How to improve your credit score

Summary

• Your payment history is a significant factor in your credit score, so paying your bills on time could help improve your score over time.
• Maintaining a credit utilization ratio of 30% or less may help boost your credit score.
• You can use methods like the debt snowball or debt avalanche to help you pay off outstanding debt.
• Check your credit reports often for mistakes like incorrect late payments or accounts that aren’t yours.

Having good credit is critical to your overall financial health. Your credit score helps lenders and service providers assess how responsible you are with your money, which may influence decisions like approving a credit card, loan, or rental application — or even setting up utilities in a new home.

If you’re looking to improve your credit score, the following 6 tips could help you build healthier credit habits and work toward maintaining a solid financial standing.

1. Pay your bills on time every month

Your payment history makes up 35% of your FICO credit score. Paying your credit card and utility bills late could make it challenging to qualify for more credit or a lower interest rate down the road.

You can set a calendar alert on your phone to make your payments on time, or you can always take advantage of autopay, so you’ll never miss a payment.

2. Become an authorized user

Becoming an authorized user on someone else’s credit card could be a good way to improve your credit score. As an authorized user, you’ll be added to the account holder’s credit card and their positive payment history and credit utilization will start to reflect on your credit report.

Remember that if the account holder misses a payment or carries a balance on their card, your credit score could decrease. So, consider all the possibilities before becoming an authorized user.

3. Keep your credit utilization low

Make sure your balance doesn’t exceed your credit limit or the amount you can comfortably pay off each month One way to manage this is to keep your redit utilization ratio the percentage of your available credit that you’re using—below 30%.  For example, if your credit card limit is $5,000, you may want to avoid carrying a balance of more than $1,500 each month.

One way to lower your credit utilization is to pay off your credit card balance before the statement date, not just the due date This helps reduce your reported balance, even if you’re carrying a balance from month to month.

You could also consider requesting a credit limit increase , which could lower your credit utilization. Just be sure not to increase your spending along with the higher limit.

4. Pay off outstanding debt

Paying outstanding credit card balances could help improve your credit score. The more you reduce your outstanding balances, the better your credit utilization ratio may be, which could positively impact your credit score.

If you look at the section of your credit card bill that tells you how long it will take to pay off a balance with only the minimum payments you’ll see that it could take years. Try adding even a small amount to your minimum payment each month to help speed up the process.

You can also consider one of the two most common debt payoff methods: the debt snowball and debt avalanche.

• Debt snowball method: You pay on the card with the smallest balance first while paying the minimum on your other cards. Once you pay off the first card, you move to the next smallest balance and continue until all your cards are paid off.
•  Debt avalanche method: This method involves paying off the credit card balance with the highest interest rate first while paying the minimum on all other balances. You’ll continue this process and move on to the credit card with the next highest interest rate, and so on.

5. Dispute errors on your credit reports

An error or mistake on your credit report could be one reason you’ve seen a decrease in your credit score. Check your credit report regularly so you’re never caught off guard. If you find an error, like another person’s account or a past due bill you know you paid on time, contact the credit reporting agency and discuss it with them to resolve the issue.

6. Avoid opening too many accounts at once

You can lower your credit score when you apply for too many lines of credit at once. Each application you submit will trigger a hard inquiry—when a lender checks your credit report to make their decision.

When you consider how many credit cards you should have, keep in mind that opening accounts you don’t need could make it harder to manage your payments and may lead to overspending. If you open a credit card at your favorite department store, wait a few months (or longer) before applying for additional credit. And think: The more credit cards you open, the more you need to keep track of them.

Improving your credit score takes time and patience, but every positive step you take could bring you closer to your goals, whether that’s getting better interest rates or simply enjoying greater financial freedom.

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