Strategies for Boosting Your Credit Score

If you’re frequently denied credit or only qualify for loans with high interest rates, your credit score might be the issue. Fortunately, there are numerous strategies to help improve your score.

As your score rises, you’ll typically find it easier to obtain loans at more favorable rates.

How to Increase Your Credit Score

Improving your credit score requires time, patience, and financial discipline, according to Tom Quinn, vice president of strategic alliances at FICO. “There’s no quick fix for your FICO score, but focusing on behaviors that creditors value can make a significant difference,” he says.

In essence, while there isn’t a magic solution, the following steps can help you boost your score:

Check Your Credit Reports and Dispute Errors

Many people worry that checking their credit report will negatively impact their score, but this is a misconception, says Christina Roman, consumer education and advocacy manager at Experian. “Consumers should regularly check their credit reports,” she advises. Reports from TransUnion and Equifax also contribute to your credit score.

You can obtain a free credit report from each bureau at AnnualCreditReport.com. If you spot any errors, address them promptly, especially if they seem to be affecting your score. To dispute an error, contact both the credit bureau and the information provider with proof of the mistake.

Avoid Missing Payments

Your payment history accounts for 35% of your FICO score and is crucial for your VantageScore as well. While a slight delay might incur a fee, it won’t immediately affect your score. However, payments more than 30 days overdue can be reported to credit bureaus, impacting your score.

To maintain a good score, consistently pay your bills on time. Setting up payment reminders or automatic payments can help avoid late payments. Positive payment behavior over time will gradually improve your score.

Lower Your Credit Utilization Rate

Credit utilization refers to the ratio of your credit card balance to your credit limit. For example, if you have a $1,000 limit and a $100 balance, your utilization rate is 10%. Aim to keep this rate as close to 0% as possible, rather than the commonly advised 30%, says Roman.

Reducing your balance or requesting a credit limit increase (while not using the new credit) can help. Paying down balances multiple times a month rather than in a single large payment can also be beneficial.

Avoid closing old credit cards, as this can increase your utilization rate and lower your score. However, if overspending on a card is a problem, closing it might prevent further debt.

Other Ways to Improve Your Credit Score

Become an Authorized User: If you’re new to credit and a trusted friend or family member with excellent credit adds you as an authorized user, your score could improve significantly. Ensure the primary cardholder maintains good credit practices to avoid negative impacts.

Take Out a Small Loan: Adding a new credit line can enhance your credit mix, an important factor in your score. Credit-builder loans, designed for those without a credit history, can be helpful. Use loans responsibly to build credit.

Open a Secured Credit Card: A secured card requires a deposit to establish your credit limit. Payments are reported to credit bureaus, aiding in building or rebuilding your credit score.

By following these strategies and maintaining financial responsibility, you can effectively improve your credit score over time.