There are many ways to improve your credit score. They range from paying down debts and reducing your credit utilization to simply making on-time bill payments each month. But you can remove guesswork from the equation by signing up for a free WalletHub account. We’ll tell you exactly how to improve your credit score and even how long it will take, as part of your Credit Analysis.
Credit improvement isn’t complicated, fortunately enough. Credit scores rise and fall based on the information in your major credit reports. The more positive info and the fewer negative records they contain, the better your credit score will be. That’s why it’s so important to understand what goes into your credit score. And it’s why you don’t need to get fancy to improve your credit score.
Rather, there are a number of simple steps you can take for the sake of credit improvement, and we’ll explain them below. We’ll also dispel some common credit-improvement myths, give you a sense of the timetable you’re looking at and more.
8 Easy Ways to Improve Your Credit Score
Check Your Credit Report for Errors
One in five consumers have an error in their credit reports, and four out of five who dispute them see changes to their reports afterward, according to the Consumer Financial Protection Bureau. If you identify a mistake in your credit reports, you’ll need to follow the process for disputing credit-report errors, which is one of the easiest ways to improve your credit score and doesn’t take much time.
Keep Open Accounts in Good Standing
Lenders relay account information to the major credit bureaus every month. And the more accounts, or trade lines, you have in good standing, the more positive information will find its way into your credit reports. This will either water down negative records or help expand limited credit history.
While credit cards and loans both report to the major credit bureaus on a monthly basis, the former are far more accessible to the average consumer. Loans, of course, require repayment of whatever amount you borrow, but a credit card with no annual fee doesn’t have to cost you a thing.
Get a Secured Credit Card
If you have bad credit and are unable to get a “regular” credit card, open a secured credit card. Secured credit cards are easier to get than most other credit cards because they require a refundable security deposit, the amount of which usually acts as your spending limit. And they are treated just like any other credit card on your credit report.
You can also increase your spending limit simply by adding to your deposit, which may improve your credit score a bit. When you close your account, you will get your deposit back, minus any outstanding balances and finance charges.
Don't Apply for Credit Too Often
Applying for a credit card can lead to a slight dip in your credit score, especially when you apply repeatedly within a short period of time. Each application signifies that you will have less money to pay for every additional credit card or loan you get. And that’s a bad thing from a lender’s perspective. More importantly, applying in bulk tells lenders that you are desperate to borrow, which doesn’t bode well for your ability to pay.
So if you don’t get approved for an unsecured credit card after one or two rejected applications, opt for a secured card instead. Secured credit cards are great for credit improvement because they pretty much offer guaranteed approval.
Keep Your Credit Utilization Low
Try to maintain a credit utilization ratio below 30% on each of your credit cards. And if you really want to maximize your credit score, aim for less than 10%. A higher ratio hurts your credit score, as it indicates that you are stretched thin financially.
Credit utilization is determined by comparing the balance listed on your monthly statement against your available credit. You can improve it by spending less each month, asking for a higher spending limit or paying your bill multiple times per month to keep your statement balance as low as possible.
Don’t Close Unused Accounts
Lenders, landlords, employers and other decision makers known to perform credit checks are more likely to trust applicants with a long track record of responsible money management. Positive information in your credit reports about recently opened loans and lines of credit will help. But you have to prove yourself capable of making on-time payments and otherwise upholding your end of the borrowing bargain over time.
So put yourself in a marathon mindset. And focus on consistency, not quick fixes.
Build a Long Credit History
A lot of available credit and a long credit history are essential for a great credit score. That’s why it’s unwise to close old accounts, even if you no longer use them. Closing accounts will reduce your available credit, raise your credit utilization ratio and give the impression that you have little credit experience.
You should not, however, pay an annual fee to keep an unused account open. Rather, you should close accounts that are costing you money and use the savings to pay down debt or build an emergency fund.
Automate Your Payments
Some people struggle with remembering to pay their credit card bills on time. If you are one of them, call your credit card company and ask them to automatically withdraw your monthly payments from your bank account.
Others get tempted by credit cards to overspend and incur unnecessary debt. If you are one of them, the right solution isn’t necessarily to close all of your credit cards but instead to keep some of them open yet locked in a drawer (or even cut into pieces) to avoid using them. Before you do, though, make sure your credit card company won’t close your account if you don’t use it for a long time, which would be stated in your credit card agreement.
You can get a better sense of how long it will take to improve your credit score by signing up for a free WalletHub account. Our personalized Credit Analysis will pinpoint what’s wrong with your score, how to fix the problem and how long that will take.
Plus, you’ll get a front-row seat for the credit-improvement process, as WalletHub is the only site that offers free credit scores and reports updated on a daily basis.
Ask the Experts: More Credit-Improvement Tips
A good tip can go a long way. So we asked a panel of experts to share their advice on how people can get a rise out of their credit scores. You can check out their guidance below.
- What is your best piece of advice for someone who wants to improve his or her credit?
- What are the biggest mistakes that people make when trying to improve their credit?
- What is the biggest thing people don’t realize about the credit-improvement process?
- Should you only worry about credit improvement if you have bad credit?