors. You can file disputes with the bureau online and include any documents that support your claim.¹⁰
Follow up. Bureaus have a month to look into it. Make changes to your writing.

Things to Stay Away From

You might make mistakes in one report but not in others if you only look at one bureau.
If you don’t answer soft inquiries, your scores won’t change, but your history might look bad.

5. Lengthen your credit history. Why it matters

Your score is based on 15% of the length of your credit history⁷. Longer histories show that things are stable. When you close old accounts, your average age goes down, which could hurt your score.

What to Do

Don’t close your oldest accounts. If you have a $0 balance, you can keep your history even if you don’t use it.
Use cards every once in a while. They keep busy by making small payments, like $5 for a streaming service, and paying for it all at once.
Get permission before using it. Request that a family member with a strong history add you to their account.¹¹

After you’ve paid off your cards, don’t close them. Leave them open instead so you can see what you’ve done.

The “new credit” clock starts over if you apply for a lot of new accounts in a short amount of time.

More Great Ideas

Automate Savings: Having a good emergency fund will help you make payments on time, even if you have to pay for something you didn’t expect.
Limit Hard Inquiries: Hard pulls stay on your report for two years, but they only lower your scores for 12 months.¹²
Talk to the people who lent you money. Some of them may be willing to forgive late payments or lower interest rates if you ask.¹³
Some credit unions offer credit-builder loans, which help you build your credit history while saving money.

Common Questions and Answers

Q1: How long does it take to raise your credit score? A: You can see small changes in as little as 30 days if you lower your usage or fix mistakes. You should see big improvements (50 to 100 points) after three to six months of making all your payments on time and not using your credit too much.

Q2: Will looking at my credit report hurt my score? A: No. A “soft inquiry” is when you look at your own credit report. It doesn’t change your score at all. “Hard inquiries,” such as applying for a new credit card, can only cause a small, short-term drop.

Q3: Will my report show that I paid off a collection account? A: Paying a collection stops more fees, but it doesn’t get rid of the entry. Some collectors will “pay for delete,” but only if you promise to take the item down after you pay.

Q4: Should you pay off your debts or keep your usage rate low? A: The best thing to do is pay off all of your debts. This stops interest from adding up and helps you make better use of your money. If that’s not possible, try to keep the balance on each card below 30% of its limit.

Q5: Is it possible for me to get a higher score even if I don’t have any credit history? A: Yes. If you want to start building a credit history from scratch, you can get a secured credit card, a credit-builder loan, or become an authorized user.

In short

It’s not a miracle that your credit score will go up overnight. You need to make good decisions every day for a long time. You can improve your scores and open up more financial opportunities by paying your bills on time, keeping track of how much credit you use, diversifying your credit, checking your reports, and extending your credit history.

Pay attention to how you’re doing, change your plans as needed, and keep an eye on how credit scores are changing. If you work hard and do things the right way, you can improve your credit score and have more freedom and security with your money.