How To Improve Your Credit Score: 8 Ways To Get Started

Woman looking at her credit card APR
Vladimir Vladimirov / Getty Images

Buying power, or purchasing power, is a term used to describe the amount of cash you have available to purchase something. Usually associated with investing in stocks or cryptocurrency, buying power can also be achieved with the amount of credit you have to access.

Normally, credit is used to purchase necessities, often big-ticket items like a car or a house. Banks loan you money to buy the things you need now, trusting that you will pay the money back later. This is called using credit.

In most cases, if you have a low credit score, it will be harder for you to get a loan for any of these items. At best, you may be able to get a car loan, for example, but even that will come with a higher interest rate.

If your credit is not the best, continue reading to learn how to improve your credit score through eight actions you can take right now.

1. Find Out Your Credit Score

Before you can take steps to improve your credit score, you first need to know what your current credit score is.

Check Your Credit Today

Generally, you can get a free copy of your credit report from each of the major credit-reporting bureaus once a year. During the COVID-19 pandemic, the three major credit bureaus are offering free weekly credit reports.

Visit AnnualCreditReport.com to download your report from Equifax, Experian and TransUnion. Although your credit report does not include your credit score, it shows you all of the data used to calculate your credit score. You can request free access to your credit score from your credit card provider or bank.

2. Pay Your Bills on Time (or Early)

Paying your bills on time — or even early — helps you build credit. When you pay your bills by the due date every month, it can help you avoid having your credit score go down.

Promptly paying your bills each month shows lenders that you don’t take debt lightly. If you show consistency with paying your bills, you increase the possibility of being trusted to pay new debt on time as well. This behavior improves not only your credit score but also your creditworthiness.

3. Aggressively Pay Down Your Credit Cards

Paying more than the minimum payment on your credit card bills will save you on interest costs in the long run. If you’re only making minimum payments on a loan, then you’re strictly paying toward the interest, not the principal.

The sooner you pay off your credit card bills, the higher your credit score will be. Consider setting up automatic bill payments to help you get into the habit of paying off debt regularly and systematically.

4. Avoid Multiple Credit Inquiries Within a Short Period

Too many hard credit inquiries within a short enough period can potentially hurt your credit score. It may not be a significant amount, but all inquiries can have some effect on your score.

FICO calculates 10% of a credit score’s weight to new credit, which is typically attributed to lenders making hard inquiries into a borrower’s credit history.

Check Your Credit Today

Soft inquiries are less damaging than hard inquiries. The difference between the two is that with hard inquiries, you permit lenders to view your credit report. With a soft inquiry, lenders can check your credit without your knowledge.

5. Keep Your Credit Utilization Rate Low

Your credit utilization rate, or ratio, is the amount of your current revolving credit usage divided by the total amount of revolving credit available to you. Simply put, it’s how much you owe divided by your credit limit, usually expressed as a percentage.

For example, if you have a credit limit of $20,000 available to you on two credit cards, and your balance on one of them is $10,000, then your credit utilization rate or ratio is 50%.

Credit utilization makes up about 30% of your FICO score, so you want to keep this percentage low to show that you’re good at managing credit and don’t spend more than you earn.

Here’s a look at other factors that affect your FICO score:

What Affects Credit Score

6. Protect Your Identity and Monitor Your Credit

If someone steals your identity and uses your personal and financial information without your permission, they put you at major risk.

Unauthorized access to your name, Social Security number, address, bank accounts and credit cards or numbers allows someone to get a new credit card in your name or make purchases with your current credit cards and numbers.

To prevent this theft and fraud, consider getting identity theft protection and credit monitoring to regularly track your bill accounts, bank account activity and credit reports. Any unrecognized activity could be a sign of identity theft that could potentially damage your credit score.

7. Don’t Close Old Credit Card Accounts

You may have been tempted to close a credit card account that you’ve rarely or never used. But before you call the credit card company to cancel your card, think about the potential ramifications of your decision on your credit score.

While, in some cases, it may be prudent to close old credit card accounts, you should generally not do it. Closing old, rarely or never-used credit card accounts might hurt your credit score in one, or both of two ways:

  1. Closing out an old credit card account could reduce the age of your accounts or the length of your credit history. This is not perceived as important as number two.
  2. More importantly, if you close an old credit card account, you reduce the amount of your available credit, which potentially increases your overall credit utilization rate or ratio. As mentioned before, you want to keep credit utilization low.

8. Have Paid-Off Negative Entries Removed From Your Credit Report

If you have late payments or old collections on your credit report that you have paid off, then you can ask the credit bureaus to remove them. Just be sure that you have paid them off, and be prepared to show proof.

Removing negative entries from your credit report can increase your credit score and put you in a position of favor with future lenders.

Why Should You Know How To Improve Your Credit Score?

Negative credit information stays on your credit report for approximately seven years and subsequently lowers your credit score. Fortunately, you can always improve your credit score by taking the actions presented in this article.

Good To Know

In addition to the three major credit bureaus’ websites, you can obtain your credit score for free at other locations as well. Here are some of the ways that you can get your credit score without paying a dime:

  • If you have a credit card issued by Citi, Discover, Chase or Capital One, the banks will provide you for free with either your FICO score or VantageScore.
  • Credit Karma is another top website you can use to check your credit score for free.

Since credit scores affect so many areas of life, having good credit comes with several benefits. Knowing how to increase your credit score now will help you enjoy some of the biggest advantages listed here in the future:

  • Lenders will seek you because of your responsible payment history.
  • Having good credit usually exempts you from needing a co-signer to qualify for a loan.
  • With good credit, you can qualify for lower interest rates on nearly all loans.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

Kathy Evans is a personal finance freelance writer and entrepreneur with a technical writing and instructional systems design background. She holds an MS in technical writing and informational design and is currently a doctoral student in instructional technology at Towson University. Through work experience in the federal government as well as commercial and nonprofit industries, she has focused her freelance writing on finance, investing and economic content with a specialization in budget coaching.  

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