There are a lot of good reasons to improve your credit score. It can help you secure an apartment, qualify for a mortgage or car loan, and pay less for home and car insurance. I can also help you negotiate better rates and terms on financed purchases. It may even let you access more valuable rewards and perks that often come with credit cards that are targeted to people with excellent credit.<\/p>\n
For the first year of the pandemic, some low-income households in the U.S. actually saw\u00a0credit scores rise<\/a>. This may have been due to several things. There was an influx of pandemic relief cash authorized by Congress. Also, many people had lower expenses thanks to the sudden stop of commuting and business closings that kept folks at home. However, increasing fears of a recession may yet undo some of those gains. And if you\u2019ve been laid off, as so many in the tech sector have been, those financial stressors can do further damage to your score.<\/p>\n If you\u2019re not happy with your credit score, or simply want to try to improve it, first make sure you understand the basics of credit reporting and\u00a0credit scores<\/a>. Then take a look at the following 15 strategies to help you reap the benefits of a higher score.<\/p>\n While credit scores are determined by company-specific formulas that take into consideration a number of factors, late payments can really hurt your score. So while it won\u2019t give you an immediate boost, and it\u2019s probably not the most exciting strategy on our list, paying your credit card and loan bills on time every month is the single most powerful thing you can do to help you\u00a0repair a damaged credit score<\/a>.<\/p>\n Payment delinquencies of 30 days or more may significantly lower your score. This is especially true if there are several such late payments on your credit report. Late payments will also likely result in additional fees and raised interest rates. That means it will cost you more to keep using that credit and may reduce the amount of cash you\u2019ll have on hand to pay down balances.<\/p>\n Credit utilization is the ratio of credit that you use at any given time to the amount of your total credit limit. For example, if you have a combined total credit limit of $10,000 and you\u2019re carrying total balances owed of $5,000, you have a 50% credit utilization rate. In other words, you\u2019re using exactly half of the credit that was made available to you. While there\u2019s no bright-line rule here, most experts generally recommend that you keep your credit utilization rate below 30% if you want to improve your credit score.<\/p>\n It\u2019s important to shop around for the best deal when you\u2019re about to make a\u00a0major financed purchase<\/a>. However, you can actually do some damage to your credit score if you apply for\u00a0too many new accounts<\/a>\u00a0at the same time. More than a few new credit inquiries on your account in a short span of time can constitute a red flag to lenders who may be concerned that you\u2019re a risky borrower.<\/p>\n Note that this only applies to so-called hard inquiries, or actual applications, which can imply uncertain financial circumstances to lenders. Hard inquiries are more significant if you don\u2019t have a lengthy credit history or if you only have a few accounts total. Soft inquiries, which generally include prequalified offers you might receive, will not result in an adverse impact on your score.<\/p>\n Credit reporting bureaus and scoring companies aren\u2019t infallible\u2014they\u00a0often make mistakes<\/a>. If you aren\u2019t already in the habit of regularly reviewing your\u00a0credit score<\/a>\u00a0and credit reports from all three of the major reporting bureaus (that\u2019s Experian, TransUnion, and Equifax), start doing it now. In the U.S., you have\u00a0the right to request a free copy<\/a>\u00a0of your credit report from each of those companies once a year. Start by visiting\u00a0AnnualCreditReport.com<\/a> or call 1-877-322-8228.<\/p>\n Next, review your reports carefully for any errors. If you note any discrepancies\u2014such as accounts listed as still due that you paid off, or payments erroneously marked as delinquent\u2014take steps to\u00a0dispute those errors<\/a>\u00a0as soon as possible.<\/p>\n Legitimate, consumer-oriented credit repair services may help you identify and resolve negative items and errors on your credit reports. However, this is an area that can be rife with fraud, so it\u2019s vital to do your own research, look at independent user reviews, and get personal recommendations from friends or colleagues where possible.<\/p>\n To choose a service or company that\u2019s reputable and transparent, avoid companies that:<\/p>\n A secured credit card is one where you make a security deposit in some amount (usually $200 or more). The amount of your deposit then becomes your credit limit. You\u2019ll make purchases on the card just as you would with any other credit card, up to the amount of your limit, then pay those off each month.<\/p>\n If you fail to pay the amount due, the credit card company can access your deposit to satisfy the debt, because the deposit secures their extension of credit to you. It eliminates their risk and is thus an attractive option for borrowers trying to\u00a0rebuild their credit<\/a>\u00a0and raise their scores.<\/p>\n Remember that any debt you carry that\u2019s tied to a high interest rate is costing you every month that it isn\u2019t paid off in full.\u00a0High interest debt<\/a> can cause a lot of financial problems, including making it harder for you to maintain good credit, improve your credit score, and pay down other debt. Pay off your expensive debt and free up that cash to make full and timely monthly payments as well as reduce your overall debt burden, both of which will help you boost your credit score.<\/p>\n It\u2019s tempting to close old credit accounts once you\u2019ve successfully paid them off, especially if they have negative historical events such as delinquent payments. However, closing the account won\u2019t get rid of the past events, and it can actually do more harm than good. That\u2019s because the age or length of your credit accounts is also a factor that companies use to calculate your credit score.<\/p>\n If possible, keep those accounts open with zero or very low balances and think twice before\u00a0freezing your credit<\/a>, unless you\u2019ve been the victim of identity theft. That\u2019ll also help improve your credit utilization rate for a further score boost.<\/p>\n Maxing out your credit card accounts can not only tank your credit utilization rate, but it also indicates that you\u2019re experiencing financial stress. Lenders will definitely see that as a red flag and may decline credit applications or raise interest rates on existing accounts as a result in order to protect themselves. That can eventually lower your credit score.<\/p>\n A credit limit isn\u2019t free money. Whatever you charge, you\u2019ll have to pay back with interest (usually). Sometimes that interest can be fairly steep. Resolve never to charge more than you can reasonably expect to pay off each month. Except in cases of actual emergency, such as medical emergencies or essential car or home repairs, you\u2019re better off using credit for purchases you\u2019d otherwise make in cash.<\/p>\n Wait, didn\u2019t we just say\u00a0not\u00a0<\/i>to close out old accounts? Yes, and for the most part that\u2019s good advice. However, there\u2019s a potential exception here. It just requires a phone call to your card issuer, during which you express your interest in closing the account. If you\u2019ve got a history of regular card use and timely monthly payments, your card issuer may offer incentives to keep the account active.<\/p>\n You might get an increase on your credit limit, a lower interest rate for some period of time, statement credits, a reduced annual fee, or other perks. This isn\u2019t guaranteed, but there\u2019s no real risk in calling and asking if there are any incentives the representative can offer to entice you to stay.<\/p>\n A small percentage of your credit score is determined by what\u2019s known as credit mix. This refers to the types of credit accounts you have. For example, your credit cards are considered different types of credit products than installment loans, such as your car loan. Having both types of accounts represented in your credit reports can help improve your credit score, although probably not by much.<\/p>\n1. Pay your bills on time<\/h2>\n
<\/span>2. Keep your credit utilization low<\/h2>\n
3. Don\u2019t apply for too much new credit at once<\/h2>\n
<\/span>4. Dispute errors on your credit report<\/h2>\n
<\/span>5. Consider a credit repair service<\/h2>\n
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<\/span>6. Use a secured credit card<\/h2>\n
<\/span>7. Pay off high-interest debt<\/h2>\n
<\/span>8. Don\u2019t close old credit accounts<\/h2>\n
<\/span>9. Don\u2019t max out your credit cards<\/h2>\n
<\/span>10. Use credit responsibly<\/h2>\n
<\/span>11. Consider calling your card issuer to close the account<\/h2>\n
<\/span>12. Maintain a diverse credit mix to improve your credit<\/h2>\n
<\/span>13. Be wary of cosigning for someone else\u2019s loan<\/h2>\n