How to improve your credit score — 5 essential tips

Credit score on phone and laptop
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If you’re looking to open a new credit card, or buy a car or house, it’s important to know how to improve your credit score; not only will it make the process easier, but lenders will also give you more favorable terms the higher your score. 

Many credit cards and loans will require you to have a minimum credit score for approval. A high credit score is an easy way to show lenders that you manage your money responsibly. However, if your credit score is not quite where you’d like it, don’t worry. There are steps you can take to boost your score into a range you’re happy with, but it will take patience.

 How is a credit score calculated?

Understanding how a credit score works makes it easier to improve it. Your credit score is made up of five factors, each impacting a different percentage of your score. These are payment history, credit utilization, length of credit history, new credit lines and credit mix. By analyzing how your credit management falls in these areas, you’ll make it easy to prioritize what areas need the most focus.  

What's a good credit score?

FICO credit scores range from 300 to 850. To have a credit score in the "good range," it'll need to be at least 670. If your score is 740 or higher, you're considered to have "excellent" credit. 

If you don't know what your credit score is, here's our guide on how to get your credit score.

 Consistently make on time payments 

The most important factor in determining your credit score is payment history, impacting 35 percent of your overall credit score. Because it makes up such a large portion, it’s crucial to consistently make on time-payments. Even one missed payment will drop your score substantially, so it’s imperative that you make payments on time, all the time.

That one missed payment can drop your credit score drastically, and rebuilding it will take a while. You’ll have to reestablish a long-term history of on-time payments. Consistency is key here: automated reminders or autopayments can be an easy way to ensure you don’t forget to pay that bill each month. 

 Keep credit utilization low 

Credit Utilization is the next largest factor, making up 30% of your overall credit score. Therefore, the next important step to take to improve your credit score would be to keep your credit utilization as low as possible. Your credit utilization is determined by dividing your total balances by your current credit limit.

The easiest way to keep this number low is to pay off your credit card in full each month. However, if you absolutely have to carry a balance, you should aim for a target utilization below 30%. By keeping this low, you’re demonstrating to lenders that you can responsibly pay down your debt and signal that you’re not a financial risk. 

 Open a secured card 

Those who have limited credit history or a very low credit score can also consider opening a secured card in order to help boost up their score. A secured credit card is a great option because you won’t have to have a minimum credit score to be approved like most unsecured cards require.

Instead, your credit limit will be determined by the down payment you put on the card. This way, you won’t be a liability to lenders, but still have an opportunity towards credit improvements. As stated above, by making on time payments and keeping balances low, you’ll boost your score while developing responsible credit management that will help when you are eventually eligible for an unsecured card. 

 Avoid opening many new accounts at once  

Whenever you apply for a new line of credit, you’ll have a hard inquiry pulled on your credit report. Usually, this only minimally affects your credit score. However, if you have multiple inquiries in a short span of time, your score will be negatively impacted, potentially showing lenders that you may be trying to borrow more than you can afford. Because of this, you’ll want to exercise caution when applying for loans or credit cards, so your score doesn't drop. Consider approval odds before applying or only apply when you’ve been pre-approved 

Make sure your credit accounts are accurate

Checking your credit report and keeping track of where you stand is another really good way to improve your score. Not only will it show you which areas in your credit needs the most work, but you’ll also be able to see if any errors have occurred, which is more common than you may think.

To make sure your report is accurate, you’ll have to be on the look out for potential errors, so if something is wrong, you can get that fixed by filing a dispute. Don’t wait until after you’ve been denied a credit application to check for errors if you want your score to be the best it can be. 

It might also be useful to get your credit report, which gives you a complete rundown of your credit history.  

Bottom Line

Having a mix of credit types and a long history of credit are also other ways you can improve your score. However, the best way to improve your score is to be consistent with making on-time payments, because it affects the highest percentage of your overall credit score. While increasing your credit score will take time and effort, it is possible. With the help of the above steps, you’ll be able to slowly increase it over time.   

Do you know the difference between credit report and credit score? It's also important to know how to set up a fraud alert to protect your credit and identity, and how to freeze your credit in order to prevent identity theft. Finances tight? Learn how to save despite inflation.

Erin Bendig
Staff writer, personal finance

Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.