How to Improve Your Credit Score: Steps That Actually Work

A better credit score can mean lower interest rates on mortgages and car loans, easier approval for credit cards and apartments, and even lower insurance premiums in many states. Over a lifetime, the difference between fair and excellent credit can add up to tens of thousands of dollars. The encouraging news is that credit scores respond to consistent habits, and anyone can improve theirs over time.

Know what goes into your score

FICO, the company behind the most widely used credit scores, says payment history and amounts owed are among the biggest factors in its scores. Payment history reflects whether you pay your bills on time. Amounts owed considers how much debt you carry, especially your credit card balances compared with your limits.

Other factors also play a role. Length of credit history looks at how long your accounts have been open. New credit considers how many accounts you’ve opened recently and how many hard inquiries appear on your report. Credit mix reflects whether you have experience with different types of credit, such as credit cards and installment loans.

VantageScore, another scoring company, uses similar factors with somewhat different weightings. The same habits improve scores under either model.

Pay every bill on time

Payment history is the foundation of your credit score. Even one payment that’s 30 or more days late can cause a significant drop. Set up autopay for at least the minimum payment on every credit card and loan so you never miss a due date by accident. Calendar reminders or alerts from your bank provide another layer of protection.

If you’re struggling to make a payment, contact the lender before the due date. Many offer hardship programs or adjusted due dates.

Pay down credit card balances

Your credit utilization, the share of available credit you’re using, can move your score relatively quickly. Lower balances compared with your limits generally help. Many experts suggest keeping utilization under 30%, and people with the highest scores often keep it much lower.

Paying down balances before your statement closing date can help, because issuers often report your statement balance to the credit bureaus.

Check your credit reports for errors

Errors on credit reports are more common than many people think. You can get free reports from Equifax, Experian and TransUnion at AnnualCreditReport.com, the official site for free reports. Look for accounts you don’t recognize, late payments you believe were on time, incorrect balances and old negative information that should have been removed.

If you find a mistake, dispute it directly with the credit bureau reporting it, and consider contacting the company that supplied the information. Bureaus are required to investigate disputes, typically within 30 days.

Be thoughtful about new credit

Each application for new credit can result in a hard inquiry, which may lower your score slightly for a short time. Opening several new accounts in a short period can have a larger effect and also lowers the average age of your accounts. Apply for new credit only when you need it.

When shopping for a mortgage, auto loan or student loan, scoring models typically treat multiple inquiries for the same type of loan within a short window as a single inquiry, so you can compare rates without excessive penalty.

Keep older accounts open

The length of your credit history matters. If you have older credit cards with no annual fee, keeping them open, and using them occasionally for a small purchase you pay off, preserves both your history and your available credit.

Build credit if you’re starting out

If you have little or no credit history, a secured credit card, which requires a refundable deposit, or a credit-builder loan from a credit union can help you establish a record. Becoming an authorized user on a responsible family member’s card can also help in some cases.

If you’ve missed payments

Get current as soon as possible and stay current. Late payments can remain on your credit report for up to seven years, but their impact generally fades over time as you build a record of on-time payments. The most recent behavior matters most to lenders.

Myths to ignore

Checking your own credit doesn’t hurt your score. It’s considered a soft inquiry. You also don’t need to carry a balance to build credit. Paying your cards in full each month builds credit just as well and saves you interest. And closing cards doesn’t always help. It can raise your utilization and shorten your credit history, which may lower your score.

Avoid credit repair scams

The Federal Trade Commission warns against companies that promise to remove accurate negative information or create a new credit identity. No one can legally remove accurate, timely information from your credit report. You can dispute genuine errors yourself for free.

Be patient

Improving your credit takes time, but every on-time payment and every dollar of debt repaid moves you in the right direction. Check your progress periodically, stay consistent, and your score will follow.