Whether you've never used credit so far, or you've experienced some mishaps like late payments or collections accounts that have harmed your score, an unacceptable credit score can give you problems whether you're applying to rent an apartment or requesting a loan for a major purchase.
In both situations, you can easily take steps to raise your credit score and get on a better financial path. However, know that it won't happen overnight. Take a look at some easy ways you can improve your credit score and learn more about how the scoring system works so you know what to expect.
Understanding How Credit Scores Work
To best understand the ways you can raise your credit score, you need to first understand what exactly makes up that number and what constitutes a good or bad score.
According to myFICO, your payment history (35 percent) and amounts owed on the accounts (30 percent) make up the largest parts of your score. Your credit history length (15 percent), credit mix (10 percent) and hard credit inquiries (10 percent) make up the rest of the score. Good actions in these categories (like paying on time and reducing debt) make your score go up, while bad actions (like missed or late payments) make it drop. The good news is that this means you have a lot of control over changes in your credit score.
Whether you're looking for your credit score from Equifax, Experian or TransUnion, know that scores may differ across these credit bureaus, and that they usually fall between 300 and 850. Anything under 580 is considered a poor or very poor score, while having a score of 580 to 669 means you've got fair credit. You start to have good credit once your score reaches 670, very good credit at 740 and excellent credit at 800. Higher credit scores can help you get approved more easily, offer better interest rates and potentially lead to higher credit limits.
Demystifying the "Quick Fix" Myth
If you're looking to boost your credit score fast, you probably wonder if there's an overnight solution to bad credit. Unfortunately, the Federal Trade Commission (FTC) warns that any company promising to boost your credit score instantly or overnight or wipe away a bad credit history is either scamming you or encouraging you to act illegally.
Some examples of "quick fix" scams include credit repair programs that charge you money and claim to restore your score, companies that give you fake Social Security numbers and organizations that claim they can give you a new credit file. Falling for these won't fix your credit problems, but they can lead to legal issues and costly fines.
The truth is that repairing your credit can take months or even years depending on the situation. Creditors typically report updates every 30 to 45 days, so small improvements can happen with timely payments and debt payoffs. However, major issues like accounts sent to collections and bankruptcies have an impact on your credit for seven to 10 years, while credit inquiries take two years to fall off. This means you'll need to stay patient as you work hard on improving your score over time.
Fixing Errors on Credit Reports
Although it can take a month for the investigation to occur, an easy way to boost your credit score, possibly significantly, is to check your credit reports from the three bureaus for inaccurate information and report any findings to the credit bureaus. At least once a year, you can request reports from the bureaus through their websites, by phone or through the mail. When you obtain your reports, carefully look for issues such as accounts you didn't personally open, delinquencies you can't recall and issues with the account balances.
If you see something that looks inaccurate, you can draft a dispute letter to send to the credit bureaus showing the potentially incorrect information. They'll do an investigation, request more information from you and respond with findings. You can then write a letter requesting that the inaccurate information gets removed from your report so that your credit score won't reflect it in the future.
Avoiding Late Bills
With your payment history making up more than one-third of your credit score, taking easy steps to pay everything as scheduled and avoid falling behind helps you boost your credit score in a short time. The busyness of life makes it easy to miss one of several bill payments, so consider setting up auto payments or putting reminders on your phone or computer each month.
For an even better result, not only pay your credit bills on time, but also pay more than the minimum as well. This helps the account balance part of your score and reduces the interest paid over time for a win-win scenario.
If you think you can't make your bill on time, being proactive can help minimize damage to your score. Reach out to your creditor as some have hardship programs that let you skip a payment or give you extra time. If you've already missed one, pay off the amount due and any fees as soon as possible. And if possible, try to find out if your creditor will give you some leeway, especially if you don't have a trend of late payments.
Raising Your Credit Limit
If you already have a decent credit score and have shown responsibility with the account, you could try to get existing creditors to raise your credit limit. This can help your score slightly in a short time since a higher limit reduces your credit utilization.
You can often request this through your creditor's website or by phone. However, do be aware that some creditors use a hard credit pull when considering limit increases, and this could offset the improvement you could get. So, consider asking your creditor about their process before you request an increase.
Being an Authorized Card User
When a lack of credit history is the factor causing your credit score problem, then it can seem challenging to get started in the first place. After all, creditors usually will want to see your prior use of credit before handing you a card or credit line. One way to start building your score quickly is to have someone you know make you an authorized user on one of their accounts. However, you'll want to tread carefully.
While becoming an authorized card user adds that account to your own credit file thus impacting your score, the quality of the account matters too. If the person has missed payments or has almost maxed out the card, then that likely won't help you much. However, someone with a longstanding account with a clean history and low balance would be a good person to ask about becoming an authorized user.
Avoiding Unnecessary New Credit Accounts
When done properly, adding new credit accounts can help your credit score. After all, a new account will increase your available credit (thus lowering your credit utilization) and can benefit your credit mix if you're opening a new type of account, such as an auto loan or mortgage. However, a new account also means that your average credit history number gets shortened, and that you'll likely have another hard inquiry on your credit report.
So, you'll need to consider factors like the potential new credit limit, your plans for using the new account and your current credit situation to decide whether to proceed. For example, if you have a thin credit file with no accounts, the benefits in the future can outweigh the initial negative impact of opening a new account on your score.
In any case, use your new account responsibly by paying on time, not taking on more debt than absolutely necessary and continuing to work toward an overall low credit utilization rate. Also, avoid closing open accounts if possible, since doing so would harm the average credit history length part of your score.
Lowering Your Credit Utilization
With your total debt making up 30 percent of the credit score, significant reductions in that amount can help your score pretty quickly and save you money too. Taking a look at your credit report will shed light on your current balances across all accounts. While paying off any debt will help, consider aiming for those accounts with the highest interest rates, such as credit cards and private student loans.
For example, maybe you have a card with a very high interest rate and a high balance. If possible, you could pay off the whole amount for the quickest credit score increase, or you could just start making larger payments each month and see smaller increases as time passes. However, if you have longer loans, such as a mortgage, you may consider just paying a bit more principal each month versus trying to immediately pay off a high balance loan with a relatively low interest rate.
As you pay off the most expensive debt, you can move on to the next account and continue to see improvements in your credit score as the utilization drops. At the same time, though, avoid adding more debt since that can defeat the purpose of this strategy.
Considering Credit Boost Offerings
Typically, only accounts like credit cards, personal loans, mortgages, student loans and car loans get reported to the bureaus and impact your score. This means that other bills you may pay on time using a bank account directly – like your phone or utility bills – won't have an impact.
If you have bad credit or limited credit, you could consider an offering like Experian Boost to increase your credit score with the consideration of other bill payment habits. However, keep in mind that service only impacts your Experian credit report and associated scores, and it doesn't wipe away a bad credit history. Further, you need to have used a bank account for the transactions to count.
How this works is that Experian looks at bank accounts you use for regular bills and has you link those to your Experian account. It then scans the bank accounts for past bill payments and has you confirm that you want the information used for your credit file. Once you accept this option, you can see your Experian credit score go up quickly and for no fee.
Estimating Credit Score Changes
If you're looking at the various actions discussed and wondering exactly how much they'll improve your credit score, you can find plenty of tools online through financial platforms like Credit Karma, the credit bureaus and even credit card companies that offer a credit score simulator. How this works is that you log in, the site grabs your current score, and you get a list of actions to simulate.
For example, you could select a type of loan and credit limit and see how adding that account would hurt or improve your credit score. You can also see the impact of closing accounts, getting limit increases, lowering debt, having accounts sent to collections or missing a payment. Experimenting with these simulator tools can offer a new perspective on just how much your actions impact your credit score.
With these tips and some patience, you can be well on your way to improving your credit score. Just keep an eye on your credit reports regularly and track your score through the sources you have available.
- myFICO: What's in My FICO® Scores?
- Equifax: What Is a Good Credit Score?
- Federal Trade Commission: Credit Repair Scams
- TransUnion: How Long Does It Take for a Credit Report to Update?
- Experian: How to Improve Your Credit Score
- Federal Trade Commission: Disputing Errors on Credit Reports
- Acorns: How to Raise Your Credit Score Fast
- Capital One: Credit Line Increase FAQ
- Experian: Will Being an Authorized User Help My Credit?
- Fidelity: How To Pay Off Debt—and Save Too
- Experian: Can Opening a New Account Hurt My Credit Score?
- Experian: Only Experian Can Raise Your FICO® Score* Instantly
- Credit Karma: Credit Score Simulator
- Fair Isaac Corporation. "What is a Credit Score?" Accessed Oct. 11, 2020.
- VantageScore Solutions, LLC. "Who Uses Credit Scores?" Accessed Oct. 11, 2020.
- VantageScore Solutions, LLC. "Free Score Providers." Accessed Oct. 11, 2020.
- Fair Isaac Corporation. "What's In My FICO Scores?" Accessed Oct. 11, 2020.
Ashley Donohoe has written about business and technology topics since 2010. Having a Master of Business Administration degree, bookkeeping certification and experience running a small business and doing tax returns, she is knowledgeable about the tax issues individuals and businesses face. Other places featuring her business writing include Zacks, JobHero, LoveToKnow, Bizfluent, Chron and Study.com.