How to Increase Your Credit Score
Updated: Mar 5, 2022
Car trouble, special occasions, medical bills, stress shopping, and unexpected expenses can easily cause you to use up far more of your credit than planned. When your score begins to drop, what can you do to help it go back up? Here are a few things to keep in mind.
Unfortunately, there is no quick fix to miraculously help your credit score shoot through the roof, but there are numerous factors that 100% affect your score over time and can be handled properly each month to ensure your score only improves. Within 6 months to a year, that number should only be climbing higher as you work on the following six aspects of your credit score rating and make the change necessary to boost your score.
Make On-Time Payments
The most important factor that can help or absolutely destroy your credit score is whether you consistently make on-time payments. Making all of your payments on time—even if they're only the minimum payments due—is hugely significant in showing creditors that you can be relied on to pay your debts at the bare minimum; therefore, you are trustworthy with any further credit or loans even if your financial habits may reflect hitting some hard times occasionally when your credit usage gets higher than what's ideal.
Every month that you pay your bills on time will slightly bump your score higher. If you happen to miss the deadline for a payment and it's flagged though, it could easily knock your credit score down by nearly 100 points. Individuals who already have lower scores may not be hit as hard as a 100-point deduction, but it will still continue to lower your score and will not bode well for you later when trying to take out a loan, apply for a credit card, or having other sources check your credit history to determine your risk level.
Maintain Your Oldest Credit Line
Whenever you open an account, even if you don't plan on using it very often, be sure to keep it open for as long as possible. (Also, occasionally charging $20-50 on it and paying it off shortly after will only help your case). An individual cannot be considered to have "good credit" until their oldest line of credit and credit history date back by at least 7 years.
There's no way to go about this factor besides simply keeping your accounts open and maintaining them for the long term. The longer you have an account open, the more history you're able to provide for lenders and other interested entities, and this is considered significant enough for your oldest account's age to determine nearly 15% of your overall credit score.
All of those credit card offers you keep getting in the mail? If you're not a big spender and at risk of causing yourself financial trouble by doing so, open a few extra accounts. The inquiries may bump your score down for a month or two, but you'll help boost your total score in the long term as well as have extra credit to fall back on in the event of an emergency.
Keep Your Credit Usage Below 30%
Although you certainly want to use your available credit to be able to provide a strong history of responsible spending and on-time payments for any debts due, it's important that you try to maintain a total credit usage of 30% of your total available credit or lower.
By doing this, you're showing those who make inquiries that you are responsibly using the credit that's available to you but you aren't entirely reliant on it nor making poor spending choices. Keeping your average usage around the 30% mark or lower can greatly boost your score over time. The best method I've noticed in my own experience is spending up to this mark (knowing that I have the funds to pay it off) and then gradually paying off the amount and bouncing back and forth between 30% and lower usage amounts.
Ideally, when trying to boost your score with this factor, you don't ever want to spend more than you have on hand to pay the amount off. Consider it a bit like "tricking" those who determine your score. Instead of simply paying for everything in cash and avoiding debt entirely, you're instead providing the illusion of using all of this credit, but you're still just paying it off with the money you already had to cover the expenses anyway.
Keep Opening New Accounts to a Minimum
This one is a bit tricky. Opening a new account (or taking out a new loan) may put a slight dent in your score for a bit, but the long-term benefits heavily outweigh the short-term negatives.
Try to avoid any lenders or credit card companies that have suspicious or negative reviews, and be sure to properly familiarize yourself with the interest rates and terms and conditions of the new account you'll be opening. Don't be foolish about your finances and committing to a new line of credit just because the opportunity fell into your lap.
It's often recommended that individuals have five or more credit cards and at least one loan to contribute to their overall credit history and boost their score in the long term. You'll likely notice that anytime your credit usage gets higher, all of those great-sounding offers arrive in the mail around the same time too. Don't open too many cards at once and don't go overboard with opening new accounts either (this can cause too many hard inquiries and impact your score negatively), but simply try to add one or two accounts every one to two years if possible.
Once you have these accounts, avoid closing them, but be sure to use them responsibly to keep improving your credit score each month.
Avoid Inquiries When Possible
Inquiries are an unavoidable part of life and the general credit-using experience, and there are two main types to be aware of: hard inquiries and soft inquiries.
Soft inquiries do not affect your credit score and only take place when credit card companies may be inquiring whether you're suitable to receive certain offers or if your new place of employment is doing a background check to learn more about you.
On the contrary, hard inquiries do affect your credit score, and it's best to avoid them when possible. One or two hard inquiries, such as applying for a new line of credit or trying to get a loan for your vehicle or school, may negatively impact your score a bit, but it's having numerous hard inquiries (and especially during a short amount of time) that throws up red flags for future lenders when they're checking your credit history to determine eligibility for whatever it is you may be seeking to acquire—and this will typically always have a significant negative impact on your score.
You definitely want to aim for keeping your credit usage at or below the 30% mark, but when it comes to your total available credit, there's no such thing as "too much" available credit. The more you have available to use, the better. (This is why strategically opening those accounts is so important!)
Try to make your monthly payments on time and even make additional payments throughout the month between your due dates to keep your usage low and your available credit amount high. The longer this is shown to be a consistent practice on your credit report and in your credit history, the higher your score will climb and the better your opportunities will be when needing to seek our loans or additional sources of credit in the future.
Above All, Be Patient
Improving a credit score is not particularly easy nor is it a particularly quick process. Trust me. I made the drop and made the climb yet again over the past few years, but unexpected medical bills along with two of our pets needing thousands of dollars in unexpected care in the past six months have hit my score so hard that it feels like it'll be impossible to ever get it back up again.
However, I've done it before and I can do it again. I just have to be consistent in my credit-related practices and wait for that number to get back to a point that I don't want to cry upon immediately seeing it. By the end of the year, it should likely be right back up just a tiny bit below where it was before the pets killed our finances and budget all at the same time.
Six months is the quickest "sweet spot" for seeing positive change take place, but you should expect at least a year or more before having a really huge amount of difference be noted on your accounts. It's annoying, I know, but that's how it works.
Consistency is key!
For further assistance with managing your finances and improving your credit score, consider reading our pieces on Healthy Habits to Stay On Top of Your Finances and Financial Planning: 5 Reasons You Should Get Organized.