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Credit Scores and Reports

How to improve your credit score

Using credit cards wisely could send your score in the right direction

Summary

Struggling with a low FICO credit score? Don’t worry: You can take some simple steps to improve your score. You’ll just need to change your negative financial habits.

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Your three-digit credit score is a key number. It gives lenders and credit card providers a quick look at how well you’ve managed your credit and paid your bills in the past. If you’re stuck with a low credit score, you might struggle to qualify for loans or credit cards. And when you do, they’ll come with high interest rates.

Fortunately, you can improve a weak credit score. Once you do, you’ll qualify for loans with lower interest rates and credit cards with valuable rewards programs.

The key is to pay your bills on time and cut down on your existing debt.

How credit scores work

Credit card, loan and mortgage payments you make each month are reported to the three national credit bureaus: Experian, Equifax and TransUnion.

If you pay these bills on time, your credit score will rise. But if you pay any of these bills 30 days or more past their due dates, your credit providers and lenders will report them as late to the credit bureaus, causing your credit score to fall.

Your score will also fall if you have too much debt and are using too much of your available credit. If you run up your credit cards to their maximums, your score will drop.

You have several credit scores, but two important ones are your FICO score and VantageScore.

Your FICO score, maintained by the Fair Isaac Corporation, ranges from a low of 300 to a high of 850. This is the score most lenders use when determining whether you qualify for a loan. Because of this, it’s important to have a good FICO score. Most lenders consider a FICO score of 740 or higher to be an excellent one, and the average FICO score in the U.S. is 716.

VantageScore was created by Experian, Equifax and TransUnion. This score isn’t as widely used by lenders but is another gauge of how well you’ve managed your finances. The latest versions of the VantageScore also range from a low of 300 to a high of 850, and the average in the U.S. is 695.

How to improve your credit score

If you have bad credit, you can take several steps to boost it.

Decrease your credit utilization ratio

Your credit-utilization ratio measures how much of your available credit you are using. The lower this number, the better it is for your credit score. If you have a high amount of credit card debt, then, paying it down can boost your credit score.

You might turn to balance transfer offers to pay off your credit card debt. Some credit cards offer 0% introductory APR – usually 12 to 18 months – for balance transfers. This gives you the chance to pay off your existing credit card debt without having to pay interest on it. Just make sure you pay off the debt you’ve transferred before the 0% interest offer ends. If you don’t, your leftover debt will be assessed at your card’s normal APR.

Become an authorized user

When you’re an authorized user, you are added to the credit card account of an existing cardholder. You’ll be sent your own credit card that you can use to make purchases. The primary credit card account holder, though, is responsible for making all payments.

When the primary account holders make their on-time credit card payments, they are reported to the national credit bureaus in your name, too. This helps build a record of on-time payments in your credit file, something that can help you build a credit history or improve a bad credit score.

Most commonly, parents add their children as authorized users to help them build their credit scores. If you are an authorized user, make sure to only spend what the account’s primary cardholder and you agreed upon.

Make on-time payments

The most important step to boosting your credit score is to pay your bills on time. Paying 30 days past your due date on payments that are reported to the credit bureaus – including mortgage, auto loan, student loan, credit card and personal loan payments – could cause your credit score to fall by 100 points or more.

Link non-traditional accounts

Traditionally, many payments that consumers make haven’t been reported to the credit bureaus. These payments, then, don’t help increase consumers’ credit scores. This includes monthly rent, medical, utility, bills and phone bills.

However, you can sign up with rental reporting agencies that will report your rent payments to the credit bureaus, such as Rent Reporters, Rental Kharma and LevelCredit.

Be aware, though, that while reporting your rent through these services might help your VantageScore and some alternative versions of your FICO score, it won’t help boost the FICO score that lenders most often use when determining if you qualify for mortgages and other loans.

You can also sign up with services such as Experian Boost and UltraFICO. These link to your checking, savings or money market accounts to give the credit bureaus a better understanding of how you manage your money. The goal is to help consumers who aren’t paying back loans or haven’t used credit cards extensively build a solid credit score.

Again, though, while this might boost some versions of your credit score, it won’t help all. Experian Boost will increase your FICO Score 8. Lenders, though, might not use this score when determining if you qualify for a loan. And the UltraFICO score is only being offered now through a small group of lenders as part of a limited pilot phase.

Open a credit-builder loan or secured credit card

Some banks offer credit-builder loans, small loans that you take out for the sole purpose of paying back. The on-time payments will help you build a credit history if you lack one. Just make sure to make your payments on time and that you can afford your loan’s monthly payments.

If you lack a credit history, you can also apply for a secured credit card. These act like traditional, unsecured credit cards but with a credit limit tied to a deposit that you make with the bank issuing the card. You might deposit $600 with the bank. You’ll then have a secured credit card with a credit limit of $600.

Once you have a secured card, make small charges throughout the month. Pay these charges off on or before your due date and the on-time payments will be reported to the credit bureaus, which will help boost your credit score.

Limit credit inquiries

Don’t apply for too many credit cards or loans at one time. Every time issuers or lenders do a hard credit inquiry, your credit score takes a small hit, usually about five points. Apply for too many loans or cards at once, and those small hits can add up.

How to build credit with a credit card

Every time you make an on-time payment on your credit card, it’s reported to the national credit bureaus. A history of on-time payments is the most important factor in building a strong credit score. Your payment history accounts for 35% of your FICO score, the biggest factor.

How much debt you owe is also important, as this accounts for 30% of your FICO score. Make sure, then, that you don’t run up thousands of dollars of debt on your credit score. Keeping your credit-utilization low will help boost your credit score, too.

How long you keep your credit cards matters, too. FICO says that the length of your credit history accounts for 15% of your FICO score. The longer you keep, and make payments on, your credit cards, then, the better it is for your score.

How long does it take to improve your credit score?

How long does it take to boost your credit score? Unfortunately, there’s no one answer. Credit bureau Experian says it could take a few months to several years depending on how damaged your credit score is. There are no quick fixes. You need to commit to a long-term strategy of on-time payments if you want to fix your score.

Bottom line

A high credit score can make your life easier when you apply for loans and credit cards. Fortunately, earning a good credit score is far from impossible. Just follow the simple rules: Make your payments, including credit card payments, on time each month. And pay down your credit card balances and other debt. Do this consistently, and your credit score will steadily rise.

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Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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