How to Improve Your Credit Score

Learn How to Improve Your Credit Score With a Few Simple Tips

Do you need to improve your credit history? If you’re like the majority of Americans, the answer is yes. According to FICO, 60% of all people have a credit score less than 750. This means there is plenty of room for improvement for many people. (for more on what is a good credit score) There are many methods to check your FICO Score and Report. I really like using Credit Karma to check my credit score, be sure to check out my Credit Karma Review for more info.While you can’t simply fix your credit history overnight, there are many things you can do to begin building a more positive credit history. Here are 16 steps you can take:

1. Pay Your Bills on Time

This one is probably quite obvious, but it has to be mentioned right out of the gate. The single greatest factor that determines your credit score is your payment history. If you pay on time and continue to do so for years, this will lay a solid credit foundation. One thing you do have to keep in mind is that this goes beyond just paying your credit card, mortgage, or car loans on time. Even things such as utility bills, cell phone, rent, and so on will likely be reported if late. While these types of accounts don’t generally show up on your credit report if you’re in good standing, they usually will still show up as a blemish if you’re late (usually after 30 days late).

2. Don’t Bounce Checks

What does bouncing a check have to do with your credit history? On the surface, it seems like an innocent bounced check wouldn’t be of much concern other than the overdraft fee, but it can adversely affect your credit history. While your overdraft may not show up on your credit report, most banks have their own system to track customers with bad finance habits. It is called ChexSystems, and if you don’t think it will show up the next time you’re looking for an auto loan or mortgage through a bank or credit union, think again.

3. Start Small

If you have a limited or poor credit history, the likelihood of being approved for a large amount is slim. Without a proven credit record, most lenders won’t be willing to extend significant amounts, so it is in your favor to start with smaller requests. A lender would like to see that you are financially responsible with a relatively small amount before taking on more risk with a larger sum. Sometimes you have to crawl before you can walk, but even a good payment history with small amounts can go a long way towards proving you are responsible over the long run.

4. Visit Local Lenders

A local lender may be more willing to extend credit to you than a large national chain. In many cases with the large chains, your Social Security number simply gets run through a computer that checks your credit information and automatically approves or denies your application. When you work with a small and local institution, the decision may be based on more than a simple computer calculation. They may know you personally, know your employer or family, and this can potentially lead to an approval.

5. Apply for a Secured Credit Card

If you are having a hard time getting approved for any standard credit card, you may want to consider opening a secured card. To establish a secured credit card, you typically have to keep a deposit with the bank that can cover the charges you make on the card. This works as collateral just as a home or vehicle would be on a mortgage or loan. While it won’t quickly improve your credit history, it will begin to show that you are financially responsible and lead to possibly getting approved for other loans or credit cards to further build your credit.

6. Apply for a Small Loan or Credit Card with a Co-Signer

If you’re unable to get approved for a loan or card by yourself, you may consider applying with a co-signer. This is different than just adding an authorized user as it an actual joint account. Use this as a last resort and keep the limit small, but if you maintain a positive repayment history on this account, it will help you begin to establish and improve your credit history.

7. Review Your Credit Report Once a year

When you know you have bad credit, one of the last things in the world you feel like doing is pulling your credit report just to be reminded of it, but it is still important to check it annually. The information is usually accurate, but mistakes do happen on occasion, and even worse, you may notice fraudulent activity. It is in your best interest to correct these issues sooner rather than later. If too much time passes before you try to resolve an issue, it may be too late, and that inaccurate mark won’t disappear for seven years.

8. Review Your Credit Report a Few Months Before Requesting a Major Loan

When you’re thinking about applying for an auto loan or a home mortgage, make sure you give your credit report a once over a few months before going into the application process. This will give you a head’s up on any potential inaccuracies so that you can have them resolved before going into the loan, or at least help you be prepared to explain to the lender why an item is on your report and whether or not it is being resolved. The lender is certainly going to pull your report, so the last thing you want to do is go in uninformed and possibly face a surprise.

9. Avoid Letting Accounts be Turned Over to a Collection Agency

If you thought a few late payments to your lenders was bad, you don’t want to entertain the idea of letting your accounts go to collections. The last thing a lender wants is to turn over an account to a collection agency because they will only recover a fraction of the outstanding debt even if you pay the collection agency in full. Since the lender doesn’t want to turn you over to collections, it is in your best interest to work with the lender directly when problems arise. If you’re already late and foresee a problem of getting your account current, give them a call and see if they will work with you. In most cases they will work to develop a more reasonable payment plan so that this can be avoided.

10. Avoid Having Judgments Filed Against You

Being dragged into court faced with a judgment against your debt is clearly not a position you want to be in. Unfortunately, if you fail to repay a debt, this is a very real possibility. Just like with collection agencies, even if you pay what the court says you owe, the judgment will stay on your credit report for seven years. This will not help your chances of getting approved for a credit card or loans. Again, it is in your best interest to work with your lender at the first sign of a problem to avoid this from happening.

11. When Denied Credit, Review Your Credit Report

When you’re denied a loan or credit, the lender is required to offer you a copy of your credit report at no cost. While they may give a brief explanation as to why you were denied, this is a good time to pull your report and find out exactly what they saw. It could be a legitimate problem with your history, but you also want to keep an eye out for something out of the ordinary if this denial came as a surprise.

12. Try to Avoid Constantly Switching Employers

Understandably, this isn’t always possible, but if you have the option and ability to remain at an employer you should do so if you’re seeking credit. Lenders like to see stability in employment as stable income means you’ll have a better chance of making good on your payments. Once you’ve been with an employer for about five years, this really begins to improve your chances with lenders. Of course, this doesn’t mean you should stay at a dead-end job just for the sake of your credit score, but you do need to be conscious of the fact that this does play a role in your chances in being approved.

13. Try to Avoid Frequent Changes in Residence

Just like constantly moving from job to job, lenders like to see stability in residence. If you’re renting a new place every year, the lender will wonder why you need to keep moving. Lenders also look favorably upon homeowners, so if you currently do own a home, this can also help.

14. Work to Increase Your Income

Easier said than done, but your debt-to-income ratio is quite important when it comes to getting approved or not. In addition to the actual ratio, lenders like to see regular increases in your income. Whether this is through annual raises or occasional bonuses, this can help your chances of getting approved. Also, if you are expecting a bonus sometime shortly after applying for a loan, bring this up to your lender. Knowing that you’ll be receiving additional income can be a deciding factor if you are on the line of being approved or not.

15. Work to Decrease Your Debt

The debt-to-income ratio can be improved by decreasing outstanding debt. The more income you have relative to your debt, the better. So that means if you can’t easily increase your income, you can achieve the same results by decreasing your debt. If you continue to use credit cards while paying them off, your amount of debt relative to your income won’t improve. On the other hand, if you can show that you have consistently been reducing your overall debt for a period of time, this can look as good as showing regularly increasing income.

16. Check your Clue Report

Your CLUE Report, Comprehensive Loss Underwriting Exchange, can can have big effects on many aspects of your financial life. Specifically when it comes to insurance. Make sure you are checking it every once in a while.

Remember, It Takes Time

It can be frustrating, but working to establish or improve your credit history takes time. There isn’t an overnight solution, so you have to approach this as a long-term goal. If you’re just beginning to establish credit for the first time, take things slow and begin by opening a few small accounts. With these initial accounts, make sure you use the credit wisely and develop sound habits. It won’t be long and you’ll be on your way to building a great credit history.

If you already have a credit history but it has been damaged by something mentioned above, don’t despair. While you won’t be able to increase your score 200 points in the span of a a couple months, following the suggestions above will put you on the right track to begin increasing your score. But whatever the situation, it is important to check your credit, I recommend Credit Karma.

 

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

51 comments
NaumanAhmad
NaumanAhmad

An out of the box thought is to innovate your sources of earning. Innovation has brought the humanity to its present levels. If we continue to innovate in our personal life, our solutions would create more opportunities for payment, and it will finally give us increased financial flexibility.

Norbert Szabo
Norbert Szabo

I just recently found out that keeping the credit balance below 7% always increases credit score more than anything you can possible while you still building a credit history.

If you can't do that you can always increase the credit limit. It won't hurt your credit score if you always paid on time.

MyDesire4
MyDesire4

I believe being responsible credit card holder cannot bring in you into debt trouble.  Yes working out to cut your debt is a long term goal in order to improve your credit score.  They key is to start budgeting and reducing cost of living to reduce the debt load.

Ronald_Mueller
Ronald_Mueller

Some of the things I heard from some of my colleagues is not never max out your credit card, avoid applying for too many loans when you haven't paid the others, and of course, always make sure to pay your cc balance every month in full.

Deliberatecreation
Deliberatecreation

here every one is sharing such familiarity, thus it's pleasant to read this weblog, and I used to visit this web site everyday.

bankruptcy attorney Baltimore
bankruptcy attorney Baltimore

I find the 10th tip very much relevant. Of course, all the other tips are important to practice but avoiding judgment issues is a huge contribution to keeping a good record, plus it will surely help increase trust among lenders. I am looking forward to reading more tips you can provide for credit history improvement. Thank you for these tips.

TamraEhler
TamraEhler

Great tips.

 

It is important for people to know that it will be better to improve their credit report without hiring credit repaid company.Many companies use loopholes and can get you in legal troubles.Credit improving is a long process, but if you know how to do it, it will help.

glady
glady

Great article, Thought this might be useful, I found this free tool that integrates credit checking and credit scoring by directly credit checking Microsoft Dynamics CRM, credit checking in Microsoft AX 2012, Business Contact Manager and credit scoring directing into Existing spreadsheets for Microsoft Excel. Best part is its completely free. Here’s the Install link and a YouTube link underneath that: http://pinpoint.microsoft.com/en-GB/application..http://youtu.be/abwI7cc3Yio Hope it’s useful for you guys. 

Ryan
Ryan

Hi, i'm trying to build credit, I notice this said "multiple accounts" is it a good idea or a bad Idea to get more than one credit card from local banks to help establish credit? or will this hurt rather than help? thanks.

Sara
Sara

I am fairly young and have been very responsible with my spending thus far. I save up and purchase things ONLY when I have the money for it, although recently,(in my opinion) I have been punished for this. Me and my husband are newly weds and cannot be approved for a morgage. We have taken out small loans in the past and desided to take out a loan for a second vehicle (the first one we saved up and bought in full). Now the lenders say our credit is great, however we still cannot be approved! They said that our credit history is not "long enough". Please tell me, how long is long enough?? After reading this I am assuming that the true reason is in the fact that we have changed residences and employers recently. It just dosen't seem right, when you are young things are constantly changing and hopefully developing. Should I just be patient and stay where I am for awhile and wait this thing out?

Christine
Christine

* I have been with my bank for 24years.

Christine
Christine

Even if you do everything right it really doesnt matter if they want to strip you of your credit they will. I pay on time, I dont move freuquently, I have been with my employer for almost 10years, my visa credit card keep getting lowered every time I pay it down they lower it to that amount ( ie if my balance was 1500 I paid off all but 500 its lowered to 500) I have with my back for 24 years. I have a dress store credit card and they keep uping my balance... how does that make any sense. Can someone please help me to get back a larger balance on my visa. I use that for flight and car repairs... I need a larger balance.

Marc M
Marc M

I'm really grateful this information was published for public view - it's very thorough, and exactly what I've been looking for. Thank you so much!

payday quick cash
payday quick cash

The best thing to do at this point is pay the bills on time and not use credit. Basically, there were a ton of lates, and I had some go to collections. Once I started paying the bills on time and lowered the amount of credit I owed in relation to the credit I had, the score started to go up. I was able to get a home mortgage in 2003 with a 690, and since then my deliquencies started to come off of my credit. The deliquency takes up to 7 years to leave, so time is one thing that heals the most (while you are paying on-time). My credit score is now over 800.

Mack jackson
Mack jackson

All are the perfect ways to improve our credit score and fico score also, according to me always find some way of earning extra income is the perfect point.

Frank Fitton
Frank Fitton

There certainly are no quick fixes in attempting to raise your credit score. The most important thing is to stay on top of things and know whats in there. There very well could be errors in your credit report due to things misrepresented, even fixing these is going to take time. In order to raise it though you have to know what's in it for sure, as well as exactly what effects it.

One area I think that is very important to address in these times. Is to make sure that you don't lose any of your cards. Companies are canceling cards that are not being used. This could be really damaging if its one of your oldest cards. Remember this, and just use the card every once in awhile to keep it in rotation. You need that available credit in theory at least.

Dr. Len Schwartz
Dr. Len Schwartz

Such great advice here! I like how you touched on the subjects such as consistent employment history and residence. Many people do not realize the impact of those things on credit. Wonderful post.

Tom
Tom

Very valuable information in your posting.

Question, please: About 1 1/2 years ago had a credit account through a credit union and soon reached the max of $1000 and lost employment at nearly same time. Made no payments. Now employed and offered to pay the entire balance but found out the credit union had terminated my account and is not expecting, let alone demanding, payment. If I pay them anyway, will my credit rating be improved significantly? Other advice on this?

Marina Rork
Marina Rork

My credit has gone down a lot due to a divorce 5 years ago, and resulted in a lot of my creditors being sold to collections agencies. Although some of the accounts were settled through collection agencies, it didn't help much on my credit reports. I've been consistent and paying on time on all of the accounts I have left. However, my credit score is still extremely low and I'm wondering if the negative items will ever disappear off my credit reports.

Money
Money

Nice articles and great advice. Thank you.

Credit score is a very important element for you for your present and future credit needs. Whether you need money for investing or for some personal use, your credit score can make or break it.
money

charlene
charlene

I want a new house, I just graduated from school as a RN and making good money but my credit is bad. when I went to inquire about the house they said my score have to be atleast 550, but its under that. I want to buy my home atleast within the next 8-12months. If I pay off my debt, do you think my scrore would increase by then? its 515.

Tiffany
Tiffany

Wow, I literally did everything wrong. Or at least 90%. :-/ I really do want to improve my credit but I can see it's going to take a loooong time. I've moved a lot in the past and have been sent to collections more than once. The situation was beyond my control but that's life sometimes.
It's not impossible I know but going from the 500s to 700 seems awfully daunting.

Pete
Pete

I have no credit score at all. How long does it take to get one? I have been in the US for 5 months and have had a secured credit card for 4 months.

I really resent having to give the credit card company my own money as colateral.

I have also had to resort to giving a bank some money which they then `lent' back to me, and then I pay installments off each month. It's just a ridiculous charade, all for the benefit of the banks and credit reporting agencies!

I have over 20 years of credit history in the UK, but the credit reporting agencies don't seem to want to report to themselves (Experian and Equifax are dominant in the UK).

Da Truth
Da Truth

John,
You hit the nail on the head. The entire credit report/history system is built to give lenders the opportunity to charge the maximum interest rate to their customers. It's laughable when creditors such as car finance companies offer cars at 0% interest. I wonder what percentage of America's car buyers qualify. I know I don't.

Furthermore, this system (interest terms based on credit history)is spreading to other countries. The influence of America cannot be overstated. All over the world, we are seeing an increase in credit, and thereby an increase in debt. Of course, it's human nature to spend money, and indeed lust for more money but if you note carefully you'll see that the major financial companies typically have a presence all over the world. Their power is frightening and as an individual one can't help feeling overwhelmed.

Everyone should be aware of "The Game". Unlike Vegas, where we know we're playing against the house but receiving entertainment in return, here we're enduring sleepless nights. This game is no fun.

John
John

This is a reply to Dawn's comment.

I did some really stupid things when it came to my credit. I've finally paid off all my debt. In the process of reaching this goal I did a lot of studying on the credit reporting process, how to improve a score, etc. Through this I learned one BIG thing, FICO is not setup to benefit you. It's a system that is created to allow the banking industry to ask for a higher interest. Why do you think most companies only report when somebody paid late? Companies and banks can report good behavior, but they rarely do. Why does it take 7 years to remove a blemish that only took 30 days to create? So, you wonder why you can't get your score above 715, well, it's because the system wants to make it extremely hard for you. The system doesn't want a perfect credit individual. A "theoretical" perfect credit consumer doesn't make anyone money...on the bank side.

Now, the advice from the this article is really good. I'm not discrediting anything that has been said here. I'm just injecting a truth few people seem to think about.

Daji Kinabu
Daji Kinabu

The information you provided on how to establish and improve credit history and FICO score is quite useful. Thanks for the knowledge you have shared.

bet
bet

My credit score is horrible and I want to improve it. Having no paper checks and setting up payments automatically on-line has really helped me with my problem. Can anybody suggest a good secured credit card? I received an offer in the mail for one but the money I would have to pay them for a tiny bit of credit was not acceptable. I am willing to pay money in advance but not give so much to the bank issuing the credit card. Thanks for all the tips.

Jamie
Jamie

the comment about the Bank of America privacy assist is TRUE and really bennifical. Anyone concerned about there credit should sign up! This website also serves as a great foundation to improving your score

Dawn
Dawn

I really don't understand credit. I have a few credit cards that have low balances and are paid off every month. I have a mortgage that is paid on time. Nothing is ever paid late. No judgements, no late pays but can't get my report above 715.

Justin
Justin

I am trying to improve my score to buy a car in the next 6 months. I just used one of the online credit report services to get my scores for free during the trial period was had great success. I have been trying to improve my credit score from a 610 in 4/07 when i bought my house with a cosigner. It is now a 675 with a good payment history for the last 2+ years but using 80%+ available credit lines on two credit cards. All of the credit cards are still open and have had many inquires because of the new credit cards with lower rates, the house and other things. I am currently paying off the cards, 8k, in a short amount of time. After my tax return my balances will be paid off by the end of March. How much do you think my credit score could increase? 720? And how soon could it increase? 2-3 Months?

trksh22
trksh22

Thank you for this! It was very helpful and useful. We are looking into buying a home in a few months and want our credit to be as good as possible. No credit cards for us though!!! You should stress (and I know you make it clear, but really some people may need to be told again) that credit cards are not for everyone. It is not free money :) So if they lack discipline, they should stay away.

I am always reminded of that SNL skit "Don't Buy Things You Can't Afford." So funny and useful.... and it makes so much sense. This could help improve your credit tremendously.

jobs for college students
jobs for college students

Everyone reading this, should definitely be checking their credit report at least once a year. It is often an easy way to spot identity theft. Also, if there are mistakes you will want to start working immediately to get them cleared up.

berchta
berchta

Thank you for all the tips. It was such a great article. I personally think credit score charts are dead useful because we will need them when applying for bank loans even payday loans.

Jesse
Jesse

I think #1 is probably the most important of all of those. Late payments and non payments kill your credit.

Steve Austin
Steve Austin

I'd like to see a list of a number of ways to eradicate and eliminate credit history. And I don't mean repair a bad credit history with a good one. I mean shrinking and vanishing one's credit history, whether good or bad.

Kitap Özetleri
Kitap Özetleri

Thanks, People can usually part with smaller amounts of money more frequently than making a lump sum.

Jeremy
Jeremy

Well, the reason you hear so much about breaking payments down into regular smaller installments is that it is easier for most people to make payments that way. People can usually part with smaller amounts of money more frequently than making a lump sum.

So, both methods will work, and paying off in lump sums if you have the money available can actually help you save a little bit of money. Taking large chunks off the balance will reduce a little of the interest that is calculated in the coming months. While it won't usually make a lot of difference, it can help slightly.

Edgar
Edgar

Is it true that when paying off a credit card debt, that the payments should be broken up into smaller amounts. For example, instead of paying $1200 right now, I should make $200 payments every 2-3 weeks.

Which is a better option when paying off a credit card and trying to improve your credit score?

Jeremy
Jeremy

Jane, you can get a copy of your credit report for free at www.annualcreditreport.com

If you want to know your actual FICO score, you're typically going to have to pay. I would recommend the FICO Standard at myFICO. It lets you pick a score from one of the three bureaus and only costs $15.95.

They are a division of Fair Issac, and you won't be tricked or automatically enrolled into any expensive monitoring program that a lot of other sites try to do.

jane
jane

What online site do you suggest to obtain a credit score?

chexsystem
chexsystem

Thank you for the great FICO tips.The 15Ways which are given by you helps and Improve my on Credit History and FICO Score .

Matt
Matt

If you're denied credit, employment, or any other benefit based on adverse information in your credit report, you can get a copy for free from the three major credit bureaus.

Yes, you can do this by mail and pray that the blue snails don't lose something. But you can also do it online. This is much faster, much easier, and if there are items you want to dispute, you can begin the process within minutes after you get declined, instead of waiting weeks for round-trip snail mail.

Just make sure you're actually going to the credit bureaus' web sites, rather than some online phishing scam.

NJ WebGuy
NJ WebGuy

Thanks for the comprehensive list.

Bank of America has a service called Privacy Assist, which gives a 30 day free trial, and includes your credit reports scores for the three major reporting agencies. This is the first time I've been able to get the actual credit scores for free.

ses5909
ses5909

I recommend getting your credit report at least once a year whether you have poor credit or not. It is good to make sure nothing is going on it that shouldn't be.

Jeremy
Jeremy

Jeremy,

If you are denied credit or a loan and receive one of the letters, scour the fine print for a mailing address or phone number. Like you said, they don't make it very clear how to go about it, and it certainly isn't as easy as going to a website and pulling it. More than likely you have to send a letter (preferably with a copy of the letter you received) and state you'd like to receive a copy.

And Working Dollar, that is a great point. Should probably make that one number 16. For those who are trying to establish credit or have some damaged credit, getting the most attractive rates or cards is probably not going to happen. So, if you target cards that maybe aren't as good, you will have a better chance in getting accepted. And as long as you use it very carefully, it can be the first step needed to help you in the future. Thanks for bringing that up.

Working Dollar
Working Dollar

Great post. Also, taking a credit card with a high interest rate (since they are fairly easy to get), and keeping your balance low and paid off - using it in very small measure - can also help.

Jeremy
Jeremy

I tried to get a credit increase on my credit card and was declined. I only have $1000 limit, which is really small. How do you check your credit score after being declined? They don't make it easy, I got a letter but it didn't clearly explain it.

Fiscal Musings
Fiscal Musings

Like you said, I think it's important to remember that it will take some time. It's easy to get frustrated since it's not a quick fix, but if you keep at it, it'll happen.

Money Blue Book
Money Blue Book

Thank you for the great FICO boosting tips! Paying your credit bills on time is the easiest way to keep a good score.

Diana
Diana

Hello Marina,
My situation is the same as yours. I have reseraching and researching of ways to help improve my credit due to my divorce. PLEASE if you have any tips that might help me out please send them my way. My only other option is to write to the 3 credit reportings and ask them for help. I also have been paying my bills on time and have lower all my debt drastically, why is my score still low? Thank you in advance for any help you may provide. Diana