6 Steps to Improve Your Credit Score
- 1.If you are starting from scratch, a.k.a. have no credit history, start off with a secured card through either your current bank/credit union or one of the major credit card issuers. You may also qualify for a store card (such as Walmart, Target, or a more specialized retailer) but these cards carry more financial risk than a secured card. Either way, the sole purpose of these cards should be to use them each month and pay them off in order to build a solid credit score.
- 2.Check all three bureaus for any incorrect information - there could be false information harming your score and you wouldn’t even know it. You can dispute any inaccurate information through the 3 credit bureau websites, depending on which report(s) the discrepancy appears on.
- 3.If you have any accounts in collection on your report, you will want to settle them ASAP. Once a settlement has been reached with the collection agency, the account can no longer affect your credit score. However, keep in mind that accounts will disappear from your credit report 7 years after default, so if you have any older accounts that are about to cross this line it may be just as beneficial to wait them out.
- 4.Get your utilization to ~20%. You have two strategies to choose from for this step, and they’ll work best if you use them in tandem: pay down your debt and get more credit. Paying down your debt is pretty straightforward, but if you don’t know where to start you can check out Our Step-by-Step Guide on How to Become Debt-Free. You can increase your available credit by either requesting a higher credit limit on an existing card, or by applying for a new card altogether. The important part is that you do not spend any of this new credit, otherwise your credit utilization will not improve.
- 5.Always make payments on-time and, if possible, pay your balance in full. Your statement balance will still count toward your 20% utilization, even if you pay it in full every month. Following this practice will prevent you from collecting interest and will improve your credit score over time.
- 6.Keep credit card accounts open, even if you no longer use them. If possible, though, you should attempt to use each credit at least once a month, then pay them in full when your statement is issued. This will improve both your credit history length and utilization, and have the greatest positive impact to your credit report.
