How to Improve Your Credit Score (2024)

Having a high credit score can open doors and save you money.

Whether you’re applying to rent an apartment or get a loan, your chances of success—and favorable terms—hinge on your credit score, or FICO score.

Consider a mortgage: If you have excellent credit, you could secure a loan with an interest rate that’s as much as 1.5 percentage points lower than someone with marginal credit. That could save you hundreds of dollars every month—thousands every year for the life of the mortgage. So, if you have a $250,000 15-year mortgage with a fixed interest rate of 8.5%, you’ll pay about $193,000 in total interest. If you get the same mortgage with an interest rate of 7%, those interest payments come out to around $154,000, saving you roughly $40,000 on the mortgage loan.

Credit scores are usually on a scale of 300 to 850, and your score can fluctuate often. In general, scores above 750 are considered excellent.

What Ingredients Go Into a Credit Score?

Here are the five primary factors that determine your FICO score, from most to least important:

1) Payment history of credit cards and loans

2) Amount of money you owe versus your total available credit

3) Length of credit history

4) New credit

5) Types of credit

The 5 Key Factors of Your Credit Score

How to Improve Your Credit Score (1)

Here are a few ways you can improve your credit score.

Check Your Credit Report and Fix Any Errors

Most errors on a report, such as duplicated information, incorrect addresses, or credit limit errors, don’t have a significant impact. But some can be bigger deals.

That’s why you should check your credit report at least once a year to make sure all the information is correct.

You’re legally entitled to a free report annually from each of the three major providers, Experian, TransUnion, and Equifax.

Start by checking the public records section of your credit report. If a lien or bankruptcy that isn’t yours shows up on your credit report, it’s probably having a severe impact on your credit score, and you should go to the public agency to get it corrected as soon as possible.

If you find a less significant error, such as a mistake in the identifying information or credit account data, you can dispute the information with the credit reporting agency. The credit agencies have online tools you can use to dispute incorrect information: Equifax, TransUnion, and Experian.

Build Your Payment History by Always Paying on Time

The biggest factor affecting your credit score is your payment history. Payment history looks at the number of past-due payments, how far past due they were, and how recently those late payments occurred. If you’ve had late payments in the past, they will affect your credit score less and less over time if you establish a history of dependable on-time payments.

The takeaway: Stay on top of due dates. Sign up for automatic bill pay if your credit card company has that option or set a reminder for yourself a few days before your payment is due.

Limit the Amount You Owe

The next biggest factor affecting your credit score is the amount you owe on your credit card(s). This factor considers the number of accounts with balances and how much of your total available credit you are using. Your credit utilization score is calculated by dividing the total amount of money you owe by your total credit limit. For instance, if you owe $3,000 and your credit limit is $10,000, you have a 30% credit utilization. Any percentage below 30% is considered good in terms of your credit score, but the lower the better.

The takeaway: When possible, treat your credit card like a debit card, and don’t spend more money than you have. Resist the temptation to spend up to your maximum credit limit.

Maximize Your Credit History by Keeping Long-Standing Accounts Open

Another contributing element is the length of your credit history. Keeping your oldest accounts open and in good standing can help your credit score. You’ll want to think carefully about closing your long-standing lines of credit.

Let’s say you decide you have too many credit cards and want to close one. You’re deciding between one you’ve had since 2004 and one since 2016. All things equal, it’s better for your credit score to keep the card with the longer history of on-time payments open. However, this shouldn’t be the only factor driving your decision. If the older card has a higher interest rate or annual fee, it could be better to close it.

The takeaway: If you feel confident that you can keep your spending down and pay on time, it’s a good idea to open a credit card as early as possible to start building your credit history. Your future self will thank you.

Open New Credit Wisely and Understand the Effect of Inquiries

Opening new lines of credit frequently can be an indicator of financial troubles, so it’s good to be mindful when you do it. New credit looks at the proportion of accounts that were recently opened, and the number and recency of new credit inquiries. Inquiries happen when you apply for a credit card, car loan, or other line of credit, and the provider requests your credit score. These credit checks are considered “hard inquiries” and can have an impact on your credit score.

Only inquiries that you initiate by applying for new credit count against your score, so checking your own score will not count against you. When you check your own credit score, or when an employer or landlord is conducting a background check, this is considered a “soft inquiry.” Soft inquiries have no effect on your credit score.

The takeaway: Choose your new lines of credit wisely, and consider the timing of when your credit score could take a hit.

Have a Mix of Credit Types

A borrower with a long history of responsibly managing a mix of credit types—such as a mortgage, a credit card, and an auto loan—will likely have a higher credit score than someone with just one type, all else equal. That said, your credit mix only accounts for 10% of your credit score.

The takeaway: Having a mix of credit types is a small piece of your overall credit score; stick with the credit lines that make sense for you.

How to Improve Your Credit Score If You’re Just Starting Out or You’ve Had Some Missteps

The options below could help you build good credit (but only if you always pay on time).

Get a secured credit card. A “secured” credit card is backed by a secured payment that’s used as collateral on the loan. Unlike a debit card, a secured credit card can help you establish and build credit. Make sure you understand the fees and conditions when applying for secured credit cards.

Consider an auto loan. Auto loans can be easier for subprime lenders to get than other types of loans. There are a few reasons for this: Data reveals that many people who default on other types of loans still tend to make their car payments to keep using their vehicle. Also, auto loans generally require a down payment and are considered “secured” because the car itself is collateral. The auto credit score used by auto lenders is different from the regular credit score, though it is also calculated by FICO. Many auto lenders base their lending decisions on your auto credit score, which is calculated primarily on your previous auto loan history and not your overall credit.

The author or authors do not own shares in any securities mentioned in this article.Find out about Morningstar’s editorial policies.

How to Improve Your Credit Score (2024)

FAQs

What is the main way to improve your credit score? ›

The road to a healthier credit score
  • Pay bills on time. ...
  • Watch your credit card balances. ...
  • Don't mindlessly open new credit card accounts. ...
  • Alert banks and card companies when you move. ...
  • Check your accounts online. ...
  • Pay off delinquent bills. ...
  • Look for inaccuracies.

How can you improve your credit score group of answer choices? ›

How do you improve your credit score?
  • Review your credit reports. ...
  • Pay on time. ...
  • Keep your credit utilization rate low. ...
  • Limit applying for new accounts. ...
  • Keep old accounts open.

How can I improve my high credit score? ›

Ways to improve your credit score
  1. Paying your loans on time.
  2. Not getting too close to your credit limit.
  3. Having a long credit history.
  4. Making sure your credit report doesn't have errors.
Nov 7, 2023

What are five 5 tips for improving your credit score? ›

Here are five credit-boosting tips.
  • Pay your bills on time. Why it matters. Your payment history makes up the largest part—35 percent—of your credit score. ...
  • Keep your balances low. Why it matters. ...
  • Don't close old accounts. Why it matters. ...
  • Have a mix of loans. Why it matters. ...
  • Think before taking on new credit. Why it matters.

Can we improve credit score? ›

So if you are looking to improve CIBIL score pay your dues on time and rack up a good score. Use service that let you automate bill payment so that you don't have to worry about missing deadlines. Too much is, well, too much: Use credit prudently. Avoid taking on too much debt at one time.

How to raise your credit score overnight? ›

How to Raise Your Credit Score 100 Points Overnight
  1. Become an Authorized User. This strategy can be especially effective if that individual has a credit account in good standing. ...
  2. Request Your Free Annual Credit Report and Dispute Errors. ...
  3. Pay All Bills on Time. ...
  4. Lower Your Credit Utilization Ratio.

What is the first step to improve your credit score? ›

  1. Pay credit card balances strategically.
  2. Ask for higher credit limits.
  3. Become an authorized user.
  4. Pay bills on time.
  5. Dispute credit report errors.
  6. Deal with collections accounts.
  7. Use a secured credit card.
  8. Get credit for rent and utility payments.
Mar 26, 2024

How to improve credit score in 30 days? ›

Steps you can take to raise your credit score quickly include:
  1. Lower your credit utilization rate.
  2. Ask for late payment forgiveness.
  3. Dispute inaccurate information on your credit reports.
  4. Add utility and phone payments to your credit report.
  5. Check and understand your credit score.
  6. The bottom line about building credit fast.

How long does it take to improve your credit score? ›

How long does it take for your credit score to go up?
EventAverage credit score recovery time
Missed/defaulted payment18 months
Late mortgage payment (30 to 90 days)9 months
Closing credit card account3 months
Maxed credit card account3 months
3 more rows
Jul 27, 2023

Can I pay someone to fix my credit? ›

Yes, it is possible to pay someone to help fix your credit. These individuals or companies are known as credit repair companies and they specialize in helping individuals improve their credit score.

Can you improve your credit score if its bad? ›

Paying your accounts on time and in full each month is a good way to show lenders you're a reliable borrower, and capable of handling credit responsibly. Old, well-managed accounts will usually improve your score - although be sure to read about the potential impact of unused credit cards.

What are the 5 C's of good credit? ›

The five Cs of credit are important because lenders use these factors to determine whether to approve you for a financial product. Lenders also use these five Cs—character, capacity, capital, collateral, and conditions—to set your loan rates and loan terms.

What are the 5 C's of credit score? ›

Character, capacity, capital, collateral and conditions are the 5 C's of credit. Lenders may look at the 5 C's when considering credit applications. Understanding the 5 C's could help you boost your creditworthiness, making it easier to qualify for the credit you apply for.

How do I raise my credit score 10 points? ›

How to Raise Your Credit Score by 10 Points
  1. Dispute Errors – Errors on your credit report can adversely impact your score. ...
  2. Pay Down Credit Card Debt – Paying off credit card debt reduces your credit utilization, which measures how much of your credit you're using.
Sep 23, 2022

What is #1 factor in improving your credit score? ›

1. Payment History: 35% Making debt payments on time every month benefits your credit scores more than any other single factor—and just one payment made 30 days late can do significant harm to your scores. An account sent to collections, a foreclosure or a bankruptcy can have even deeper, longer-lasting consequences.

How to get 800 credit score? ›

Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.

How can I raise my credit score in 30 days? ›

Steps you can take to raise your credit score quickly include:
  1. Lower your credit utilization rate.
  2. Ask for late payment forgiveness.
  3. Dispute inaccurate information on your credit reports.
  4. Add utility and phone payments to your credit report.
  5. Check and understand your credit score.
  6. The bottom line about building credit fast.

How to raise your credit score 200 points in 30 days? ›

How to Raise Your Credit Score by 200 Points
  1. Get More Credit Accounts.
  2. Pay Down High Credit Card Balances.
  3. Always Make On-Time Payments.
  4. Keep the Accounts that You Already Have.
  5. Dispute Incorrect Items on Your Credit Report.

References

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