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So you want to improve your credit score, huh? You’re in the right place. I’m going to demistify some of this the whole credit thing for you. Sit tight. Maybe grab a glass of wine? And let’s get started.
Here are 25 things you can do to improve your credit score:
Get your free credit reports. The first thing you need to do is grab your credit reports. You can get free credit reports from multiple places. Why do you need this? The information on your credit reports (payments, accounts, etc.) are what’s used to calculate your credit scores. You need to clean up your reports to improve your credit score. The first step of cleaning up is knowing where you stand. Here’s where you can get your credit reports:
- You can get free reports once per year from the site annualcreditreport.com.
- You can get free reports from sites like Credit Sesame as well. These sites have free reports that include credit monitoring and other cool stuff.
Pull your credit scores. Your free credit report from annualcreditreport.com doesn’t come with a credit score. Remember these two things are different. Credit reports are a record of your payments and accounts. Your credit score is a risk score or grade of your credit report. You can grab this score at a free site like Credit Sesame. You may be able to get your credit reports for free from your bank or credit card company. Wells Fargo, Bank of America, and American Express are examples of places that offer you a score for free.
Sign up for a free credit reporting site to get alerts. After pulling your score and reports, consider signing up for regular monitoring to improve your credit score. This will help you get notified whenever there are changes in your score. Credit Sesame and your financial institutions may offer regular alerts which means you get an email monthly or message if something changes. Different moves you make will impact your credit score. You want to get familiar with behaviors that improve your credit score so you can keep doing them.
Limit inquiries. Inquiries are credit checks. Getting credit checks done sporadically can hurt your score and make lenders question if you’re financially stable. If you were financially stable, why would you be applying for so much credit? Shopping for auto loans and mortgages are different. You’re able to shop around within a few week period and it counts as one credit check. Shopping for the best possible deal is good. Applying for credit all willy nilly is bad.
Get a secured card. Moving on to a tip for building credit. If you’re new to credit or you’re rebuilding poor credit, a secured card can be the right next move. A secured card is one where you put a deposit down and that acts as your credit line. Typically, you can get approved for this account with no credit or poor credit. Use and pay off the secured card and you can build credit and eventually qualify for a regular card. Look for a secured card that has very limited fees. Here are some cards that you may want to consider.
Get a credit builder loan. A credit builder loan is exactly what it sounds like. It’s a loan that’s meant to help you boost your credit and it’s often offered by credit unions. What happens is the lender lends you money, but you don’t get access to the cash. It gets put into an account for you and you make payments with interest on the “loan.” Once you pay it off, you get the cash. There are two perks of this product. You pay on time which can improve your credit score and at the end you get a lump sum of cash that can be the start of your emergency fund. Self Lender is an example of a place that offers credit builder loans.
Lower your credit utilization. If you already have credit cards, lowering your credit utilization can help you improve your score. Your credit utilization is a comparison of your credit limits to your credit card balances. The lower your balances compared to your limits the better. You want to be using less than 30% of the credit that’s available to you. If you have maxed out cards, start working on paying those down.
Dispute negative records on your report. If you have negative records, make sure all of the records are accurate. If not, dispute, dispute, dispute. You can file a dispute with the credit bureau or the creditor to have items removed. Keep all documentation of your disputes. It’s generally better to file a paper dispute vs. an online one because you can send in proof and the online dispute may have some stipulations. Learn more about why not to dispute items online.
Make sure that old negative remarks are no longer hurting your score. Beyond removing incorrect or incomplete report records, you can also dispute very old records that should no longer be impacting you. Late payments should drop off after 7 years. Bankruptcy should stop affecting you after 7 to 10 years.
Pay your bills on time. Paying bills on time has the greatest impact on your score. Late payments can ding your score several points. If you can’t dispute records, you can improve your score with current good payment behavior. Set up automatic payments or payment reminders.
Open a new card. Use and pay it off each month. Opening a new card can raise your credit limit which in turn can improve your credit utilization. A new card will cause an inquiry, but the few points you lose may be worth the points you gain from using a new card responsibly. Keep the utilization low on your new card by charging a small balance and paying it off completely.
Become an authorized user on someone’s account. Becoming an unauthorized user on someone’s account can improve your score because their account may show up on your credit report. The account you’re adding on should have several years of stellar credit history.
Pay your rent with a credit card. Your rent is due every month. Use your credit card to pay the rent and then pay it off right away. The using and paying off on a regular basis may improve your credit score.
Put money away in an emergency fund. Time to start saving, friend. When you have an emergency savings account, you won’t have to fall on debt to pay for bills that pop up. Limiting use of your credit cards can improve your credit score.
Start a budget and change your spending habits. Start getting your financial life together. Every part of your financial life is related to each other. Your budget, savings, debt, and credit. Budget your money and get control of your spending habits to improve your credit score.
Be selfish with your credit. Don’t cosign for other people’s loans. If you can, take your name off loans you’ve already cosigned for. Yes, you want to be helpful but you can’t provide financial stability for your family if someone is using and ruining your credit. Take your cards back and avoid backing someone’s loan. Their payment habits will affect you and you could even be on the hook if they default.
Don’t cancel your accounts quick fast and in a hurry, let them age. The longer your credit history the better. If you decide to pay off your accounts, don’t go right ahead and cancel them. The length of your credit history is the average of all of your accounts. Your old accounts make your credit history longer.
Read a book on building credit. Not sure what you’re doing? There are tons of books and videos on building credit around that can help you improve your credit score. Take a moment to check a few out here:
Come up with a debt repayment plan. What’s your plan on crushing debt. If you don’t have one, formulate one. Think about how much you’re going to pay down on your debt monthly. You can also check out this post to learn what debt should you pay off first.
Shop around for lower interest rates. Interest rates are the silent killer of your debt repayment plan. High interest rates can cost you quite a bit of money before you even attack the principal (the money that you actually borrowed to purchased something). You can lower your interest by using a balance transfer card or refinancing your debt. A balance transfer card is one that offers a 0% interest rate for 10 to 15 months. You transfer your debt onto the card and pay it off interest free. A loan refinance is when you apply for a new and more affordable loan to pay off an old one. Here are two places to look for balance transfer cards.
Get a credit limit increase. Requesting a credit limit increase on your credit cards can reduce your debt utilization and boost your score. Asking for a credit limit increase usually triggers an inquiry on your credit report. However, it may be worth losing a few points temporarily to gain more points from a reduced credit utilization. Make sure you don’t max out your card or use the new available credit. The goal is to leave this new credit available!
Ask your creditor to rescind late payments or negative remarks. If you’re still using an account that has negative remarks and your current history is good, you can try sending a letter to the creditor to request that they remove late payments. This may or may not work but it’s worth a try. Make sure you get any agreement in writing.
Be careful with debts in collections. Don’t go to pay off debt in collections right away particularly debt that is “charged off.” The payment cycle for charged off debt may have ended because it’s assumed you’re not going to pay. Starting to pay again may restart the cycle.
Negotiate debt in collections. For active debt in collections you should contact the company to make an agreement. They may be willing to forgive some of your debt if you’re able to pay off an agreed amount. Ask if you can establish a payment agreement in exchange for them taking the record off your report. Keep all agreements in writing!
Sign up with a credit repair company. If you don’t want to go about repairing your credit on your own, you can hire a credit repair company. Usually, they charge a commission to do the ground work for you. They’ll dispute and look for other credit building opportunities.
*Wiping off my sweaty brow* That’s it! 25 ways to improve your credit!
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