7 tips for improving your credit score

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7 tips for improving your credit score

Boosting your credit score is a key step toward enhancing your financial well-being. If your score is lower than you’d like, there are actions you can take to achieve — or improve — a higher credit score, some faster than others.

Splitero looks at some of the most effective ways to improve your credit score. By following these tips, you can take control of your financial health. Remember, repairing your score can take time, so don’t get discouraged.

1. Make on-time payments

Making payments on time is the most important factor in your credit health. Late payments can stay on your credit report for up to seven years, so staying current is crucial. If you miss a payment by 30 days or more, call your creditor immediately to see if they will consider a goodwill deletion to no longer report the missed or late payment to the credit bureaus.

Regardless of whether the creditor does or does not do this, get current on your account as soon as possible.

Helpful tips for making on-time payments

• Set up calendar reminders, automatic payments, or account reminders to prevent missing payments.
• Create a budget to keep your spending in check long-term and to help pay off debt quicker. This will help you gain clarity in the amount you’re earning and be smarter in your purchase choices.

2. Make multiple payments

The number of payments you make each month is not listed in your credit report, and credit scoring systems don’t take that into consideration. However, making multiple monthly payments would most likely pay the minimum amount you owe, which could reduce or eliminate any possibility of late payments.

Multiple payments could also help pay your credit card bill in full each month so you won’t spend money on interest fees. Also, making multiple payments means your balances decrease faster, resulting in a low utilization rate, which is good for your score.

3. Keep credit utilization low

Credit utilization — or how you utilize the credit extended to you — is the second biggest factor in overall credit health. Carrying high balances and having a high debt-to-credit utilization ratio can hurt your credit score. A good rule of thumb is to use less than 30% of your credit limit on any card at any time. (The lower, the better.)

Making additional payments can also help to reduce your credit utilization limit to lower than 30% and could help to increase your score.

Ask your credit card company for a higher credit limit, which could reduce your debt-to-credit utilization ratio and improve your credit.

4. Become an authorized user or obtain a cosigner

Becoming an authorized user on someone else’s credit card can help you establish credit if you’re just starting your credit journey.

This is particularly helpful if you have a thin credit profile. If you have a relative or friend with a high-limit credit card and a good payment history, ask them to add you as an authorized user to help you establish credit. The account holder doesn’t even have to let you use the card or let you use it. Being an authorized user on the account can help beef up your credit.

Obtaining a co-signer for a loan could also help build your credit history as the primary loan holder and the cosigner shares equal responsibility for the debt that will appear on both of your credit reports.

5. Dispute errors and collections

A mistake on one of your credit reports could be pulling down your FICO score(s). Disputing any credit report errors can help to improve your credit quickly. You can get free credit reports from each of the three credit bureaus every 12 months by visiting AnnualCreditReport.com.

This will give you insight into what lenders and other creditors see. If you see anything that looks wonky, address the issue or missed reporting with your credit card company or lender and also to the credit bureau company that is misreporting the error.

To dispute an error or collections with your credit bureau company, explain the error and why you think the error is wrong, and include copies of documents supporting your dispute. You can contact the nationwide credit reporting companies online, by mail, or by phone. The Consumer Financial Protection Bureau (CFPB) has a detailed process on its website that further details the dispute process.

Be sure to contact your creditor or lender directly to report the error. They may also have you send your dispute documents to them to correct the error on their side.

6. Vary your credit accounts by age and type

Leave accounts open — closing credit card accounts may shorten the length of your credit history, impacting scores. Closing credit card accounts affects your debt-to-credit utilization ratio and your credit reports’ mix of credit accounts. Instead, work on paying off those accounts.

Lenders and creditors like to see that you have been able to properly handle different types of credit accounts over a period of time. Having a nice mix of older and newer accounts with different account types, such as car loans, home loans, student loans, and credit cards, diversifies your credit report.

7. Limit applying for new accounts

When you have multiple credit inquiries on your credit report in response to applications for new credit in a short period, this impacts your credit scores and causes lenders to view you as a higher-risk borrower.

Frequent hard inquiries can negatively impact your credit score and may suggest to lenders that you are trying to take out more credit than you could reasonably repay. The one caveat is that the scoring model for the credit bureaus takes into account multiple inquiries within a certain timeframe (between 14 and 45 days), during which multiple inquiries are recognized as a single credit application instead of multiple.

This is to your advantage because it’s best to shop around and go to multiple lenders for auto and home loans to ensure you get the best rate. However, this advantage typically will not apply to credit card applications.

Note: Your credit score typically drops when you buy a house. Don’t be alarmed if you see a big difference. Taking on thousands of dollars of debt has an impact.

The bottom line

Improving and repairing your credit is a process that requires time, effort, and patience. The amount of time it takes to see progress will differ depending on your unique circumstances.

It’s important to keep in mind that fixing your credit won’t happen overnight. However, by resolving any errors in your credit report and following the aforementioned tips provided, you can achieve your credit goals in the long run.

This story was produced by Splitero and reviewed and distributed by Stacker.