Having a poor credit score can be a major roadblock to achieving financial goals and realizing the lifestyle one has always dreamed of. It can limit access to credit, increase borrowing costs and even affect employment opportunities. However, the good news is that improving a low credit score is within reach with the right strategies and mindset.
Below, 15 Forbes Finance Council members share actionable tips that can help individuals turn their credit scores around and pave the way to financial success. From understanding credit utilization to building positive payment habits, these tips are designed to empower individuals to take control of their credit and unlock a brighter financial future.
1. Use Credit
The most straightforward way to build or rebuild a low credit score is by using credit. As part of your credit-building journey, it’s important to pay off your balance each month rather than only making the minimum payments. Lastly, always ensure that any line of credit you open is with an institution that reports to the three main credit bureaus, or you may not see your credit score improve. - Matt Bochenek, Avant
2. Take Responsibility
Be honest with yourself. It's easy to cast blame on external factors that have caused your financial predicament, but it takes courage to take full personal responsibility, and the result of doing so is immeasurable. Taking responsibility for your financial decisions will liberate your mind and allow you to ingest the tips from experts in this article in a completely different manner. - Drew Gurley, Redbird Advisors
3. Get A Secured Credit Card
A secured credit card can be a good entry point to begin building or repairing a low credit score. With this type of product, you put down a security deposit and are only allowed to spend up to the deposit amount. This structure makes it more feasible to make your monthly payments and improve your credit score over time, eventually enabling you to graduate to a mainstream credit card. - Randell Leach, Beneficial State Bank
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4. Consolidate Debt
There are many tools available to help consumers manage and monitor their credit. Consolidating debt into a lump sum and paying off high-interest credit cards and loans through consolidation is a good first step. Consumers should make sure that their credit usage ratio maintains low relative to their overall available line to ensure healthy credit building. - Ben Jen, Ben Jen Holdings SLLC
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5. Reduce The Outstanding Balance
One way to improve your score, and financial health, is to materially reduce the outstanding balances on credit cards. This action demonstrates mastery of self-control and good credit management while driving big savings in interest expense. Improving your available credit line also creates an emergency “safety valve” that, in turn, reduces the level of “financial PTSD” impacting American consumers. - Greg Mitchell, First Tech Federal Credit Union
6. Pay Bills On Time
This is easier said than done if you’re living paycheck to paycheck. Earned wage access (EWA) can really help; it allows people to use their wages as they earn them rather than bi-weekly or monthly. By helping to free up short-term liquidity and budget more consistently, they can pay bills on time, avoid late fees and overdrafts and, in turn, can improve their credit score. - Ram Palaniappan, EarnIn
7. Keep Your Balance Low
Try to keep spending 25% below the credit limit and make payments as early as you can, which is even more strategic than simply paying on time (which remains critical). Not only will low spending prevent you from overextending yourself and being unable to pay back your debt, but it will also help improve your score quickly. - Anthony Georgiades, Pastel Network
8. Pay Down Maxed-Out Cards
After reviewing over 100,000 credit reports, the path to a higher FICO score is to work to pay down maxed-out or high-balance credit cards. This represents 30% of your credit score and is a quick way to boost your score. You can also get a personal installment loan to pay down your cards and that can be effective too. Definitely the top tip to a higher FICO! - Leo Kanell, 7 Figures Funding
9. Work With An Accountant
Consolidating debt is often overlooked when it comes to improving a credit score. Many small business owners put expenses on personal credit cards and then harm their scores to keep their businesses afloat. Working with a skilled accountant can help them identify new opportunities for reducing their overall debt by consolidating it into low-interest options. - Nick Chandi, ForwardAI
10. Avoid Missed Payments
I will never forget my father saying, "Pay your bills on time!" Now I get it! 35% of your weighted score is your payment history. Some institutions give you a grace period, but be sure you speak with them before you miss a payment. Next up is the revolving credit ratio, which is 30% of the calculation, so work on keeping that at 20% to 30% usage. Take care of this 65% and you will see your score climb! - Will Murphy, Everlasting Capital
11. Understand Why Your Score Is Low
Young people just starting out can have low scores because they have no history. There’s a very different approach to addressing that problem than for someone with a long credit history and high balances on credit cards, for instance. Know why your credit score is low so you can know which actions will bring it up. - Todd Sixt, Strait & Sound Wealth Management LLC
12. Keep Your Oldest Account Open
There’s no overnight cure for a low credit score, but you can slowly improve it by maintaining stable credit accounts. Don’t be afraid to use credit, because a thin credit file is hard to improve. Keep your oldest account open as long as you can and only apply for new credit when you need it. Each time you apply, another credit inquiry goes on your report. Too many inquiries can hurt your score. - Luz Urrutia, Accion Opportunity Fund
13. Analyze Spending Habits
In order to help an individual improve their credit score, first analyze their current spending habits, then demonstrate how each dollar earned should have a specific use. This will help identify areas of opportunity within their own financial model where they can improve their current debt levels and overall debt structure. - Kacey Butcher, Adaptation Financial
14. Track Your Credit Score
There are many free tools that allow you not only to track your credit score but to see the different drivers of that score and the impact each has on it. By getting an understanding of why the score is what it is, you can get clarity on actionable items that will help to increase the score. - Sean Frank, Cloud Equity Group
15. Educate Yourself
Credit calculation involves different levers that change the outcome. Educate yourself! If needed, get a counselor to come up with a plan. In general, paying back on time, having low balances, monitoring regularly and having fewer credit cards help. You can also get a secured card that requires an upfront cash deposit as collateral so you never go above limits or miss payments and improve your score. - Anar Pitre, Lotus Capital Partners
