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11 Ways to Improve Your Credit Score

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If you aren’t getting approved for credit cards or loans and aren’t getting favorable rates for financing, you might need to  improve your credit score. Building credit isn’t a particularly quick or simple process, but we have some tips that can help you start and keep improving it along the way.

How Can I Improve My Credit Score?

  1. Make Sure Your Credit Reports Are Accurate
  2. Pinpoint What You Need to Improve
  3. Create a Plan to Improve Your Credit Score
  4. Fix Your Late Payments
  5. Build a Strong Credit Age
  6. Clear Up Any Collection Accounts
  7. Don’t Let Old Mistakes Unfairly Haunt You
  8. Get a Credit Card
  9. Open a Secured Credit Card
  10. Limit Credit Applications
  11. Fix Your Credit Utilization Ratio

As you begin the process of improving your credit score, keep in mind that it’s a marathon and not a sprint, but improving your score is worth the effort. A poor credit score can potentially cost you tens of thousands of dollars over the course of a lifetime. It can also become a source of serious stress, making you feel like you just can’t leave the mistakes of the past behind and move on.

Luckily, you’re not alone. Plenty of people struggle to improve their credit scores, and there are numerous ways to build good credit — and reap the rewards that come with having a good credit score.

Improving FICO Scores

When looking to improve your FICO score, you should regularly check your credit report, set up payment reminders, and work to reduce the total amount of debt you owe. Your payment history contributes a staggering 35% to a FICO Score calculation and this category can and will have one of the most significant impacts on how you can improve your FICO score as you will see in the information outlined below.

Rapid rescoring is a practice commonly used by mortgage originators to help improve credit scores. Rapid rescoring is a two-step process that first involves correcting and updating information, and that information is then sent to the credit bureaus. When the rapid rescore is done, this information is added to the consumer’s credit file within days to update and improve their credit scores quickly.

However, the rapid rescore is not a service a consumer can get done on their own. They will need the assistance of the mortgage lender or other lender because rapid rescore is a service the three credit bureaus provide to these lenders.

1. Make Sure Your Credit Reports Are Accurate

The first step to improving your credit score is checking your credit reports. Everyone has three credit reports — one from each of the 3 major credit bureaus: Experian, Equifax and TransUnion. Credit reports can, and often do, have mistakes on them.

A 2012 study from the Federal Trade Commission found that 1 in 5 consumers had an error on at least one of their credit reports, and a follow-up study in 2015 found that those who reported an unresolved error on one of their reports believe that at least one piece of disputed information is still inaccurate.

Since your credit scores are based on the data in your credit reports, it’s incredibly important to make sure that all of that information is accurate. If you have a mistake or discrepancy on your credit report, your credit score will reflect that mistake.

It’s easy to check your credit reports from each of the three major credit reporting agencies. You’re entitled to a free copy, once a year, of all three of your credit reports under the Fair Credit Reporting Act. These free credit reports can be accessed via AnnualCreditReport.com, the government-mandated site run by the major bureaus. (You can also view a free credit report snapshot on Credit.com.)

Most credit scores – including the FICO score – operate within the range of 300 to 850. The credit tiers generally look like this:

  • Excellent Credit: 750+
  • Good Credit: 700-749
  • Fair Credit: 650-699
  • Poor Credit: 600-649
  • Bad Credit: below 600

Once you have your three credit reports in hand, here’s a quick checklist of questions to ask yourself to help you spot potential errors:

  • Is all of your personal information accurate? (That can include your Social Security number, birth date, full name and address.)
  • Are all of your credit accounts being reported?
  • Are there any late or missed payments listed that you remember making on time?
  • Are there any accounts or applications for credit you don’t recognize?
  • Are there any items from decades ago still appearing on your report?

It helps to go through your credit reports with a highlighter and pick out any and all inconsistencies. Keep in mind that a credit report from one credit bureau may have an error, while another may not. That’s why it’s so important to check all three of your credit reports from all three credit reporting agencies for inaccuracies on each. You may find none, a few, or perhaps many errors on your reports. That’s where the next step to improving your credit comes in.

If you find an error on all three credit reports, you’ll have to dispute it separately with each credit bureau, as they’re run separately from one another. You’ll also have to file a separate dispute for each error you find. (Here’s more on dealing with multiple errors on credit reports.) You can dispute these errors on your own for free, or you could consider hiring a reputable credit repair company or credit counselor to help.

2. Pinpoint What You Need to Improve

Simply having an error on your credit report doesn’t necessarily mean it’s causing you to have bad credit. For example, if a misspelled version of your name appears in the personal information section of your credit report, that error probably isn’t causing your credit score to dip.

Other errors, like those listed in the previous section, could be to blame — and there are a number of possible reasons why those errors are there.

Here are a few examples:

  • Your identity has been stolen, and a thief is abusing your credit.
  • A collection account from years ago is still being reported, even though it’s past the statute of limitations in your state.
  • A bill your ex was supposed to pay (per your divorce) has gone unpaid for a while, and now you’re suffering the consequences.
  • You defaulted on one loan, and now it’s showing up as multiple defaults on your credit report because it’s been sold to debt collectors.
  • Your credit information has been mixed with that of someone else who has a similar name.

If your credit report is accurate, but you still have a bad credit score, it’s important to understand why. Here are the major credit scoring factors and how each one can impact your credit score:

  • Payment History: If you have a history of making late payments, creditors see you as a bigger risk, and this factor has the greatest effect on your bad credit score.
  • Amount of Debt: Debt contributes 30% to a FICO Score’s calculation and can be easier to clean up than payment history, according to FICO’s website. (It weighs heavily on other credit scoring models, too.) That’s because if you currently have five maxed out credit cards, creditors worry whether you’ll be able to take on more credit and whether they’ll get paid back first or if your other creditors will.
  • Age of Accounts: If you’re newer to credit and borrowing, there isn’t a whole lot of data to go on. You may need time to see your credit score improve.
  • Account Mix: Lenders want to make sure you can handle different types of credit like credit cards and auto loans, for example. If the only credit you have is in the form of credit cards, you may be keeping your score from rising.
  • History of Credit Applications: If you applied for a dozen new credit cards this month, creditors wonder why. They may be worried you’re overextended financially.

3. Create a Plan to Improve Your Credit Score

If your credit report information is accurate, but you know what you did wrong and want to work to improve it, you can make an action plan using your free Credit.com account, and see how that plan impacts your credit scores over time. You can even get tips on what your problem areas might be.

To begin improving your credit score, you should aim to keep your credit card balances on the lower end along with any other type of revolving credit you may have. You should also begin the task of paying down your debt rather than moving it around, and you shouldn’t close any unused credit cards because you are looking for a “quick fix” strategy to improve your credit scores.

Finally, do not attempt to open any new credit accounts such as obtain a new loan or apply for a new credit card that you don’t need because you are just looking for a way to increase the available credit you already have.

4. Fix Your Late Payments

Even closing an account won’t make your late payments disappear. Your best bet here is to get yourself back on the right track — set up payment due date alerts with all your credit cards and loans and get organized. You can move credit card payment due dates around pretty easily on your bank or lender’s website. Be sure to check your payment due dates in relation to your paycheck schedule.

Ask your credit card issuer or lender if they can forgive that late payment. Maybe you were out of the country on vacation, or the check got lost in the mail, and you had no idea the bill existed. Credit card companies, in particular, are pretty forgiving if you have a long track record of making on-time payments.

Delinquent payments can remain on a credit report for up to seven years from the date of the missed or late payment that the credit bureau reported. This original date is also referred to as the original delinquency date.

The credit bureau, however, will not consider the payment late unless it is at least thirty days past the intended due date. But this does not mean that the credit issuer will refrain from charging you with a late fee or penalty when you are only days late.

5. Build a Strong Credit Age

If you have a short credit history, there’s not much you can do quickly here to improve your credit. You could try to piggyback on a friend or family member’s credit card if they have a long history of on-time payments.

Have them add you as an authorized user. However, you may struggle to find someone willing to do so since they would be responsible for any charges you make. Your other option: Wait it out and don’t close any accounts.

A good average age of credit history would be five years and up. The longer your positive credit history is, the better the credit scores may be. For example, a consumer with an average credit history of only one year may only have a reflective credit score in the lower 600’s while someone with over five years of good history will be much higher.

Keep in mind that if you have no history at all, it will take an estimated three to six months from the beginning date to see any kind of activity being reported on your credit reports. If you have recently acquired a credit card, you should make small purchases you will be able to pay off by the due date to begin to establish credit and show that you can manage a monthly payment.

6. Clear Up Any Collection Accounts

Pay off your debt instead of repeatedly transferring it to new accounts. Contact the debt collector listed on your credit report to see if they’d be willing to stop reporting the debt to each major credit bureau (Equifax, Experian, and TransUnion) in exchange for full payment. This technically violates some of the collectors’ agreements with the credit bureaus, so it may be a non-starter, but it never hurts to try.

Just be sure to get that promise in writing before you make a payment. Also, if it’s a debt that you don’t recognize or seems inaccurate, dispute it with all three credit bureaus. You may get it removed and see your credit score improve quickly.

7. Don’t Let Old Mistakes Unfairly Haunt You

If you’ve filed for bankruptcy, gone into foreclosure or suffered through a short sale, you may be wondering when the credit score misery ends. How long will it really take to get out of the credit score hole you’re in? For all of these mistakes, your credit score takes the biggest hit when it first hits your credit report, but its impact will lessen over time and eventually that account will disappear from your credit report due to federal laws that limit the amount of time it can impact you.

(For more on time limits those federal laws impose, check this out.) If you see an item that shouldn’t be on your report anymore, dispute it with all three credit bureaus, and you’ll likely see your credit score move up when the item is removed.

8. Get a Credit Card

If you’ve never had a credit card before, your scores may be suffering because of that account mix factor we talked about earlier. Just make sure you make on-time payments — a new credit card account with a bad payment history will hurt you, not help you improve your credit scores. If you have a fair, good or excellent credit score, there are many credit card options out there for you. If you have a poor or bad credit score, read the next tip.

  • No fees whatsoever. No late fee, international fee, annual fee, or any-other-kind-of-fee, fee
  • Up to 1.5% cash back after making 12 on-time monthly payments
  • Variable APRs 14.49% – 25.49%
  • 1% cash back on eligible purchases right away
  • Up to 10% cash back from select merchants
  • Build credit alongside tens of thousands of Petal Card members
  • Cash flow technology can help applicants without credit history get approved
  • $500 – $10,000 credit limits
  • Petal’s mobile app makes it easy to manage your money, track your spending, and automate payments
  • No deposits required. Card issued by WebBank, Member FDIC

9. Open a Secured Credit Card

A secured credit card is a type of credit card where you make a deposit into a checking account that “secures” the line of credit the bank or lender is extending you. For example, you can open a checking account and put $200 in it and get a line of credit for $200 (though some secured options will give you a higher credit limit than your deposit).

You can get a secured card with bad credit and adding a new account with a positive payment history will go a long way in showing creditors you’re back on solid ground.

If you default on the payments on a secured credit card, then the deposit you made initially will be used to cover the balance on the card.

10. Limit Credit Applications

The 10% discount for signing up for a store credit card may seem worth it at the moment, but your credit score will take a hit for applying, whether you get approved or not. A hard inquiry will impact your credit score for a full year, though your score will start improving almost immediately after you apply.

The hit is small (normally around 3 to 5 points) but if you’re on the edge of two credit score tiers or applying for lots of credit offers in a short time span, you can do a lot of damage.

If you find that a hard inquiry was placed on your credit file and you have no knowledge of it, make sure to contact the lender that performed the inquiry to see what it was pertaining to. If it is not accurate or you still have no knowledge of the inquiry, you should expect fraud or identity theft and should promptly alert the credit bureaus of the alleged fraud so that it can be investigated. Doing so may also remove the hard inquiry from your credit report, although it may take some time.

Soft inquiries, on the other hand, do not affect your credit score at all and is typically done when a lender is looking to issue you a higher line of credit or someone checks your credit report as part of a background check. A soft inquiry can happen even without your permission, but they will not affect your credit standing in any way.

11. Fix Your Credit Utilization Ratio

If your credit card balances every month are more than 30% of your credit limits, your score is suffering, even if you’re paying off your balances in full every month by the payment due date. That’s because your statement balance is most likely what’s being reported to the credit bureaus. So, keep an eye on those balances, and consider pre-paying some of the balance if you know you’ll be above that 30% mark this month.

The debt-to-credit ratio is definitely considered one of the more important factors that help determine consumer credit. This is also why it is not recommended that you close any unused credit card accounts you have as a way to try and raise your credit scores. Doing so will affect your utilization ratio percentage and can actually do more harm than good.

If you do decide to close any consumer credit account, then make sure you are able to maintain a 15% utilization percentage without having that credit card. If not, you should consider other options regarding that credit card such as replacing that account with a new credit card account just to keep up with your good credit utilization ratio.

Your debt-to-income ratio also plays a big role regarding your credit and is basically all of the monthly debt you have divided by your gross monthly income. Lenders often use the debt-to-income ratio to determine if you will be able to make your payments each month.

The difference between the credit utilization ratio and the debt-to-income ratio is that the credit utilization ratio is the only one that will impact your credit score. The debt-to-income ratio is used by lenders and can be very influential when it comes to extending credit which is why it also plays a significant role and should also be monitored as you would your credit utilization.

Like we said earlier, improving a poor credit score takes time, but it’ll be completely worth it. Constantly worrying about being approved for loans, mortgages and new credit cards is not something you want to be doing for the rest of your life.

Following these tips will not only save you money but also teach you the valuable skills necessary to maintain a good credit score in your future. If you have bad credit, don’t give up on credit entirely. Instead, be responsible and stay educated about your accounts and scores so you can successfully handle your own finances and find a credit repair plan that works well for your situation.

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If you’re consistently going over that 30% mark, ask your credit card issuer for a credit limit increase. If you’ve done some work on your credit score since you first applied and have a good payment history, they may consider upping your limit and giving you more wiggle room.

You can also open a totally new credit card to divert some spending as well. Again, remember the credit inquiry — and be sure your card can handle it. In most cases, the small hit should be more than mitigated by the newly available credit, but if you’ve been applying for a lot of credit lately or you risk being rejected for the new credit line, you’ll want to tread carefully.

Hannah Maluth contributed to this article. This article has been updated. It was originally published March 13, 2017.

One in Five Americans Are Shocked to Find Errors on Their Credit Report

Credit report mistakes can lead to disqualification for mortgages and car loans, as well as increased insurance premiums and interest rates. In some cases, those mistakes can even prevent you from getting a job.

Consumers have started enlisting a law firm to dispute negative items on their credit reports…and they’ve been wildly successful! Click here to learn about the strategies they use to fix their credit.

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[DISCLOSURE: Cards from our partners are mentioned here.]

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Reader Advisory: The National Trade Association we belong to has purchased the below classifieds. Determining the value of their service or product is advised by this publication. In order to avoid misunderstandings, some advertisers do not offer employment but rather supply the readers with manuals, directories and other materials designed to help their clients establish mail order selling and other businesses at home. Under NO circumstance should you send any money in advance or give the client your checking, license ID, or credit card numbers. Also beware of ads that claim to guarantee loans regardless of credit and note that if a credit repair company does business only over the phone it is illegal to request any money before delivering its service. All funds are based in US dollars. Toll free numbers may or may not reach Canada.

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Tips to avoid being defrauded by credit repair companies – Latest News, Breaking News, Top News Headlines

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In relation to the economic crises that have occurred in recent years, it is possible that your credit debts are increasing day by day, due to the use of credit cards, delays in paying mortgages, job losses, business closings , reduction of salaries among others. Reason why you could make the decision to go to a credit repair company thinking that they could support you with your credits. But before you could choose to request the advice of this type of companies, here are some tips to avoid being defrauded, according to what has been published by the National Commission for the Protection and Defense of Users of Financial Services (Condusef).

Tips to avoid being defrauded by credit repair companies

Although you could be anxious to pay your debts, you should be careful, because just as there are credit repairers that are known, there are others that only engage in fraud.

1.- Stay alert

There are no credit repairers that request cash or that you transfer it by deposit to a personal bank account. If you are presented with this type of situation, it is likely that they will try to carry out a fraud, so it is convenient that you could look for other options.

Tips to avoid being defrauded by credit repair companies. Photo: My Pocket.

2.- Do not sign any type of document without having read

If you have in mind to sign a contract with the credit repair company, first read this document in detail and verify what the conditions and deadlines are, and check what penalties are applied in case of delay or abandonment of the program. If you are not 100% convinced, do not sign it.

3.- Repair companies do not clean your credit history

In the event that the credit repair company you go to tells you that it could clean up your credit history, it is probably not true, so your credit history will be negative and in the future it could be difficult for you to obtain a new credit. It is also important to mention that no repair company could erase you from the credit bureau, even if they ask for money, since no person or institution can carry out this procedure.

4.- Look for valid options to negotiate your credit

There are other organizations that you could go to to negotiate or settle your debts, such as your financial institution, where you could agree on a fixed payment plan or, failing that, restructure the credit and also you could not be presented with fraudulent situations, which could lead to affect your personal finances.

It should be mentioned that credit repairers are companies that perform the function of intermediaries between the debtor and the financial institution to which it could be owed and their purpose is to offer the person who has the debt, a kind of negotiation with the banking institution through options for credit settlement. It also tries to reduce the amount through discounts and modify the credit history in the credit bureau.

According to information published by the Condusef, there is currently no legal framework that regulates the operations of credit repair companies, which means that these companies operate independently and independently, for this reason some people may go with repair companies who are not accredited, existing the probability that they are victims of fraud, and in the event that this happens, the Condusef does not have the faculties to offer them support.

More content about loans and personal finances, in our Credits section.



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Credit Repair Companies

7 Ways to Identify a Credit Repair Scam

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Unfortunately, there are people out there always trying to take advantage of anyone that they can. Whether it is a spam call, phishing email, or even a guy on the street trying to take your money, these scammers are everywhere. Credit repair scams are predicated on taking advantage of already desperate people. People who need their credit fixed in order to get a car or home loan will often look for anyone that can help. While there are a lot of legitimate places that can help, there are also hacks that will take your hard-earned money and not do a thing to help you out. We want to help you avoid these scams, so here are 7 ways to identify and avoid a credit repair scam.

1. Look at the documents you are given

If you are entering into a contract with a credit repair company and they do not give you a document called “Consumer Credit File Rights Under State and Federal Law,” then they are breaking the law. They may not be scamming you, but they are knowingly withholding the information that you have the legal right to carry out any actions on your own to repair your credit that they are also going to do. That is a red flag.

2. Read through the contract

Check to see if there is anything in the contract that stands out as unusual and feel free to ask them, search the internet, etc. about it. In addition, make sure how much you are paying and what actions they will perform on your behalf are spelled out in great detail in the contract. You want to be sure to have a legally binding document that ensures that you are actually getting what you pay for. In addition, make sure the contract is very specific and includes your name and the name of the company you are working with. Finally, ask to see if there is a clause that allows you at least 3 days to decide to cancel.

3. Request an unsigned copy beforehand

You should not have to sign the contract to review it first, so before you even decide to sign it, make sure that you have a copy that you can read through and keep. Then check for the information we have listed in the point above.

4. Look out for the fees

Credit repair agencies are not allowed to charge you any upfront fees by law. Some companies do because they are not aware of this law, but it is still a red flag that you should pay attention to. This combined with not getting a contract may be a very strong sign that you are about to get scammed. Usually, scammers will try to take your money and run with as little proof as possible, which is why upfront fees can be a sign that there is something amiss.

5. The company promises too much

We all want credit repair strategies to work, but there are just some things that credit repair agencies just cannot fix due to their nature. One of these is legitimate debt where the lender has plenty of evidence that the debt is valid. If a company promises to get you out of legitimate debts, they are either scamming you are doing something shady and illegal to get you results. Either way, if a company promises that you will see any type of results or score change, then it is a good idea to avoid them because you can be almost certain that they are breaking the law one way or another.

6. They ask you to create a new identity

As mentioned in the last point, some companies try to do illegal things in order to get you the result that you want. One of these is trying to claim identity theft and to get you to register for a new SSN or EIN. While these companies may not be scams, the results they get will be predicated on major felonies and should definitely be avoided like the plague. Do not give these companies your business and make sure to report them.

7. They ask you to waive your rights

If you are given a document to waive any of your rights, that is a major red flag. Credit repair does not require you to waive any of your rights. Luckily most of them, such as your rights under the CORA, cannot actually be waived, regardless of anything you sign. Usually, companies that engage in these practices will try to take your money and then pressure you and tell you that you have no recourse in getting your money back and they will never deliver any services.

Can you trust any credit repair companies?

Absolutely! While there are people in this world always trying to take advantage of you, there are also legitimate businesses that care about you as a person and as a customer. These companies will be transparent about their services, fees, and your rights throughout the entire process and will not try to pressure you with any aggressive sales tactics. The best agencies for credit repair will not engage in any of the red flags covered in this article, so if you do not see anything on this list in an agency that you are contracting, you can likely rest easy.

If you are interested in finding legitimate credit repair services, we recommend the Best Credit Repair Companies.

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