According to a LendingTree survey, 42% of Americans said their credit scores prevented them from obtaining a financial product in the past year.
Plus, 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.
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1. Understand How Credit Scores Are Calculated
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.
FICO score
While there are multiple types of credit scores, 90% of top lenders use the FICO score. Here’s how it breaks down:
- 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).
- 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.
READ MORE: How Do Credit Scores Work (and Why Do They Matter)?
2. Check 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 reported that 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 the Experian, Equifax, and TransUnion credit bureaus. Getting it directly from the source is a great way to ensure the results are 100% accurate and your data remains safe.
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 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.
Or you can use a free service like myFICO or Credit Karma to check your score and set up monitoring.
READ MORE: How To Check Your Credit Score for Free
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.
Even if you can’t pay down the full amount on each bill, make sure you’re making at least the minimum payments — you don't want to end up in a cycle of minimum payments and ballooning interest.
READ MORE: Why It’s Hard to Get Out of Debt With Only Minimum Payments
Setting up autopay
One of the most forehead-slapping ways to hurt your credit is to have late or missed payments simply because you forgot about them.
But with autopay, you can often choose a specific day of the week or month (to plan around payday), and sometimes you’ll even get discounts for autopay or paperless billing.
Also, utility companies often have programs that let you average out your monthly bills, so there aren’t peaks and valleys.
5. Pay 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. (You want to keep this number under 30%.)
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. Use 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 credit 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, which don't have the same credit score requirements as unsecured cards.
To get a secured card, you deposit an amount that becomes your credit limit. This way, the bank is protected if you don't pay off your balance — they can simply take your security deposit.
Otherwise, secured credit cards function just like any other credit card, which means making regular payments will boost your credit score.
Some even let you earn rewards or cashback, like the Capital One Quicksilver Secured Cash Rewards Credit Card.
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7. Hold off on Nonessential Loan Applications
One of the fastest ways to instantly ding your credit is to apply for more credit.
When you apply for any kind of loan (auto, mortgage, or 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. As a result, the credit bureaus ding your 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 to reduce outstanding debts with fixed monthly payments.
8. Use a Credit Booster Service
There are some services out there, such as Experian Boost, RentReporters, and Bilt Rewards 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.
If you’re a renter, talk to your landlord to see which is the best one for your circumstances.
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FAQs
How long does it take to improve your credit score?
The length of time it’ll take to see results depends on your existing credit history.
If you’re 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.
If you need to repair past missteps, it could take several months, or even years, to get to a very good credit score.
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.
But making on-time payments and staying under 30% of your credit limit will lift your score back up.
What is a good credit score?
In the credit score world, “good” is between 670 and 739 out of a maximum score of 850.
TL;DR: Yes, You Can Improve Your Credit Score
Improving your credit score comes down to mastering a few key habits: pay all your bills on time (set up autopay if you're forgetful!), keep your credit card balances low, and check your credit reports annually for errors that could be dragging you down.
If you're starting from scratch or have limited credit history, consider a secured credit card to establish good payment patterns. Services like RentReporters and Bilt Rewards can also give you extra credit for things you're already paying, like utilities and rent.
Remember, credit repair is a marathon, not a sprint — but with consistent effort, you'll see steady improvement over time!
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