How to improve your credit score

Your credit score plays an important role in many aspects and stages of your life, from the rate you get on a loan to passing a background check for your dream job. On the flip side, having a bad credit score can keep you from achieving your goals. Luckily, improving your credit score isn’t a mystery — it’s actually a pretty simple process. Keep reading to find out how to find, improve, and maintain your credit score — and what you should be looking for when it's time to review your credit report.

What is a credit score?

A credit score is a number that essentially tells creditors, insurers, employers, and others how well you manage credit and how likely you are to repay your loans or credit cards. Your number can determine what kind of loan or insurance you can get, and on what terms. Credit scores are calculated using complex algorithms based on your payment history — how late your payments were, how much was owed, and how often you missed a payment all factor into your number. Positive behavior, like making on-time payments, improves your credit score. Negative information, like late payments or bankruptcies, hurt your credit.

What are the credit score ranges?

Credit scores typically range from 300-850. Generally speaking, a score higher than 750 is considered to be excellent — with this number, you’ll be able to secure some of the most favorable rates available. Scores between 700-749 are considered to be good, and fair scores fall into the range of 650-699. Poor scores are usually between 600-640, and very poor scores are anything below 600.

It’s important to have a good credit score for many reasons. For example, landlords will often review credit scores before approving rental applications, and lenders will check your credit score when approving you for a loan to determine what interest rate you will pay. Chances are, the lower your credit score, the higher the interest rate. This is because, to creditors and lenders, your overall credit history could be seen as a higher risk.

How can you check your credit score?

You can check your credit score by requesting a (free!) credit report. Every American is entitled to a free copy of their credit report from all three major credit bureaus (Equifax, Experian, and TransUnion) every 12 months. You can request your free credit report here.

What should you look for when reviewing your credit report?

If it’s your first time requesting a report, chances are you might not be sure what you’re exactly looking at. But rest assured, you’re taking the first step toward a clearer understanding of your financial picture — and it’s easier than you think. So what should you be looking for?

Incorrect personal information

This is anything from your full name to your address and employer. Though this information doesn’t affect your credit score directly, it could raise a few red flags from a lender or credit card issuer.

All your open accounts are there

It may be tempting to want to hide your debt, but you don’t want anything missing on your credit report. Take a look at your open accounts and make sure they are all... accounted for (we had to). This includes accounts in which you are an authorized user, too. If something is missing (or if an account you had closed is still classified as “open”), it could have an impact on your score.

Accurate payment history

Your credit report will feature the payment history of your open accounts for the past 24 months. This is where you’d see whether or not you’ve made on-time or late payments, which has a big effect on your score. Make sure this section is accurate each time you review your credit report. (Tip: cross-check with your bank statements!)

Negative marks

If you have a lengthier credit history or haven’t checked your score in a while, look through your credit report to see what is negatively impacting your credit score (also called a derogatory mark). These could be things like late payments, an account in collections, or defaulting on a loan.

Sometimes you might catch an error. If you find one, you will need to send a letter to the creditor letting them know of the mistake. The FTC provides a free letter template for filing this dispute.

There are other companies, like Credit Karma, that provide digital tools to help you identify and dispute errors on your report.

Unexpected credit inquiries

Inquiries are otherwise known as a list of requests for your credit history. You’ll see two sections for this: requests viewed by you (which do not affect your score), and requests viewed by lenders and others reviewing your report. (For example, if you were to apply for a car loan or credit card.)

If you don’t recognize an inquiry on your report, make sure to double check with the lender first. For example, store credit cards may come up on your report as a different name. But if you find out the inquiry was indeed fraudulent, your next step would be to contact the FTC.

Signs of identity theft

Some of the above negative marks might be legitimate, but there is also a chance it could be identity theft. If anything looks suspicious and you believe you’ve been a victim of identity theft, it’s best to act on it quickly by placing an initial fraud alert on your credit report. Note: it will expire after one year, but you have the option to place another alert at that time. You can do this through Equifax, Experian, or TransUnion, the three major credit reporting agencies. From there, you may be instructed to file a police report or other types of paperwork, depending on the situation.

How can you improve your credit score?

It’s never too early or too late to improve your credit score. No matter how old you are, the first step to fixing your credit is to know exactly where you stand. Too many people know they have “bad credit,” but don’t know exactly what their credit score is or what negative marks are on their credit report.

Once you check your score and know your number, you can:

Become an authorized user

You can improve your credit score by becoming an authorized user on an account of someone who already has a great credit score. The time an account has been open is a factor, so you might want to look to your parents or grandparents. This is a great option for high school and college students or those just starting their financial journey. Don’t get a physical card or use this line of credit for purchases — you don’t need it to get the benefits. You just want your name on the account so that you can benefit from their good behavior.

Get rent payments counted

Not all bills are reported. For example, your rent payments don’t help you build credit, even though that is likely your most expensive monthly bill. There are some services out there that will help you make sure your rent helps to build your credit, like RentTrack, ClearNow, and Rental Kharma.

Automate credit building

Remember, credit is built by successfully paying off debts on time — no matter how old you are. A simple way to ensure that it happens is to put small, recurring payments on a card and then have it automatically paid off in full each month. For example, put your water bill on automatic pay. Have that be the only bill on a credit card, then set the card up to be paid in full every month.

Settle what you can

Once you have cleared errors from your report, focus on resolving what you can. To do this, you can call the collection agency holding the debt and ask them to remove the derogatory mark once you settle the debt. This is a technique called “pay for delete.” (Note: not all agencies will do this as the legality of doing so is somewhat questionable.)

Regardless of if you choose to try and negotiate a “pay for delete” deal, you should try and settle whatever debts you can, as that will always help your credit score.

Try a credit booster

There are services out there, like Experian Boost, that allow you to count your utility, cell phone, and streaming service bills toward your Experian credit score. It’s free to use and won’t harm your credit, as long as you’re comfortable with linking your bank account. However, if you charge all your bills with to a credit card (and pay that on time and in full each month), the service might not be very beneficial — but still worth looking into.

Keep accounts open

Another heavily weighted variable in your credit score is the length of an account. Some people will advise canceling your credit card when it gets paid off in order to remove temptation. If you feel like you need to do that — do it. However, you will be removing an old line of credit. To get the best of both, consider cutting up the card but keeping the account open.

How long will it take for your credit score to improve?

The time it takes to raise your credit score will depend on the reason it needs improving to begin with. For example, if you have a low score because you’re just starting your credit journey, your score could go up within months after payments begin to be made.

If your credit score is low from debt or other financial hardships like foreclosures, bankruptcy, or late payments, it may take longer — sometimes years. But with patience, persistence, and a budget in place, you’ll be on your way to a better score.

How can you maintain a good credit score?

Keep an eye on your credit report

Picture this: you’ve been saving for a down payment on a new car, and you’re finally ready to head to the dealership. You’ve been preparing for this moment since you last checked your credit score about a year ago — paying all your bills on time and in full, living within your means, and saving diligently. Your score was pretty good, so you’re confident that your smart financial habits throughout the year have set you up to get a great rate on a car loan. You head to the dealership, find “the one,” and just when it comes time to sign on the dotted line...

Your score dropped 110 points.

Turns out, about a month after you checked your score, a credit card was opened in your name — and the hefty balance has yet to be paid. You still qualify for a car loan, but the interest rate is much, much higher than you expected — and now you have to deal with the consequences of identity theft all on your own.

You don’t need to request a new report every day in fear of fraud, though. Identity protection services, like this one offer three-bureau credit monitoring*, so you can stay informed of any changes with a monthly credit report. If identity fraud is detected, you can easily submit disputes online, so you’ll never be surprised at a dealership (or anywhere else) again.

Try not to rack up the balance on your cards

One of the factors considered in your credit score is something called “credit utilization.” It is the amount of credit you have used in relation to your total combined credit limit. For the sake of simple math, pretend you have a credit line of $1,000. You spend $500 of it. You have utilized 50% of your credit ($500/$1000).

A general rule of thumb is to try to keep your credit utilization under 30%. The lower, the better, as it is a proxy of how well you are handling your debt.

To help improve your credit score, look for the credit card with the highest utilization score and pay that down. That will be a card that is maxed out. A card with a $100 limit and $99 spent will have a credit utilization of 99%. A card with a $1,000 limit and $99 spent will have a credit utilization of 9%. In this step, you're looking for a cheap and quick fix. This is different from a strategy to get out of debt; if that is your goal, target the credit account with the highest interest rate.

Automate bill payments

The single best thing you can do for your credit is to consistently pay bills on time and in full. Sometimes we fail to pay on time — even when we could — simply because we’re human and we forget. Remove the option to forget and enroll in automatic payments.

Automatic bill pay is so valuable that many institutions will provide a discount just for enrolling. Check your insurance provider, cell carrier, and financial institution to see what discounts might be available.

Apply for more credit only when you need it

There are two issues to be aware of when it comes to opening new lines of credit.

First, applying usually requires a credit inquiry check, which can either be considered a “hard pull” or a “soft pull.” Soft pulls are often done for things like background checks, and these don’t impact your credit score. Hard pulls are done when you apply for things like a car loan or a credit card, and they can temporarily lower your score by as much as 5 points.

Second, opening several lines of credit in a short amount of time could be interpreted as having financial difficulties. So if you’re considering more credit, make sure it’s for something you really need.

Live within your means

If you like using credit cards, make sure you have enough money in the bank to pay the balance off in full every single month. In other words, if you can’t pay for the item in cash in real-time — it probably should be removed from your shopping cart. Not only will this mindset contribute to maintaining a good score, but it can also help you avoid or reduce debt. If you currently have credit card debt, consider putting a budget in place that allows you to pay down your debt at a faster pace.

Fixing your credit score isn’t hard, but it does require you to consistently follow some tried-and-true rules: know your scores (and what’s on your report), pay on time and in full, get credit for everything, and continue credit monitoring with an identity protection plan. Repeating these steps will raise your credit — and open up even more financial opportunity.

*Applicable for Kasasa Protect Plus and Kasasa Protect Premium packages only.