A good credit score can open a lot of doors when it comes to qualifying for loans, credit cards, and lines of credit. But what do you do if your credit isn’t where you want it to be? In this guide, we cover some of the best tips for cultivating a good credit score, whether you’re trying to rebuild after financial hardship or just want to keep your already good score moving in an upward direction.
Before we dive in, make sure you know what your credit score is. Get your free Credit Report Card or sign up for ExtraCredit to see 28 of your FICO® scores and your credit reports from all three major credit bureaus.
1. Pay Every Bill on Time
Late payments have an increasingly negative effect on your credit score, so the best way to keep your score up is by paying all of your bills on time. Keep in mind that this doesn’t only apply to making your credit card payments on time. Loan payments, in addition to utilities, rent, and phone bills, all need to be paid on time. Setting up automatic bill pay through your payment account can help you stay organized and ensure that everything gets paid when it should be.
>> Learn more about payment history and your credit score.
2. Keep Your Debt-to-Credit Ratio Low
Seeing high levels of debt makes potential creditors nervous. Keeping your overall debt amount to lower than one-third of your available credit will help cultivate a good credit score. If you can get your debt down to less than 10% of available credit, even better. When you maintain a low credit utilization ratio, lenders see that you don’t make a habit of maxing out your credit cards. This tells them that you can manage your credit accounts responsibly. All these factors positively affect your credit.
>> Learn more about credit utilization and your credit score.
3. Establish a History of Good Credit
Potential lenders like to see a long history of responsible credit usage, so don’t automatically close out old cards that you rarely use anymore. This lowers the average age of your credit and your available credit—both of which can negatively impact your score.
>> Learn more about credit history and your credit score.
4. Maintain a Good Credit Mix
Responsible use of a variety of credit options such as credit cards and installment loans shows lenders that you understand credit and know how to use it. If you have only credit cards, consider getting an installment loan like an auto or personal loan to diversify your credit profile.
>> Learn more about credit mix and your credit score.
5. Limit Frequency of Credit Applications
Although it can be tempting to apply for as many credit cards as possible—especially when you start to see improvements in your credit score—doing so can actually have an adverse effect on your rating because they cause hard inquiries on your account. Hard inquiries lower your credit score, and several of them within a short period of time signals to lenders that you may be a credit risk.
>> Learn more about credit inquiries and your credit score.
6. Check Your Credit Report for Errors
Inaccurate reporting by creditors can shave points off your credit score, so scour yours thoroughly for any signs of mistakes. If you find them, contact the creditor and ask them to correct them as quickly as possible.
>> Learn more about credit repair.
7. Raise Your Credit Limit
Raising your limit of available credit results in a more favorable debt-to-credit ratio—as long as you don’t use it. The best way to do this is to ask a current credit card company to raise your line of credit. Getting a new credit card is an option as well, but this approach requires a hard inquiry on your account. Another possible way to increase your credit limit is to become an authorized user on someone else’s credit card.
>> Learn more about credit limits.
8. Negotiate Defaults with Creditors
A default on your record will harm your credit rating for a number of years, so see what you can do about negotiating payment. Creditors often agree to accept a partial payment for accounts they’ve long since written off as uncollectible. They may not be able to remove the account but marking it as paid may still help your score.
>> Learn more about negotiating with creditors.
9. Sign Up for ExtraCredit
ExtraCredit offers five incredible tools to provide total credit coverage. You’ll receive credit monitoring services designed to alert you to possible ID theft and mistakes on your credit report. You also get credit reports from all three bureaus, an exclusive discount to one of the leaders in credit repair, and other credit profile building offers. Members also earn cash rewards for qualified offers and receive a $5 signup bonus.
10. Be Patient
There’s no quick fix to raise your credit score. Negative items generally stay on your credit report for at least seven years. They have less impact on your score as they age but you want to focus on good credit practices going forward while you wait for the negative information to age off your credit reports.
A credit score isn’t a static number. It’s a snapshot that changes over time based on the information in your credit report, which is based on your credit habits. Turning around a low credit score can seem like a daunting project, but with practical thinking and a strong plan of action, it’s possible to take control of your finances and improve your score.