20 tips for improving your credit score
As a high school student, SAT scores felt like they might determine one's entire future. Adults know their credit score actually does indicate their future—at least when it comes to getting good deals on those big, grown-up purchases. People with high credit scores are more likely to get the apartment, car, house, or loan they want, and even end up paying less for those items thanks to lower interest rates.
What is a credit score, exactly? In simple terms, it’s a number—usually between 300 to 850—that companies use to determine how likely someone is to pay them back if they lend them money. A low score (basically anything below 650, according to Money) means one is a credit risk; companies will be wary of lending to those people for fear they’ll default on their loan. A high score, ideally above 760, means one has a track record of paying on time, so companies will line up to lend to them, offering favorable terms.
Stacker scoured through advice from governmental organizations, major financial companies, and trustworthy financial publications, and compiled the best of that counsel for a list of 20 tried-and-true ways to improve one's credit score, without the gimmicks or shortcuts. Read on to see how one can truly better their credit score.
ALSO: Click here to find out which cities have the best and worst credit scores.
#1. Find out what they’re saying.
Knowledge is power, so before trying to fix your credit score, figure out where you stand by getting a credit report. All of your financial accounts, along with your history of payments, should be listed on this report, giving you a good sense of your overall standing. Each year, you’re allowed one free report from each of the three major bureaus: Equifax, Experian, and TransUnion. Each one takes just a few minutes to download from AnnualCreditReport.com. Pro tip: Download one from each bureau every four months, so you can monitor your credit all year long.
#2. Clean up the errors.
Fun fact: 1 in 5 people have errors on their credit reports, according to the Federal Trade Commission. Considering that statistic, it’s important to check to make sure your own report is correct. Verify that the amount of loans, lines of credit, and payment histories are all correct. If you find an error, simply contact the credit card bureaus and ask them to clean up the mistake. There’s no need to worry requests will be ignored; according to NerdWallet, credit bureaus are required to get back to people within 30 business days.
#3. Know your score.
A credit report details one's financial history, but won’t actually reveal the credit score. To get that number, you’ll need to go to a second source. Back in the day, one had to pay $19.95 at MyFICO.com to get their score directly from one of the credit bureaus. People can still go that route, but these days, many third-party companies will show scores for free. American Express, for example, reveals FICO scores to customers. Discover reveals FICO scores for free, too, without even requiring a user to have an account. Many other third-party companies offer free credit scores, but do make sure that you’re getting a FICO or VantageScore, which comes from the major credit bureaus, versus an unofficial, simulated credit score.
#4. Spot your risk factors.
Wherever you get your credit score, the number usually comes along with a few tips that detail why a score is high or low. These are your “risk factors,” which are basically the issues one should consider addressing first to boost their score. Does a tip point out you’ve missed some payments? Time to get on top of those. Received a note saying you have too few accounts? Consider opening another line of credit.
#5. Stay open and active.
To have a good credit score—or really, to have a credit score at all—one needs a credit history. That means it helps to have taken out loans of some sort, whether to pay for a car, a house, an education, or anything purchasable with a credit card. Always have some open, active accounts so your credit history keeps building.
#6. Always pay your bills on time.
The biggest chunk of your credit score, a whopping 35% of it, is based on payment history. That means the most important thing to do for your credit score is pay bills on time; a single missed payment can drop a score 100 to 300 points. Have trouble remembering to pay your bills? Set up automatic payment—or at the very least, payment reminders—through your credit card or loan companies. Already behind on your payments? NerdWallet recommends calling the creditor, working out a payment plan, and asking if they’ll consider taking the dings off your report. They may not always say yes, but it doesn’t hurt to ask.
#7. Get a credit card.
A credit card will help to build a credit history. Just make sure to pick the right card for your situation. Need to carry a balance? Look for a card with the lowest interest rate possible. Always pay your card in full? Find a card with perks that appeal to you, whether that’s cash back or airline miles.
#8. But don’t get credit you don’t need.
Assuming you use them responsibly, having one to a few credit cards will help your credit score. Carry around too many, though, and they could have the opposite effect. Besides just giving you a lot of different accounts to keep track of, carrying balances on a bunch of different cards doesn’t look good to potential lenders. Bankrate reports that even if each balance is small, if the total number of all those little lines of credit is high, your credit score will take a hit.
#9. Go easy on the store credit cards.
Not sure which credit cards to say no to? Store credit cards, which generally offer low lines of credit, tend to have a larger negative impact on your credit score than regular credit cards. So unless you’re really going to take advantage of the discounts and other perks that come with that Banana Republic credit card on a regular basis, consider passing on it.
#10. Don’t close your old accounts.
If you have an old credit card you no longer use, just let it hang out in your drawer instead of officially closing the account. Why? The length of your credit history makes up 15% of your credit score. If you get rid of your oldest cards, you’ll end up shortening your history and lowering your score. While you’re at it, resist the urge to get debts you paid off removed from your credit history. “Good debt—debt that you’ve handled well and paid as agreed—is good for your credit,” notes Bankrate.2018 All rights reserved.