How to Increase Your Credit Score the Right Way

According to a recent survey by LendingTree, 42% of Americans said their credit scores prevented them from obtaining a financial product in the past year. Furthermore, 44% of Gen Zs surveyed didn’t know their current credit score and 25% weren’t sure how to find it. 

In your case, maybe you already know that your credit score needs a little work — or maybe you’re nervous to look, but you know you probably aren’t 800+. 

Here’s how credit works, how to view your full credit report, and what steps you can take today to start improving your credit score tomorrow. 

1. Increase your credit score by understanding how it is calculated

To start building your credit, you’ll first need to figure out what’s causing your credit scores to be low. And to do that, you’ll need a basic understanding of how credit scores work. 

Your credit score is like a “credit report card” of how reliable you are with other people’s money. If you borrow money from an auto lender or bank, for example, these lenders will let the major credit bureaus know. 

Then, if you act responsibly and make regular, on-time payments, your lender will send your positive payment history to the credit bureaus and your credit score will go up. 

However, if you miss payments or take out too many loans at once, your lender(s) will report that negative behavior, too, and your credit score will go down. 

All of this matters because the next time you apply for a loan, your lender will take a look at your “credit report card” and see if you’re trustworthy. If they see you’ve taken out a good number of loans and never missed a payment, they’ll offer you a loan with better terms (e.g., low interest). 

But if they see you’re not so reliable and have missed payments or borrowed too much too fast, they’ll see you as a little flaky and won’t offer you the best terms — if they offer you a loan at all. 

Related: How to check your credit score for free

FICO Score

While there are multiple types of credit scores, 90% of top lenders use the FICO score. Here’s how it breaks down: 

Source: Experian

• Payment history (35%) factors in your ratio of on-time to late payments and whether you’ve declared bankruptcy.
• Amounts owed (30%) include your total debt as well as your credit utilization ratio, which is your total credit card debt divided by your total credit limit, expressed as a percentage.
• Credit history (15%) is essentially your “years of experience” borrowing money. It looks at your oldest loan, newest loan, and the average age of your accounts.
• Credit mix (10%) factors in the different credit types you have experience with (credit cards, auto loans, mortgages). In general, making on-time payments for multiple loan types is good for credit.
• New credit (10%) reflects your most recent activity in applying for loans. If you’ve applied for multiple loan types in the past three weeks, for example, your score may drop. 

2. Increase your credit score by checking your credit reports

Every year, you’re entitled to a free copy of your credit reports from the three major credit bureaus (Experian, Equifax, and TransUnion). You can go to each bureau individually, or an easier way is to go to Annualcreditreport.com, which is authorized by the federal government. 

Once you receive your credit reports, usually available as a digital download, review them for errors — these happen more often than you may think. A 2013 study by the Federal Trade Commission (FTC) reported one in four consumers found errors on their credit report that could affect their credit score. An error could be something like credit accounts listed that don’t belong to you, a closed account still showing as open, or accounts showing as delinquent that you’ve paid on time.

If you find an error, you can dispute it, both with the credit bureau and with the creditor that reported it. Explain in writing what the mistake is and provide documents that support your case. Each of the bureaus has a section on its website indicating where and how to file a dispute.

3. Get your credit score  

An important, but confusing point: while your credit report shows your credit history, it doesn’t show your credit score. You need to know your credit score to know how much you need to improve. 

To find out your score, you can access it for free from both the Experian and Equifax credit bureaus. (TransUnion’s is paid at this time.) Getting it directly from the source is a great way to ensure the results are 100% accurate and your data remains safe. 

Below is what it looks like with Experian. Once you plug in your info you’ll be brought to your Credit Overview where you’ll see your three-digit score itself. Scroll down and you’ll see your report card: 

Photo credit: Chris Butsch

(This is just a sample, and yours may look different). 

Anything less than VERY GOOD deserves a closer look. In most cases, it’ll probably be your payment history and amounts owed that send up red flags. These two categories alone comprise 65% of your total credit score, so that’s where you might need to put in the most work. 

If you’re somewhat new to borrowing money, your credit history, new credit, and credit mix may just need a few more years to mature. 

Your credit card issuer or bank may also provide access to either your FICO Score or VantageScore through their online portal or app. So that’s another place to keep track of credit score and, hopefully, watch it increase over time.

4. Clean up past-due accounts and make on-time payments

If you have any overdue accounts, pay them ASAP. Missed payments are one of the fastest ways to tank your credit score, so getting these in order is the best way to get your score back on track. As we mentioned, payment history makes up 35% of your FICO score.

Even if you can’t pay down the full amount on each bill, make sure you’re making at least the minimum payments. (Although you’ll also want to set up a strategy for paying down your debts overall, rather than ending up in a cycle of minimum payments and ballooning interest.)

Setting up auto-pay

To put it bluntly, one of the most pointless, forehead-slapping ways to hurt your credit is to have late or missed payments simply because you forgot about them. You see the missing payment, accrued interest, and ding to your credit score and think ugh! But I have the money right here!

You can often choose a specific day of the week or month (to plan around payday), and sometimes you’ll even get discounts for auto-pay or paperless billing. Also, utility companies often have programs that let you “average out” your monthly bills so there aren’t peaks and valleys. 

If you’re concerned about setting auto pay on potentially large credit card bills, keep in mind that you technically only have to make the minimum payment to avoid a direct impact on your credit. You’ll still want to swoop in and pay off your credit card ASAP, but setting up auto-pay for the minimum payments at least avoids the most direct negative impact on your credit. 

5. Increase your credit score by paying down your balances (in the right order)

Let’s say you have the following credit card debts: 

• Credit Card A: $2,500 at 24.99% APR
• Credit Card B: $2,000 at 29.99% APR
• Credit Card C: $3,500 at 18.99% APR

Which should you pay off first to repair your credit? 

Most experts recommend the “debt avalanche” method which involves paying off debt in order of highest-to-lowest interest rate; so in the above example you’d go B, A, C. Mathematically, this method can save you money and lower your credit utilization ratio faster.

Credit utilization

Your credit utilization is the ratio of how much you’ve borrowed versus the total amount you’re allowed to borrow. You want to keep this number under 30%.

For example, say your total credit limit for the above three cards is $15,000. Your total owed is $8,000. That’s a utilization ratio of 53%, which is too high. 

That’s not to say you can’t use the full amount on your credit card(s) — you can. Just be sure to pay it off every month. It’s only after that balance carries over to a new billing cycle that your utilization ratio will start to take a hit.

Once you fully pay off a card, do a little dance but don’t close the account. At least, not yet. Closing credit card accounts can hurt your credit score, so for now, it’s best to keep it open and just ensure that you keep paying it off. 

Related: What is a debt snowball

6. Increase your credit score by using a secured credit card

One of the most frustrating issues with credit scores is that it’s hard to get access to new credit without a good score, and you can’t work your way up to a good score without proving you can use credit.

So, how can you get around this? One way is with a secured credit card.

Secured credit cards

These are available to anyone, no matter what your credit looks like. To get a secured credit card, you must deposit an amount that becomes your credit limit, minimizing risk for the issuer. This way the bank isn't taking a risk that you won't pay your balance. If you don't pay, they can simply take your security deposit to pay what you owe.

Otherwise, secured credit cards function just like any other credit card, which means making regular payments will boost your credit score. 

Here are the best credit cards for beginners.

7. Hold off on nonessential loan applications

One of the fastest ways to instantly ding your credit is to apply for more credit. 

Regardless of your current credit score, when you apply for any kind of loan (auto, mortgage, even a credit card) your lender will run a “hard check” or “hard pull” of your credit. This means they take a deep dive into your credit report, and as a result, the credit bureaus ding your credit score by a few points.

A saving grace is that if you apply to multiple loans of the same type in a short time, e.g., you’re shopping for auto loans, the credit bureaus won’t ding your credit more than once. The same is not true for credit card applications, which always result in a hard credit pull.

Even still, hold off on nonessential loan applications while you’re trying to rebuild your credit. Consider a balance transfer card or debt consolidation loan to make significant progress in reducing outstanding debts with fixed monthly payments.

8. Increase your credit score by using a credit booster service

There are some services out there, such as Experian Boost, Rental Kharma, and Bilt Rewards (under the Bilt Mastercard) that will report things like utilities and rent payments to the credit bureaus. 

Normally, the credit bureaus only track credit payments, so getting extra points for on-time electricity bills or your monthly rent could help boost your credit score while you go about your daily life.

There are some free services, as well as some that charge a monthly fee. In some cases, the fee for these services is charged to you, as the payee, while others charge the landlord. Research the various options out there and, if you’re a renter, talk to your landlord to see which is the best one for your circumstances.

How long does it take to increase your credit score? 

The length of time it’ll take to see results depends on your existing credit history. Reversing a long history of missed payments and maxed-out cards takes more time than building credit from scratch.

Think of it this way: it’s easier to change your overall GPA as a freshman than a junior — but it’s still very doable in both cases. 

If you’re a “freshman” who’s new to credit, you can improve your credit score in as little as one month by paying down your credit cards and paying all of your bills on time. 

As a “junior” with a bit more work to do repairing past missteps, it could take several months, or even years, to get to a Very Good credit score.

But that’s to go from Poor to Very Good or Excellent. Even if you have a way to go, you may start seeing your score rise way sooner than that. 

FAQs

How long does it take to improve your credit score?

You can start seeing improvements to your score in a few months. Building your credit score from Poor to Excellent can take a few years.

Does getting a new credit card hurt your credit?

Credit cards are types of loans, and any loan application will involve a “hard pull” of your credit that temporarily lowers your score by a few points. Making on-time payments and staying under 30% of your credit limit will improve your score over time when using your card.

What is a good credit score?

In the credit score world, “Good” has a very literal definition of between 670 and 739 out of 850. 

Related: What is a good credit score?

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