Is your credit score lower than you’d like it to be? That’s ok – you have the power to give your score a boost by following the eight tips laid out below. 

Understanding your credit report

The Fair Isaac Corporation (FICO) developed a method for calculating credit scores. Today, FICO’s approach is still one of the most reliable and widely used scoring systems. Most lenders use your FICO score to determine whether to approve your loan. 

Three major credit bureaus track your credit — Experian, Equifax, and Transunion. If you apply for a loan or credit card, the lender will request your credit report from at least one of these bureaus. Usually, they’ll get a report from two or three reporting bureaus. That’s because your score may vary slightly. 

A good credit score increases your chances of getting approved for a loan or credit card. Higher scores also give you access to better interest rates. 

FICO credit scores range from 300 to 850 and break down as follows:

  • Poor: Under 580
  • Fair: 580–669  
  • Good: 670–739 is good 
  • Very good: 749-799
  • Exceptional: 800+

How to improve your credit score 

If you want to improve your credit score, these eight tips can help.

1. Make those payments on time

Level of impact: High 

If you owe money to lenders, make sure every payment is on time. Credit bureaus analyze your repayment history when calculating your score. If you make many late payments, your score will suffer.

This tip is easy to apply. Pay your bills on or before the due date. Over time, you’ll build a long history of on-time payments. In turn, your score will go up. 

If you are going to be late on a payment, let the lender know. Lenders might be flexible if you have an emergency, especially if you usually pay on time. They could waive late fees or accept an alternative payment plan. However, if you don’t tell them and just pay late, they’ll probably report you to credit bureaus.

If you wait too long to pay, lenders may even send your file to a collections agency. Having accounts in collections will make your score drop even more. You want to avoid that if at all possible. 

Pro tip: Schedule bill reminders in your calendar so you never miss a payment. Consider using an app to track upcoming bills and automatically remind you.

2. Check for errors

Level of impact: Medium

The credit bureaus put a lot of effort into tracking your score. However, even they make mistakes. 

If your score seems unusually low, review your credit history. Don’t worry — you won’t have to pay for the report. You have the right to get one free copy from each credit bureau per year. They also offer free weekly online credit reports.

After you get your reports, compare the files. Look for errors or signs of fraud like:

  • Inaccurate personal details
  • Accounts that don’t belong to you
  • Incorrectly reported late payments

If you find a problem, let the credit bureau know immediately. They will correct any errors in your report and recalculate your score. 

Pro tip: Sign up for credit monitoring so you can receive alerts if your score changes. If a new account gets opened that you don’t recognize, you can act fast to minimize the damage to your score. 

3. Keep balances low

Level of impact: High

Lenders don’t just consider your total debt when evaluating your score. They also look at your utilization rate. The utilization rate is the percentage of credit you are using on each credit line, which is your borrowing limit.

Let’s say you have a credit card with a $10,000 limit. If your balance is $6,000, your utilization rate is 60%. Generally, you want to keep your utilization rate under 30%. If you want an exceptional credit score, try to get it under 10%. 

Pro tip: Credit bureaus will consider individual and total utilization rates. So if you have two cards, each with a $10,000 limit, they’ll look at the utilization rate per card, along with the overall utilization. Make sure you have a complete picture of where your money is going to keep balances low.

4. Responsibly use your credit

Level of impact: Medium

Lenders take your credit history and activity into account when calculating your score. You don’t want to zero out all of your cards and get rid of every loan. The key is to responsibly use your credit. 

For example, you could enroll in autopay with your cell phone company and use a credit card to settle your account. Then, pay off the balance each month. This shows continuous activity on your card.

You should also avoid racking up huge credit card bills or applying for new lines of unnecessary credit. It’s helpful to view credit cards as tools for emergencies instead of ways to expand next month’s shopping budget. 

Pro tip: Managing and reducing debt involves strategically using your credit lines for planned purchases. For instance, you could get gas once a month on your credit card and then pay it off the next cycle. 

5. Don’t open several accounts in a short time frame

Level of impact: Medium

Among other information, lenders want to know that you are financially stable. To determine this, they’ll look at your credit history and account activity. While they expect you to open up new accounts periodically, they don’t like to see many accounts springing up in a short time frame.

For instance, let’s say that you just financed a new car and then opened up three credit cards within a 60-day period. You may have legitimate reasons for opening these new accounts. However, to a lender, it could be a sign of financial trouble. 

Pro tip: Try to wait 90–180 days before opening up an account after getting a loan or credit card. This way, your accounts will appear as planned purchases rather than sporadic activity. 

6. Don’t close your accounts

Level of impact: High

Canceling credit cards will help prevent overspending and improve your score, right? Not necessarily. Closing accounts can potentially hurt your score in two ways: by diminishing your credit mix and reducing the average age of your accounts.

Your credit mix refers to the various types of credit accounts you have, such as credit cards, student loans, mortgages, and auto loans. A healthy mix can benefit your score, but you shouldn’t open up new accounts just to diversify your mix. Instead, diversify your credit mix naturally over time and maintain old accounts to build your total credit history.  

Lenders consider your total credit history when evaluating loanworthiness. The longer your credit history, the more positive it is for your score. If your oldest credit card has been open for 10 years, keeping it open can improve your score. 

Pro tip: Don’t close accounts unless you have to (e.g. when selling a home or paying off a car loan). Instead, keep them active and use them responsibly. You can still stay on track with your budget if you’re monitoring your accounts closely.

7. Stay focused when shopping for a loan

Level of impact: Low

If you are about to take on a major loan, like a mortgage or vehicle note, it’s smart to shop around. However, don’t wait for long stretches between credit applications. 

You get a grace period after your credit is pulled to compare options. For example, you have 45 days to shop mortgage options after the first credit pull. No matter how many lenders you talk to during this period, you’ll only be penalized for one credit pull. 

Pro tip: Have a plan in place before you submit your credit application. Make a list of lenders you’d like to consult and ensure they all run your credit within the grace period. 

8. Make a plan for paying off debt

Level of impact: High

Paying off debt is a long process. However, it’s one of the best ways to improve your score. That said, you need a sound plan if you want to succeed. 

Keep track of how much money you make each month, along with all of your expenses and debt. Make sure to include the cost of ongoing needs like rent, utilities, groceries, and gas. Also, determine how much you’re spending on things you want and can possibly adjust. 

Pro tip: Easily monitor how much you’re earning and spending with a budgeting app. Set a plan with clear savings goals that can go towards paying off debt. 

Start your journey toward a solid credit score

For some, improving a credit score can be a relatively simple and quick process. For others, the road to a high score is longer and a bit more challenging.

Regardless of which group you belong to, the key is diligence. Create a plan, identify what you want to achieve, and stick to it. Before you know it, you’ll be meeting your credit score goals.