Raise Your Credit Score With These 7 Simple Strategies

Jules Baeten lays down in the grass with credit cards surrounding her face at Crescent Lake Park in St. Petersburg, Fla., on Feb. 21, 2019.
Tina Russell/The Penny Hoarder
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A bad credit score can follow you around like an unwanted admirer, affecting everything from your eligibility for a mortgage to the interest rate on your credit cards. If your credit score lingers in the low 300s, raising it can seem daunting.

But it is possible to improve your credit score if you know where to start.

What is a Good Credit Score?

Credit scores range from 300 to 850. Simply put, a score of 300 is bad and most lenders won’t take a chance on you. Once you reach 700, your credit score is considered good and you’ll have more options available for loans and credit cards.

Even if you can get a loan with a bad credit score, your interest rate will probably be through the roof. This can create an unhealthy cycle where you can’t pay your steep monthly loan payment, which dings your credit and lowers your score even further.

Recognizing why your score is low can help you make a plan to take your credit from bad to rad.

How is Your Credit Score Calculated?

There are three main credit bureaus that keep track of credit — Experian, TransUnion and Equifax. All three use a credit reporting agency called FICO to calculate your credit score.

Your FICO score is made up of five factors:

  • Payment history
  • Amount owed
  • Credit history
  • New credit
  • Credit mix

Payment History

The largest factor that goes into determining your credit score is your payment history. Pay your bills on time and you’ll notice an uptick in your score. Late or missed payments mean your credit score will suffer.

Amount Owed

It’s not bad to owe money (especially for something tangible like a house or a car), but having a large amount of credit card debt can negatively affect your credit score. Additionally, lenders will look at how close you are to maxing out your available credit. The closer you are to the max, the riskier you seem since you’re more likely to miss a payment.

Credit History

When you get your first credit card, you’ll notice your rates are higher. That’s because you don’t have any credit history. The longer you have credit cards or debt that you manage responsibly, the better your credit score should be, and the better interest rates you’ll get.

New Credit

Opening a new credit card doesn’t necessarily harm your score, but if you open a bunch at once you’ll send red flags that you’re on a spending spree and your score will dip.

Before adding a new line of credit, ask yourself why you need it. Can you hold off on a purchase until your credit’s in a better place? If not, go through your other options (loans from family, using current credit cards instead of new ones) before opening a new credit card.

Credit Mix

A variety of credit types helps push your score up. If you have mostly credit card debt, your score will suffer. But if you have a mortgage, car loan and a couple of credit cards, your score should be in better shape.

How to Improve Your Credit Score: 7 Strategies

A close look at a woman handling her bills.
Carmen Mandato/The Penny Hoarder

Before you make a plan for improving your credit score, take a look at your credit reports. If anything looks like it could be an error, you can file a dispute with the credit bureau and ask to have it removed.

Then it’s time to focus on making a few changes to your financial behavior.

1. Pay On Time

The simplest thing you can do to improve your credit score is to pay your bills on time each month. That includes utility bills, your mortgage, car loans, cell phone and credit card bills. If you have trouble remembering to pay your bills by the due date, set up payment reminders on your phone or sign up for automatic payments.

Ideally, you should get your amount of credit card debt down so that you can pay off your balance entirely each month.

2. Pay Off Your Debt

There are many types of debt, but some should be paid off more quickly than others. According to Time Money, good debt is money you’ve borrowed to pay for a house or an education.

But high-balance credit cards are considered bad debt, so you should tackle those balances first. Need a solid strategy? Some Penny Hoarders have had great success with the snowball and avalanche methods for staying motivated and paying off even the largest debts.

3. Keep Your Credit Utilization Under 30%

Even if you have a high-limit credit card, that doesn’t mean you should go on a shopping spree and charge everything to credit. Keeping your credit utilization to 30% or less will tell lenders that you have some good self-control.

That means if your credit limit is $1,000 on one card, you should keep your balance at $300 or less.

Some experts say it’s a good idea to make payments throughout the month if your balance is more than 30% of your credit limit. That’s because your lender will report your total balance to the credit bureaus, so carrying a high balance until the due date could affect your credit utilization. Making payments throughout the month can help get your credit utilization down to an optimal level.

Keeping a low balance is the key here. But beware of having multiple credit cards with low balances — that can be as detrimental as having a high-balance credit card. To improve your credit score and maintain it once it reaches a good level, stick with fewer credit cards in addition to keeping your credit utilization to 30% or below.

4. Remove Old Collection Accounts

Most negative information on your credit report will cycle off after a certain amount of time. For most missed payments and collections, this period is seven years, and that increases to 10 years for bankruptcies.

Sometimes the credit bureaus might miss an older collection when cleaning up your credit report. In this case, you can file a dispute to have them removed.

5. Mix Up Your Credit Types

A credit card is a great tool when building credit, but if you really want to increase your score you’ll need to vary the types of credit to your name.

A good mix of credit includes things like a mortgage, car loan or student loan in addition to credit cards. Avoid falling into the trap of opening multiple credit cards in an attempt to improve your credit score, especially if you open them in quick succession.

6. Raise Your Credit Limit

If you’ve had a credit card for a while, call your bank and ask if they will raise your limit. If you can get them to agree, you could see an increase in your credit score.

Remember that even if you do get a higher limit on your card, that doesn’t mean you should max it out or go crazy on eBay. Use your credit card sensibly if you want to maintain a good or excellent credit score.

7. Get a New Credit Card

A new credit card can help you build credit if you go about it the right way. If you’re starting from scratch with a low score due to a short credit history, opening a new credit card can actually work in your favor.

I moved to the U.S. from England in 2007 and had no credit to my name. I found a bank that would give me a low-limit, high-interest credit card and used it to buy groceries, paying it off in full each month.

Eventually, I had enough credit to apply for a better credit card, then a car loan and eventually a mortgage. That first credit card opened the door to new opportunities that helped build my credit history.

Pro Tip

Another option is to sign up for a secured credit card, which requires a cash security deposit. It reduces the risk for the credit card companies, which might otherwise not issue you a card.

How Long Does it Take to Improve Your Credit?

Just as it takes time to build new credit, it can take time for your efforts to result in an improved credit score. You can’t expect your score to improve overnight or even within 30 days, but that doesn’t mean you should stop trying.

Check In With a Free Credit Report

If you’re curious about what’s being reported, you can request a free credit report from each of the three bureaus once a year at AnnualCreditReport.com. While this will show you what’s on your report, it won’t tell you your three-digit credit score.

There are a few other ways to find out your credit score. Some banks will report your score each month when you sign up for a credit card with them. (My USAA credit card does this, and it’s how I keep track of my score.) If you can’t find a bank that will do this, websites like Credit Sesame will provide you with your score when you sign up for an account.

How Often Should I Check My Credit Score?

Contrary to popular belief, checking your own credit score won’t lower it. That kind of query is called a soft inquiry; the type that harms your credit is a hard inquiry and is what happens when banks or lenders request your credit score.

Even though it can be tempting to check your credit score often when you’re trying to improve it, it’s best to keep it to once a month or less to avoid obsessing over it. Just like losing weight, repairing or improving your credit takes time, so there’s no sense in checking your score too often.

Whether you’re trying to recover from crippling student loans, a Chapter 7 bankruptcy or a mortgage default, it is possible to improve your credit over time by taking control of your finances.

Catherine Hiles is a British writer living in Ohio with her husband and two young kids. She built her credit from nonexistent to excellent by trying to make good financial decisions, (but still has a weakness for running shoes and nail polish).