How to Improve Your Credit Score

Experts encourage you to be realistic. According to FICO, for example, “raising your credit score is a bit like losing weight.” In other words, meaningful and sustainable improvement takes time – and there is no quick fix. People often ask, “How can I raise my credit score in 30 days?” or “How can I raise my score by 100 (or 200) points?” But, according to the same FICO resource, “The best advice is to manage your credit responsibly over time.”

Your own actions, though, are what determines your score – and there are ways that you can have a real impact. And if you need to raise your credit score by as much as 200 points, there’s probably some room to change your credit-related behavior in a way that demonstrates increased responsibility.

There are some principles to consider as you shape your plan. Effective credit-building strategies typically depend on first getting your credit reports from the three major credit bureaus, Experian, Equifax, and TransUnion. You’re entitled to one free credit report per year from each of the bureaus. They can be accessed at a Federal Trade Commission (FTC)-approved resource. Without reviewing your credit reports, you won’t have a clear picture of what you’re trying to solve, or the areas that represent the best opportunities for improvement.

Don’t get discouraged if you don’t see all the improvement you’re hoping for right away – improving your credit score is a long game, and there can be a lag between the time positive actions are performed – like paying off a revolving credit balance – and when the creditor reports it to the credit bureaus.

1. Clear up errors on your credit report: If anything on your credit report isn’t correct, dispute it with the credit bureaus. Getting it removed or corrected can improve your score. According to Consumer Reports' 2021 Credit Checkup survey, 34% of participants found at least one error on their credit report.²
2. Pay down your balances: Accounts owed, which includes your credit utilization ratio, makes up 30% of your FICO score, second only to the longer-term strategy of always paying your bills on time. Because credit card issuers commonly report card member activity to the credit bureaus once every billing cycle, you may not have to wait long to see the benefits of reducing your credit utilization ratio. According to FICO, the lower your credit utilization ratio, the better. Keeping it below 10% – while continuing to make on-time payments – can help you establish a good credit score.³
   
   I saw this in action using the credit score simulator that’s available through MyCredit Guide from American Express. Paying down balances so that my credit utilization ratio was just under 30% helped improve my credit score by about 1%, but paying them off in full boosted my score by more than 8%, according to the simulator.
3. Resolve collection accounts: Payment history makes up 35% of your FICO score. While even a payment made 30 days late can have a negative effect, an account sent to collection – which usually happens when a bill is 120 days past due – can impact your credit score even more. While there’s no way to remove an accurate collection account from your credit report, paying off the account could positively affect your credit score – especially if it’s the only negative item on your credit report.⁴
4. Open a secured credit card: If you’re struggling with a low score, experts say that opening a secured credit card can be an effective way to increase your score. To get such a card, you deposit funds and the bank issues a card with a credit limit that’s typically the same as your deposit. If you default, the bank keeps your money. To get the boost to your credit, you’ll need to charge against your deposit and then make your payments on time, to demonstrate responsible credit use. You may get a similar lift by becoming an additional card member on someone else’s account, provided that person has maintained a good payment history.

Following the strategies outlined above might help you see a relatively quick boost to your credit score. After that, greater – and more sustained – improvement will take more time. Here are some longer-term strategies:

• Always pay your bills on time.
• Limit your inquiries and applications for additional credit. Using the simulator, I saw each one caused a measurable ding to my credit score.
• Maintain a mix of credit. A blend of revolving credit– which mostly refers to credit cards– and installment loans is the healthiest blend.
• Build your credit history. Unlike removing accounts in collection, closing an account in good standing could adversely affect your credit score, so you may wish to keep them open even if you don’t use them.