The steps you take to improve your credit score will depend on your unique credit profile. In general, its important to understand the factors that influence your score, including your payment history, amounts owed, length of credit history, credit mix and new credit.
There are several ways you can improve your credit score, including making on-time payments, paying down balances, avoiding unnecessary debt and more. But depending on your unique situation, it can be difficult to know where to start.
Whether youre building credit from scratch or rebuilding after some credit missteps, understanding the factors that go into your credit score can help you determine which steps to take. With that in mind, here are seven ways to improve your credit score, how much impact theyll have and how long it can take to start seeing results.
Having a good credit score is crucial for getting approved for loans and credit cards with favorable interest rates. However, many people struggle with low credit scores due to late payments, high balances, and other mistakes.
The good news is that there are concrete steps you can take to boost your credit score. By understanding what goes into your score and addressing problem areas, you can start to see improvement in just a few months.
Here are the 7 most important things you can do to improve your credit score
1. Make All Payments On Time
Payment history has the biggest impact on your credit score, accounting for 35% of your FICO® score When you make late payments, it’s reported to the credit bureaus and will negatively affect your score
To boost your score:
- Set up automatic payments or payment reminders to avoid missed payments
- If you’ve missed payments, get current and make on-time payments going forward
- Allow extra time for mailed payments to avoid late fees
With consistent on-time payments, you can start rebuilding your credit score history. Even one 30-day late payment can hurt your score, so aim for 100% on-time payments.
2. Lower Your Credit Utilization Ratio
Your credit utilization ratio is the percentage of your total available credit that you’re using. Keeping this ratio low demonstrates responsible credit management.
Ideally, keep your utilization rate under 30%. To lower your ratio:
- Pay down balances, focusing on maxed-out cards first
- Ask for credit limit increases
- Make multiple smaller payments before your statement date
Reducing your utilization rate from 50% to 30% could boost your score by 40-50 points or more.
3. Limit New Credit Applications
When you apply for new credit, the lender runs a hard inquiry on your credit report. Too many inquiries in a short period can negatively impact your score.
Before applying for new credit:
- Check for prequalification offers to avoid unnecessary hard inquiries
- Space out applications by at least 6 months
- Don’t open store cards just to save 10% on your first purchase
Limiting applications will help minimize credit report inquiries and prevent opening unnecessary accounts.
4. Correct Errors on Your Credit Report
Incorrect information on your credit report, like late payments you didn’t actually make, can sabotage your score. That’s why it’s critical to check your reports from Equifax, Experian, and TransUnion annually.
If you find errors:
- Dispute them immediately in writing with the credit bureau
- Provide documentation like bank statements proving the error
- Get errors deleted so they stop damaging your score
Correcting credit report mistakes can lead to an instant boost in your credit score.
5. Maintain Old Accounts
The average age of your credit accounts impacts 15% of your credit score. The longer you maintain accounts in good standing, the better it is for your score.
To maximize the average age, avoid:
- Closing your oldest credit cards, even if you don’t use them
- Opening a lot of new accounts in a short period of time
Nurture your longstanding accounts while limiting new applications.
6. Build Your Credit Mix
Lenders like to see you handling different types of credit responsibly, like credit cards, a car loan, and a mortgage. This credit mix diversity makes up 10% of your score.
You can build credit mix organically as you take out loans over time. Avoid opening accounts just to diversify credit types. Focus instead on managing what you already have responsibly.
7. Monitor Your Credit Report
Besides correcting errors, monitoring your credit report helps you identity signs of fraud and track your credit profile. You’re entitled to one free report annually from each of the credit bureaus.
Monitor your report at least once yearly to:
- Verify all accounts are yours
- Check for errors or fraudulent activity
- Review negative items like collections
- Confirm your personal information is accurate
Regular credit report monitoring enables you to protect your score from inaccuracies and fraudulent accounts.
By taking these actions, you can start to see an improved credit score within a few months. But remember that building strong credit takes time. The most important thing is developing responsible long-term habits like paying bills on time and keeping balances low.
With diligence and commitment to these credit score boosting steps, you’ll be well on your way to an excellent score and improved financial opportunities. Monitor your progress monthly, dispute errors immediately, and stick to good habits. Healthy credit is well worth the effort!
Limit New Credit Applications
Credit impact: Virtually every time you apply for credit, the lender will run a hard inquiry on one or more of your credit reports. These inquiries and how long its been since youve opened a new account make up 10% of your FICO® Score.
Each hard inquiry will typically knock fewer than five points off your credit score, but multiple inquiries in a short period of time, especially when applying for credit cards, could have a compounding negative effect.
Actions you can take: Only apply for credit when you need it to avoid too many hard inquiries. Before you apply for a loan or credit card, check to see if the lender offers prequalification, which can give you an idea of your eligibility and potential terms with a soft credit check, which wont impact your credit score.
If youre shopping around for a mortgage loan, auto loan or student loan, newer FICO® Score versions will combine multiple inquiries into one for scoring purposes as long as you complete the rate-shopping process within a short timeframe, often between 14 and 45 days depending on the version used.
How long it takes: Hard inquiries remain on your credit reports for two years, but they only impact your FICO® Score for up to one year.
Diversify the Types of Credit You Have
Credit impact: Credit mix accounts for 10% of your FICO® Score and involves managing different types of credit. For example, someone with two credit cards, an auto loan and a mortgage loan will have a stronger credit mix than someone with just one credit card.
Note that your credit mix generally wont be a major factor in determining your eligibility for a loan or credit card, but it can help take a good credit score to the next level.
Actions you can take: Your credit mix will likely improve naturally over time as you apply for different types of credit to meet your financial needs. If youre just starting to establish your credit history, it can help to apply for a starter credit card and a credit-builder loan.
Once you get going, however, try to avoid taking on more debt than is necessary just for the sake of building credit.
How long it takes: Because your credit mix has a smaller influence on your credit score, theres no need to rush. Diversifying your credit mix can take several years as you apply for new credit accounts when you need them.
How to RAISE Your Credit Score Quickly (Guaranteed!)
FAQ
What is the no. 1 way to raise your credit score?
Pay your bills on time.
One of the most important things you can do to improve your credit score is pay your bills by the due date. You can set up automatic payments from your bank account to help you pay on time, but be sure you have enough money in your account to avoid over- draft fees.
What are the 5 main factors that make up your credit score?
- Payment history – 35 percent of your FICO score. …
- The amount you owe – 30 percent of your credit score. …
- Length of your credit history – 15 percent of your credit score. …
- Mix of credit in use – 10 percent of your credit score. …
- New credit – 10 percent of your FICO score.
How to get a 700 credit score in 30 days?
What are 3 ways to improve your credit score?
- Paying your loans on time.
- Not getting too close to your credit limit.
- Having a long credit history.
- Making sure your credit report doesn’t have errors.