Your credit score is one of the most important measures of your financial health. It tells lenders at a glance how responsibly you use credit. The better your score, the easier you will find it to be approved for new loans or new lines of credit. A higher credit score can also open the door to the lowest available interest rates when you borrow.
If you would like to boost your credit score, there are a number of quick, simple things that you can do. While it might take a few months to see an improvement in your credit score, you can start working toward a better score in just a few hours.
- It takes less than a couple of days to pull all your credit reports from the three major credit bureaus, and assessing your credit score is the first step to raising it.
- In just a few hours, you can set due-date alerts for bills, so you know when a bill is coming up. Paying your bills on time Is one of the most important steps in improving your credit score.
- Pay down your credit card balances to keep your overall credit use low. You can also phone your credit card company and ask for a credit increase, and this shouldn’t take more than an hour.
- Don’t close old credit card accounts or apply for too many new ones.
- You can sign up for credit monitoring services quickly, and they will help you keep on top of your credit score.
Why Does a Good Credit Score Matter?
Credit scores measure your ability to manage debt. The higher your score, the more responsible you appear in the eyes of lenders. An 850 credit score, for instance, is considered to be a perfect score using the FICO model.
What does a high credit score get you? The simplest answer is better loan terms and easier approval. A good or excellent credit score will save most people hundreds of thousands of dollars over the course of their lifetime. Someone with excellent credit gets better rates on mortgages, auto loans, and everything that involves financing.
Individuals with better credit ratings are considered lower-risk borrowers, with more banks competing for their business and offering better rates, fees, and perks. Conversely, those with poor credit ratings are considered higher-risk borrowers, with fewer lenders competing for them and more businesses getting away with high annual percentage rates (APRs) because of it.
Additionally, a poor credit score can affect your ability to find rental housing, rent a car, and even get life insurance because your credit score affects your insurance score.
FICO credit scores place the most emphasis on payment history and even one late payment could cost you substantial points.
How to Build Good Credit
Luckily, there are several steps that you can take to improve your credit score. Some of them may be things you work on over the course of weeks or months. Others are doable in a single day and will help your credit improve quickly:
- Review your credit reports.
- Get a handle on bill payments.
- Use 30% or less of your available credit.
- Limit requests for new credit.
- Pad out a thin credit file.
- Keep your old accounts open and deal with delinquencies.
- Consider consolidating your debt.
- Track your progress with credit monitoring.
Each of these steps, whether short-term or long-term, will help you improve your credit score and build good credit. Here's a closer look at what's involved in each step of the process to build good credit and how long you can expect each step to take.
1. Review Your Credit Reports
Estimated time: 1-3 hours
Before you can work on improving your credit, it helps to know what might be working in your favor (or against you). That’s where checking your credit history comes in.
Factors that contribute to a higher credit score include a history of on-time payments, low balances on your credit cards, a mix of different credit card and loan accounts, older credit accounts, and minimal inquiries for new credit. Late or missed payments, high credit card balances, collections, and judgments are major credit score detractors.
You're entitled to a free copy of your credit reports from all three credit bureaus once each year, which you can access through AnnualCreditReport.com.
How often should you check your credit score?
You should check your credit score regularly to check for errors, but make sure that you do so through soft inquiries so that your score isn’t dinged. Many banks offer free credit monitoring to their customers; check with yours to see if you can enroll in their service and get alerts whenever your score changes.
How can you quickly improve your credit score?
Improving credit scores can take time and you likely won't see a huge increase overnight. However, you can potentially speed up the process by having our revolving credit as much as possible to lower your credit utilization percentage inaccurate things removed (especially late payments), or being added as an authorized user to someone else's old account with perfect payment history, ideally with a low utilization rate. Ideally, this is done by a friend or relative, and they do not even have to give you the card.
Be wary of credit repair services that advertise instant credit repair or anything else that seems too good to be true.
2. Get a Handle on Bill Payments
Estimated time: 1-2 hours
More than 90% of top lenders use FICO scores to make credit decisions. These are determined by five distinct factors:
- Payment history (35%)
- Credit usage (30%)
- Age of credit accounts (15%)
- Credit mix (10%)
- New credit inquiries (10%)
As you can see, payment history has the biggest impact on your credit score. That is why, for example, it’s better to have paid-off debts (such as your old student loans) remain on your record. If you paid your debts responsibly and on time, it works in your favor.
So a simple way to raise your credit score is to avoid late payments at all costs. Some tips for doing that include:
- Creating a filing system, either paper or digital, for keeping track of monthly bills
- Setting due-date alerts, so you know when a bill is coming up
- Automating bill payments from your bank account
Another option is charging all (or as many as possible) of your monthly bill payments to a credit card. This strategy assumes that you’ll pay the balance in full each month to avoid interest charges. Going this route could simplify bill payments and boost your credit score if it results in a history of on-time payments.
Use Your Credit Card to Improve Your Credit Score
3. Aim for 30% Credit Utilization or Less
Estimated time: Varies, based on total debt and monthly payments
Credit utilization refers to the portion of your credit limit that you use at any given time. After payment history, it’s the second most important factor in FICO Score calculations.
The simplest way to keep your credit utilization in check is to pay your credit card balances in full each month. If you can’t always do that, then a good rule of thumb is to keep your total outstanding balance at 30% or less of your total credit limit. From there, you can work on whittling that down to 10% or less, which is considered ideal for raising your credit score.
Use your credit card’s high balance alert feature so you can stop adding new charges if your credit utilization ratio is getting too high.
Another way to improve your credit utilization ratio: Ask for a credit limit increase. Raising your credit limit can help your credit utilization, as long as your balance doesn’t increase in tandem.
Most credit card companies allow you to request a credit limit increase online; you’ll just need to update your annual household income. It’s possible to be approved for a higher limit in less than a minute. You can also request a credit limit increase over the phone.
4. Limit Your Requests for New Credit—and the Hard Inquiries with Them
Estimated time: Varies based on how often you need to access credit
There are two types of inquiries into your credit history, often referred to as hard and soft inquiries. A typical soft inquiry might include you checking your own credit, giving a potential employer permission to check your credit, checks performed by financial institutions with which you already do business, and credit card companies that check your file to determine if they want to send you pre-approved credit offers. Soft inquiries will not affect your credit score.
Hard inquiries, however, can affect your credit score—adversely—for anywhere from a few months to two years. Hard inquiries can include applications for a new credit card, a mortgage, an auto loan, or some other form of new credit. The occasional hard inquiry is unlikely to have much of an effect. But many of them in a short period of time can damage your credit score. Banks could take it to mean that you need money because you’re facing financial difficulties and are therefore a bigger risk. If you are trying to raise your credit score, avoid applying for new credit for a while.
Does avoiding hard inquiries raise your credit score?
Yes, having hard inquiries removed from your report will boost your credit score—but not drastically so. Recent hard inquiries only account for 10% of your overall score rating. If you have erroneous inquiries, you should try to have them removed, but this step won’t make a huge difference by itself.
5. Make the Most of a Thin Credit File
Estimated time: 3 to 6 months to begin to see results
Having a thin credit file means that you don’t have enough credit history on your report to generate a credit score. An estimated 62 million Americans have this problem. Fortunately, there are ways to fatten up a thin credit file and earn a good credit score.
One is Experian Boost. This relatively new program collects financial data that isn’t normally in your credit reports, such as your banking history and utility payments and includes that in calculating your Experian FICO Score. It’s free to use and designed for people with limited or no credit who have a positive history of paying their other bills on time.
UltraFICO is similar. This free program uses your banking history to help build a FICO Score. Things that can help include having a savings cushion, maintaining a bank account over time, paying your bills through your bank account on time, and avoiding overdrafts.
A third option applies to renters. If you pay rent monthly, several services allow you to get credit for those on-time payments. For example, Rental Kharma and RentTrack will report your rent payments to the credit bureaus on your behalf, which in turn could help your score. Note that reporting rent payments may only affect your VantageScore credit scores, not your FICO Score. Some rent-reporting companies charge a fee for this service, so read the details to know what you’re getting and possibly purchasing.
A new entry into this field is Altro (formerly Perch), a mobile app that reports rent payments to credit bureaus free of charge.
6. Keep Old Accounts Open and Deal with Delinquencies
Estimated time: The older your current accounts are, the better
The age-of-credit portion of your credit score looks at how long you’ve had your credit accounts. The older your average credit age, the more favorably you appear to lenders.
If you have old credit accounts that you’re not using, don’t close them. Though the credit history for those accounts would remain on your credit report, closing credit cards while you have a balance on other cards would lower your available credit and increase your credit utilization ratio. That could knock a few points off your score.
And if you have delinquent accounts, charge-offs, or collection accounts, take action to resolve them. For example, if you have an account with multiple late or missed payments, get caught up on what is past due, then work out a plan for making future payments on time. That won’t erase the late payments but can raise your payment history going forward.
If you have charge-offs or collection accounts, decide whether it makes sense to either pay off those accounts in full or offer the creditor a settlement. Newer FICO and VantageScore credit-scoring models assign less negative impact to paid collection accounts. Paying off collections or charge-offs might offer a modest score boost. Remember, negative account information can remain on your credit history for up to seven years—and bankruptcies for 10 years.
7. Consider Consolidating Your Debts
Estimated time: 2-3 hours
If you have a number of outstanding debts, it could be to your advantage to take out a debt consolidation loan from a bank or credit union and pay off all of them. Then you’ll just have one payment to deal with, and if you’re able to get a lower interest rate on the loan, you’ll be in a position to pay down your debt faster. That can improve your credit utilization ratio and, in turn, your credit score.
A similar tactic is to consolidate multiple credit card balances by paying them off with a balance transfer credit card. Such cards often have a promotional period when they charge 0% interest on your balance. But beware of balance transfer fees, which can cost you 3% to 5% of the amount of your transfer.
8. Use Credit Monitoring to Track Your Progress
Estimated time: 20 minutes
Credit monitoring services are an easy way to see how your credit score changes over time. These services—many of which are free—monitor for changes in your credit report, such as a paid-off account or a new account that you’ve opened. Also, they typically give you access to at least one of your credit scores from Equifax, Experian, or TransUnion, which are updated monthly.
Many of the best credit monitoring services can also help you prevent identity theft and fraud. For example, if you get an alert that a new credit card account that you don’t remember opening has been reported to your credit file, you can contact the credit card company to report suspected fraud.
Does paying off collections boost my credit score?
Historically, paying off your collections does not improve your credit score because a collection stays on your report for seven years. Newer ways of calculating credit scores no longer count collections against you once they have a zero balance, but it is not possible for you to predict which method your lender will use to calculate your score.
Does paying off a loan help or hurt credit?
Paying off a loan frequently hurts credit because it impacts your credit history and your credit mix. If the loan that you have paid off is your oldest credit line, then the average age of your credit will become newer and your score will drop. If the loan that you pay off is your only loan, then your credit mix suffers.
Will paying the minimum on my cards improve my credit score?
No. This is a widespread myth. You need to pay at least the minimum payment due on your credit card every month so that your cards have an on-time payment history. You do not have to pay a single cent in interest to improve your credit score. In fact, paying your credit card balances in full every month will have the greatest positive impact on your score, because it will improve your credit utilization percentage.
How long does improving your credit score take?
There is no set minimum, maximum, or average number of points by which your credit score improves every month, and there is no set number of points that each action will gain. How long it takes to boost your credit depends on the specifics for why your credit score is low. If the major negatives on your credit score are credit utilization, and then you pay off your balances, your score can improve drastically in a single month. If your credit is low because of multiple collections and poor payment history, then it will take several months of on-time payments to see any positive movement in your score.
Does getting a new credit card hurt your credit?
Getting a new credit card can hurt or help your credit, depending on your situation. It can help to increase your credit mix and improve your credit utilization percentage, but it will add a new hard inquiry to your account and make your average credit age younger—both of which could lower your score. For those in the credit-building stage, adding a new credit card will most likely lower your score in the short term but lead to a stronger credit score in the long term.
The Bottom Line
Improving your credit score is a good goal to have, especially if you plan to either apply for a loan to make a major purchase, such as a new car or home, or qualify for one of the best rewards cards available. It can take several weeks, sometimes several months, to see a noticeable impact on your score when you start taking steps to turn it around.
You may even require the aid of one of the best credit repair companies to remove some of those negative marks. But the sooner you begin working to improve your credit, the sooner you will see results.