Your credit report has a huge impact on your financial life. A good credit score will give you access to the best terms and rates when applying for loans and credit cards. If you have a bad credit score you may not qualify for loans with mainstream lenders, your insurance premiums may be higher, you could miss out on career opportunities and you’ll struggle to rent an apartment. It’s no secret that improving your credit can make for a happier, healthier financial life.
But how exactly do you improve your credit score?
How to improve your credit score: two strategies
There are two main strategies to improve your scores.
First, you can repair your credit by removing negative items from your credit reports. The information in your credit reports is collected and managed by credit bureaus. These are for-profit organizations that have the legal responsibility to remove negative items if they are incorrect, inaccurate, or there is no evidence to back them. Removing negative items from your credit report can increase your credit score quickly.
Second, you can develop good credit habits that help you build a solid credit history. It can take months or even years to see big changes, but with patience and consistency, you can improve your credit score with the following good habits.
We will first explain how to remove negative items from your reports and then provide detailed instructions to build a solid credit history.
Let’s dig into what determines your credit score and some key strategies to improve your credit score.
What factors affect your credit score?
Before you can start working to improve your credit score, it helps to understand the factors which determine your credit score. These include:
- Payment history, which accounts for 35% of your credit score. Your payment history measures your ability to consistently pay your bills on time.
- Your credit utilization ratio is the percentage of your credit limit that you’re currently borrowing. This determines 30% of your credit score.
- The length of your credit history determines 15% of your credit score.
- Your credit inquiry frequency determines 10% of your credit score. What does that mean? Well, when you apply for a loan or a new credit card, the issuer sends a “hard credit inquiry” — a formal request to review your credit report. If a credit bureau sees too many such inquiries in a row, it indicates that you’re borrowing heavily. This can be a risk factor for lenders.
- Your credit mix determines 10% of your credit score. The type of credit accounts you have matters. Examples include secured and unsecured loans, credit cards, and mortgages.
Want to improve your credit score? Change your spending behavior to improve your standing in each of these categories. Focus most of your efforts on your payment history and credit utilization ratio since the credit bureaus weigh these two factors most heavily.
How to repair your credit score
FICO scores aren’t infallible — even the big three credit bureaus make mistakes from time to time, which can lower your credit scores. If you aren’t already checking your credit report regularly, it’s time to start. The odds are good that there is at least one error. Even a seemingly small mistake, like a misspelled name, can have a negative impact on your scores by getting your account confused with someone else’s even worse credit.
Correcting an error on your credit report is the fastest way to raise your credit. In fact, it’s the only strategy that can improve your FICO score overnight.
Check your credit report and correct any mistakes
Removing negative information that is not accurate from your credit files is not difficult, but you need to be persistent, and it can be tedious and time-consuming. That is why many people prefer to hire a credit repair company to take care of these tasks. However, there is nothing a credit repair company can do that you can’t do by yourself.
Here is how you can remove negative information from your credit files.
- Request a copy of your three credit reports (Experian, Transunion, and Experian). Services like Credit Sesame and Annualcreditreport.com allow you to do it for free.
- Carefully examine the reports and identify any items you don’t recognize, are incorrect, or otherwise suspicious. Write a list with the information for each account.
- Write a letter of dispute and send it to each credit reporting company requesting they delete all the incorrect or suspicious accounts you identified in step 2. I have added the addresses for each credit reporting company and a template you can adapt to your personal situation. Credit reporting agencies have 30 days to complete the investigation and send you a reply.
- Send a second letter requesting verification for all the suspect items that are still on your report. I have added a template you can use below, which is based on advice provided by the Consumer Financial Protection Bureau. The idea is to request detailed information on each derogatory item.
- Write a third letter expressing your intent to complain to the Consumer Financial Protection Bureau. Of course, only take this step if the credit reporting companies have not provided the detailed information requested in step 4. See template below.
- File a complaint with the Consumer Financial Protection Bureau. If you feel the credit reporting agencies have not provided evidence for the negative items hurting your credit scores, an official CFPB investigation may help. Click here to get started.
- Request evidence of the debts on your reports to the debt collection agencies or original creditor, such as a credit card issuer. It is usually best (and faster) to work through the credit reporting agencies, but this is also a good strategy if you don’t get the response you want. Debt collection agencies and creditors, such as card companies, are required by law to have evidence of your debt, such as a debt contract. I have added a template you can adapt below.
- Ask the debt collection agency (or the original creditor) to remove any items for which they did not provide evidence.
Now, let’s cover each step in detail and include template letters you can adapt for your own case.
How to build your credit score
Once you have removed any mistakes or inaccuracies that could lower your credit score, it’s time to start building your credit history. Here is a list of strategies that can help.
Always make your payments on time
Paying your bills on time is the biggest step you can take towards good credit. Your payment history has the biggest impact on your credit, accounting for a whopping 35% of your total FICO score. Nothing can raise – or lower – a FICO score more than the way you pay your bills.
If you want to increase your credit score and keep it that way, it’s important to establish good habits. If you struggle to remember to make your payments on time, try setting up autopay to take the responsibility out of your hands.
Pay off your debts
Your debt-to-total credit ratio determines 30% of your FICO score. Carrying a high ratio can tank your credit. By resisting the urge to max out your credit cards, you’ll lower your stress and raise your credit score.
If you’re only making minimum payments on your credit card bills, you’re not doing yourself any favors. Ideally, you should pay off balances in full every month. If you can’t afford to do so, start by increasing your monthly payments. It’s always a good idea to pay more than the minimum.
If you’re carrying credit card balances on multiple cards, try paying off the one with the highest interest rate first. Make the maximum monthly payment that you can comfortably afford until you’ve reduced the balance to zero. Then, use the same strategy with the credit card with the next-highest interest rate.
Note: While it’s smart to pay off your balances as quickly as possible, don’t close the account as soon as you’re debt-free. If you close too many credit accounts, your credit utilization ratio will drop, even if you’ve cut down on your debts.
Consolidate your bills
Are you grappling with multiple credit card balances? Try consolidating your bills into a single monthly payment. Credit consolidation can make your life easier in two key ways. First, it lets you eliminate high-interest credit card debt, letting you lock down a lower total monthly payment. Second, it makes it easier to keep track of payments.
Note that we don’t recommend closing your unused credit accounts after transferring their balances out. Closing your accounts lowers your total available credit (which hurts your credit utilization ratio). Plus, closing an older account shortens the average age of your credit accounts.
Keep your spending well below your credit limit
When your credit card balance, loan, or other lines of credit fall below 30% of your credit limit, your credit score will probably improve. So if you’re carrying a balance higher than 30%, you should pay it off as soon as you’re able. The sooner you can shrink your balance, the sooner you’ll repair your credit score.
Avoid closing credit accounts
If you’ve struggled with debt in the past, you may be tempted to close some or all of your credit accounts to avoid temptation. However, this behavior will actually hurt your credit score. That’s because it affects two of the factors that determine your credit score: your credit utilization and your credit history. Eliminating credit accounts lowers your total credit limit, hurts your balance-to-limit ratio, and lowers the average age of your credit accounts. On the other hand, a credit limit increase can help improve your score.
Become an “authorized user” on someone else’s credit card
If you have family members with good credit, you can become an authorized user on one or more of their credit cards. Your credit will get an immediate boost, and you won’t be responsible for any of their debts.
But be careful with this tactic. If you slack off on paying your bills, you could trash your family member’s credit, not to mention your relationship. Likewise, if their credit takes a hit, yours will too.
Work with a reputable credit repair company
If you suspect that there are mistakes on your credit file, but you don’t know how to find them, a trustworthy credit repair company can help. These professionals are trained to find and remove negative misinformation from your report. As mentioned above, there is nothing a credit repair company can do that you can’t do by yourself. Follow the detailed instructions in the first section of this article if you prefer to do it yourself.
A reputable credit repair company will provide certain information in advance, including:
- A written contract listing the services they’ll provide, along with your legal rights.
- An estimate of the time it will take for them to get results.
- The total cost of their services.
When shopping for a credit repair company, be wary of scammers. These opportunists know that customers seeking credit repair are typically in dire straits and try to take advantage of their desperation. But as long as you are wary, you can sidestep the scams.
When vetting potential credit repair companies, keep an eye out for the following red flags.
- Unrealistic promises or guarantees.
- Requests for payment in advance.
- The company tells you not to contact the credit bureaus directly.
- You’re asked to dispute the information you know to be correct.
- The company suggests that you lie on an application.
- They neglect to tell you your rights.
This is SuperMoney’s list of the best credit repair companies available.
Speak with a credit counselor
Another great option if you’re overwhelmed by this process is to work with a credit counselor. A good credit counselor will review your finances and then help you put together a plan of action. With a step-by-step plan in hand, the prospect of achieving good credit should feel far more achievable. Best of all, if your budget is low, you can get credit counseling for free from many non-profit organizations.
However, as with credit repair companies, be wary of predatory companies. A good counselor shouldn’t make any unrealistic guarantees, and should be licensed by your state.
Try improving your credit with a secured credit card
If you have no credit history, it’s very hard to get a credit card to help you build history. If you’re unable to qualify for an unsecured credit card with your current credit score, consider a secured card. Even applicants with poor credit can qualify for secured credit cards. That’s because secured credit cards are backed by cash deposits, which serve as collateral, providing an additional layer of security for the credit card company. In this way, it’s like a checking account, letting users borrow money from themselves. But unlike a checking account, using a secured credit card responsibly can improve your credit score.
What to avoid when trying to increase your credit
Not all responsible financial behavior will improve your credit. When working to improve your credit, you should be aware that the following actions will have no impact on your credit score:
- Using a debit card.
- Taking out a payday loan.
- Using a prepaid card.
- Working with a lender that doesn’t make reports to the three major bureaus.
When in doubt, be sure to ask each lender or credit card company whether or not they make reports to the three major bureaus.
Frequently asked questions about improving your credit
How many scoring models are there?
There are two main scoring models: FICO and VantageScore.
FICO has several types of scores, such as Classic FICO, NextGen FICO Risk, FICO Expansion, and FICO Industry Options. There are three different Classic FICO scores, one at each of the bureaus. They are branded as Beacon scores at Equifax; FICO Risk or Classic (formerly known as EMPIRICA) scores at TransUnion; and Experian/Fair Isaac Risk Model scores at Experian. FICO scores range from 300 to 850, with higher scores reflecting lower credit risk.
VantageScore is a new system developed by the bureaus in 2006. The score ranges from 501 to 990 and is scaled like the letter grades of an academic scale (A, B, C, D, and F). The higher the score, the lower the credit risk.
How can I raise my credit score in 30 days?
If you have a family member with good credit, one of the best credit-boosting shortcuts is to become an authorized user on one of their credit cards. Your credit will get an immediate boost, and you won’t be responsible for any of their debts.
But be careful with this tactic. If you slack off on paying your bills, you could trash your family member’s credit, not to mention your relationship. Likewise, if their credit takes a hit, yours will too.
How fast can you raise your credit score?
Credit card issuers typically report to the bureaus every month. As such, if you’re able to significantly reduce your outstanding balances, you could see the impact on your credit score within a month’s time. If you’re able to pay off a maxed-out card — or, even better, more than one of them — you could elevate your score by nearly 100 points.
What helps your credit scores the most?
Nothing will improve credit scores as much as paying your bills on time, every time. Making sure that you never miss a payment is the single best way to repair shaky credit reports. That’s because steadily paying down your balances improves both your payment history and your credit utilization, two factors that collectively account for 65% of your credit scores.
What is your FICO score?
A FICO Score is a three-digit number determined by the data on your credit file. Lenders use it to determine how trustworthy you are as a borrower. This, in turn, affects how much you can borrow, how many months you have to repay, and how much it will cost (the interest rate).
How do I get my credit score up 100 points in one month?
Improving credit scores isn’t a sprint; it’s a marathon. Unfortunately, unless you are able to pay off a ton of debt in a short time span, it will be difficult to significantly boost your score in a month’s time. If you check your credit and find a mistake in your credit report, you might be able to boost your score overnight. However, if there aren’t any major errors on your FICO score, the best thing you can do is to steadily pay off your outstanding balances.
How long do late payments stay on your credit report?
Like collection accounts, late payments can remain on credit reports for up to seven years. However, not all late payments are equal. A payment that is 30 or 60 days late won’t affect your credit score as much as a payment that’s 90 days past due.
Why did my credit score drop?
Several factors can cause your credit scores to drop. High credit card utilization, late payments, and too many hard inquiries are just a few issues that affect your credit health.
If you haven’t missed any payments and are unsure why your FICO score dropped, review your credit file for potential errors.
Will a balance transfer hurt my credit scores?
It might, especially if you close your old account after transferring your balance out. Closing an older account will reduce your available credit, which hurts your credit utilization rate. Plus, it shortens the average age of your accounts, which reduces your credit history.
That said, if consolidating your accounts will help you to make your payments on time, it will still help your credit in the long run.
Templates for letters of dispute
If you want to dispute a negative item on your credit file, you will need to send a letter, return receipt requested, and keep a copy of the letter and post office receipt for your records. Consider sending letters to both the credit reporting agencies and the debt collectors and creditors furnishing the incorrect information. These templates are based on examples provided by the Consumer Financial Protection Bureau. Make sure you adapt them to your personal situation.
Dispute letter template to credit reporting agencies[Your complete name] [Report confirmation number, if available] [Identifying information requested by the company, typically including:
- Date of birth
- Telephone number]
[Address of credit reporting company, select one of three below]
- Equifax Information Services, LLC P.O. Box 740256 Atlanta, GA 30374
- Experian Consumer Services P.O. Box 4500 Allen, TX 75013
- TransUnion LLC Consumer Dispute Center P.O. Box 2000 Chester, PA 19016
Dear [Name of credit reporting company: Equifax or Experian or TransUnion],
I am writing to dispute the following information that appears on my [Equifax or
Experian or TransUnion] consumer report:
Dispute 1 [Include all disputes that apply]
Account Number or other information to identify account: [Insert account number or other information, such as account holder names and past addresses. This is especially important if you have had multiple accounts with the same company.]
Source of dispute information: [Insert the name of the company, such as the bank, that provided the information to the credit reporting company.]
Type of disputed information: [Insert category of disputed information such as public records information, unknown credit account/tradeline, inquiry, etc.]·
Dates associated with the item being disputed: [Insert the date that appears on your report. This helps ensure that the correct account is identified by the company and to identify which aspects of the report are being disputed. You can still file a dispute if you don’t have this date.]
Explanation of item being disputed: [Insert details about why you think the information is inaccurate. Choose one of the choices below if it fits, or add your own description.]
- My report includes accounts with a reported name that is different than mine.
- I don’t recognize the accounts in question.
- The report shows I owed money to the company that I have already repaid. [Give details about when you paid, and attach a copy of any proof that you have.]
- The current status of my account is not correct. The report shows that I am delinquent, but I have made all of my payments on time. [Include account history or other information that shows the on-time payments.]
- I’m the victim of identity theft, and I don’t recognize one or more of the accounts on my report. [Include a copy of the FTC identity theft affidavit describing the identity theft if available.]
- Other [Describe what is wrong with the report and include copies of any additional supporting documentation that you have.]
Dispute 2 [Continue numbering for each disputed item on your report and include the same information.] [Include the following sentence if you are attaching a copy of your credit report or other supporting documentation. “I have attached a copy of my report with the accounts in question circled.”]
Thank you for your help.
Letter to debt collection agencies and creditors requesting debt validation[Your name] [Account Number at the company, if available] [Date of birth or other identifying information requested by the company] [Your return address] [Date] [Company Name] [Company address for receipt of direct disputes]
Re: Disputing error[s] on credit report
Dear [Name of company],
I am writing to request a correction of the following information that appears on my [Equifax, Experian, TransUnion] consumer report:
Dispute 1 [These are examples. Pick the ones that apply to your credit report.]
- Account Number or other information to identify account: [Insert account number or other information such as account holder names and past addresses. This is especially important if you have had multiple accounts with the same company.]
- Dates associated with the item being disputed: [Insert the date that appears on your report. This helps ensure that the correct account is identified by the company and to identify which aspects of the report are being disputed. You can still file a dispute if you don’t have this date.]
- Explanation of item being disputed: [Insert a detailed explanation of why the information is inaccurate. Choose one of the choices below if it fits, or add your own description.]
- The report shows I currently owe money to your company that I have already repaid. [Give details about when you paid, and attach a copy of any proof that you have.]
- The date of the first delinquency on my report is not accurate. [Give details about delinquency status, including payment history.]
- My student loan shows a period of delinquency when I was actually in an income-driven repayment plan. [Provide documentation, including copies of your billing statements.]
- I’m the victim of identity theft, and I don’t recognize one or more of the accounts on my report. [You may wish to include a copy of the FTC identity theft affidavit describing the identity theft.]
- Other [Describe what is wrong with the report. You may include copies of any additional supporting documentation that you have.]
Dispute 2 [Continue numbering for each disputed item on your report and include the same information] [Include the following sentence if you attach a copy of your credit report or other supporting documentation. “I have attached a copy of my report with the accounts in question circled.”]
Thank you for your assistance.
Andrew is the managing editor for SuperMoney and a certified personal finance counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.