Insights

How to Improve Your Credit Score

December 15, 2021
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Certified Credit

Your credit score impacts the financial opportunities you can qualify for. Having a high credit score can help you get approved for credit cards, loans, and mortgages. It will also make you eligible for better rates and terms. On the other hand, a low credit score can stand in your way when trying to qualify for these opportunities.

If your credit score is lower than you’d like, you may be scouring the internet looking for ways to improve it. While building a high credit score takes time and consistency, you can speed up the process by taking the right steps.

8 Tips to Improve Your Credit Score Fast

Here are eight steps you can take to boost your credit score and begin qualifying for better rates, terms, and opportunities.

#1 Understand Which Factors Impact Your Credit Score

Before you can improve your credit score, you need to know which factors impact it. This way, you can make the changes to your credit management habits that will have the greatest impact and assure a positive outcome.

In the United States, 90% of top lenders look at credit scores that are calculated using the FICO scoring model.1

Your FICO credit score is based on the following factors:

  • 35% — Payment history
  • 30% — Credit utilization
  • 15% — Age of credit accounts
  • 10% — Credit mix
  • 10% — New credit inquiries

Based on these factors, the following credit management habits can help you cultivate a high credit score:

  • Make all your credit payments on time
  • Don’t spend too much of your credit limit (ideally, never more than 30%)
  • Use credit for a long time (and do not close old accounts) to showcase your experience
  • Get experience using a variety of credit accounts (both revolving and installment)
  • Keep your new credit inquiries to a minimum

#2 Check Your Credit Score

Once you understand how credit scores are calculated, it’s time to take a closer look at your score and pinpoint exactly which FICO factors need immediate attention.

There are several online resources you can use to check your credit score for free. AnnualCreditReport.com enables you to check yours for free once a year, while also giving you access to your credit report from each of the major credit bureaus, Equifax, Experian, and TransUnion.

Once you have your credit reports in front of you, ask yourself the following questions:

  • Do I have any late or missed payments?
  • Have any payments gone to collections?
  • What percentage of my total credit limit am I currently using?
  • How old are my open credit accounts?
  • What types of credit accounts do I currently have open?
  • Have I applied for new credit within the past six months?
  • Do I have any bankruptcies or foreclosures?

Familiarizing yourself with your credit data will allow you to identify which changes you need to make going forward, whether that’s catching up on missed payments or reducing your credit utilization.

#3 Dispute Any Errors on Your Credit Report

Occasionally, lenders may report inaccurate information to the credit bureaus on accident. Over 30% of Americans have at least one error on their credit report.2 If you’re one of them, this reporting error may be dragging down your credit score.

When reviewing your credit report, if you notice any mistakes you can dispute them with the associated credit bureau. No error is too small to dispute. Some of the most common credit report errors to watch out for are:3

  • Inaccurate names, phone numbers, or addresses
  • Credit accounts that don’t belong to you
  • Inaccurate credit account statuses
  • Duplicate debts
  • Misreported payments
  • Incorrect credit balances or credit limits

After you file a dispute, the credit bureau will reach out to your lender to investigate the error. If your lender can’t prove that the data is accurate, the credit bureau is required to remove the error from your credit report. Once it’s removed, your credit score should be able to adjust to its accurate number.

#4 Get Your Payment History Back on Track

Since your payment history is the most influential factor that impacts your credit score, you want to make sure it’s in great shape.

If your payment history isn’t perfect, there are a few steps you can follow to help it improve:

  • Pay off any late payments right away — A late payment is any missed payment that’s over 30 days late. The later the missed payment, the worse it is for your credit score. To avoid a negative impact on your score, you should try to pay back late payments as soon as you can.
  • Find out if your lenders are willing to remove late payments — Even after you pay them off, late payments can remain on your credit report for up to 7 years.4 Fortunately, their impact on your credit score will decrease as time goes on. Even so, you can increase your credit score faster by getting them removed early. All you must do is ask your lender politely if they’d be willing to remove them. If the missed payment in question went to collections, call the collection agency instead. There’s no guarantee that your creditor will oblige this request, but if they do, it can make a notable difference in your credit score.
  • Develop a payment system that works for you — Going forward, you should develop a system that makes it easier for you to make your payments on time. Here are a few effective strategies:
    • Establish a reliable bill filing system (either paper or digital)
    • Create calendar alerts to remind you of your payment due dates
    • Set-up automatic payments for each credit account’s minimum payment

If you’re struggling to afford a credit payment, you should always reach out to your lender before it’s due. They may be willing to put you on a payment plan and agree to keep the late payment off your credit report in return.

Once your payment history is back on track, your credit score should start improving gradually over time. However, if you had a very poor payment history to start with (multiple collections accounts, bankruptcies, etc.), you may have to wait for these negative marks to fall off your credit report before you see significant improvements in your score. Negative marks typically remain on your credit report for seven years.

#5 Reduce Your Credit Utilization

Your credit utilization ratio compares how much credit you’re using to the amount of credit you have access to. For example, if you have a combined credit limit of $1,000 and your current credit balance is $350, your credit utilization would be 35%.

Since credit utilization is the second most impactful factor in the FICO credit scoring model, reducing yours can help you increase your credit score quickly. Ideally, you want to always keep your credit utilization below 30%. If you can keep it under 10%, even better.

Tips to Lower Your Credit Utilization

Here are a few ways to reduce your credit utilization and boost your credit score:

    • Pay down revolving credit card debt — If you’re in a lot of credit card debt, you need to make paying it down a priority. Reducing your total debt balance will help you maintain a lower credit utilization. While you’re tackling your debt, you may need to be a little more frugal, so you have extra funds to put towards your debt payments. But, this temporary sacrifice will be well worth it when it increases your credit score.
    • Spend sparingly — Once you’re no longer in a lot of debt, you can maintain a low credit utilization by using your credit card sparingly. Try to always keep its utilization below 10%.
    • Set up high balance alerts — Some credit card companies allow you to set up alerts to let you know when you’ve reached a certain balance. By setting alerts at your desired credit utilization amount (ideally 10% as mentioned above), you can maintain an optimal credit utilization with ease.
    • Make multiple payments during the month — Your credit utilization is calculated using the balance that’s shown on your monthly credit card statement. You can lower this amount by making multiple payments throughout your billing cycle. This tip is especially helpful if you make a large, one-time purchase on your credit card that pushes your credit utilization past 30%.You can also achieve this end by scheduling your credit card payment to post right before the end of your billing cycle. This way, your reported balance will be at its lowest.
    • Ask your lenders for credit limit increases — Keeping your spending low is only one side of the credit utilization equation. The other half involves your credit limit. By increasing your credit limit, you can lower your credit utilization instantly.

Generally, you can request a credit limit increase from your lender every six months, if you haven’t been maxing out your credit card. Just give your lender a call or request one online. It should only take a few minutes to fulfill the request.

Your lender may or may not need to do a hard inquiry to grant you the credit limit increase, so make sure to ask beforehand. Hard inquiries can temporarily lower your credit score, though the credit limit increase may still be worth it in the long run.

    • Apply for a new credit card — Another way you can increase your credit limit is to open a brand new credit card. If you have fewer than three credit cards5, this may be a worthwhile option. Remember: a new credit application will also result in a hard inquiry into your credit report!

#6 Avoid Unnecessary New Credit Applications

Unless you’re applying for new credit to get a credit limit increase, you should avoid any new credit applications while you’re trying to boost your credit score. Not only do new credit accounts result in hard inquiries, but they also lower the average age of your credit accounts. Both events can reduce your credit score and set back your credit-improvement progress.

Additionally, waiting to apply for new credit after you’ve improved your credit score will help you qualify for more favorable terms.

#7 Become an Authorized User

If you have a family member or close friend who has excellent credit, find out if they’d be willing to add you as an authorized user on their credit account. As an authorized user, you’ll receive a credit card with your name on it that’s tied to their account.

Being an authorized user can boost your credit score quickly, because this credit accounts’ activity will be reported under your name too. For this reason, it is important to make sure the account holder has great credit management skills. Otherwise, being their authorized user could have the opposite effect.

#8 Take Advantage of Certified Credit’s CreditXpert Tools

Lastly, you can use our CreditXpert tools to determine what steps will make the greatest impact on your credit score.

Here’s how these tools work:

  • CreditXpert Wayfinder — Where there’s a will, there’s a way! This sentiment certainly applies to your credit score. With our helpful Wayfinder tool, you can gain insight into what actions you can take to improve your credit score. By taking the guesswork out of it, you can enjoy greater assurance that the changes you make will yield the credit score improvements you’re after. 
  • CreditXpert What-If Simulator — Our What-If Simulator enables you to test out an unlimited amount of scenarios involving your credit management. For example, you can see how much your credit score will increase if you make all of your current credit payments on time for the next year. By reviewing the potential outcomes of positive credit decisions, you can decide with confidence what the best path forward looks like for you and your credit score. 

How Long Do Credit Score Improvements Take?

As you can see, there are many ways you can increase your credit score. But, the amount of time it will take for these strategies to yield results depends on your credit score’s starting point. For example, recovering from one missed payment will take a lot less time than rebuilding your credit score after bankruptcy.

No matter where you’re starting from, following these steps with dedication and consistency can earn you a high credit score in due time.

Explore Certified Credit’s Blog

For more credit-related tips and tricks, check out the Certified Credit blog. Our library of articles from industry experts dives into a variety of credit-related topics, from credit score improvement strategies for borrowers to tips for mortgage lenders.

 

Sources:

1FICO. FICO® Scores Are Used by 90% of Top Lenders.
https://www.ficoscore.com/about

2Consumer Financial Protection Bureau. What are common credit report errors that I should look for on my credit report?
https://www.consumerfinance.gov/ask-cfpb/what-are-common-credit-report-errors-that-i-should-look-for-on-my-credit-report-en-313/

3CNBC. A third of Americans found errors on their credit reports. Here’s how to fix those mistakes.
https://www.cnbc.com/2021/06/11/how-to-fix-those-mistakes-on-your-credit-report.html

4Investopedia. How Long Does Negative Information Stay on Your Credit Report?
https://www.investopedia.com/how-long-does-negative-information-stay-on-your-credit-report-4769774

5Consumer Financial Protection Bureau. What’s a credit inquiry?
https://www.consumerfinance.gov/ask-cfpb/whats-a-credit-inquiry-en-1317/

6FICO. UltraFICO.
https://www.fico.com/ultrafico/

7CNBC. Here’s How Experian Boost Can Help Raise Your Credit Score For Free. https://www.cnbc.com/select/how-experian-boost-works/