How to Improve Your Credit Score

Gregory Tanzer, Senior Managing Director, First Republic Bank
March 23, 2022

  • A higher credit score can gain you access to more financing options and lower interest rates.
  • There isn’t one best way to improve your credit score; combining strategies is often recommended. 
  • Once you improve your credit score, it’s important to adhere to good financial practices in order to maintain a high score.

Having a good credit score can benefit you in many ways. For instance, people with strong credit have access to a wider variety of financial options when working with lenders, such as having an easier time getting a loan or credit card or enjoying lower interest on financing. To maintain a high credit score, it’s important to manage your money wisely. Even a single missed payment on a loan or credit card can damage your score. Think of your credit score like a financial report card that fluctuates throughout your life.

There are several ways to ensure your credit score remains high. Additionally, if you are looking to build your credit, you can use these strategies to raise your credit score and improve it. While there is no single best way to improve your credit score, combining multiple approaches can be advantageous in the long term.

1. Strategically manage your credit utilization

A significant component of a credit score is your credit utilization ratio, also called a credit utilization rate. This figure, which is the ratio of revolving credit balances to available credit, plays a major part in how your credit score is calculated. 

For instance, if you have a total available credit of $10,000, and you are using $2,500, your credit utilization ratio is 25%.

Credit scoring formulas consider both overall utilization for your total available credit and card-by-card utilization. This means each credit card balance will factor into your total credit utilization ratio, as well as the ratio for that specific credit card. High credit card debt will negatively affect your credit utilization ratio.

One of the best ways to improve your credit score is to lower your credit utilization ratios and keep these numbers as low as possible. One way to do this is to pay down high balances across credit cards.

You should also consider how often you open and close credit cards. In the above example, if you maintain $2,500 in debt but close a credit card with a $5,000 limit, your credit utilization would increase from 25% to 50% without you changing anything. This could lower your score.

2. Don’t close credit cards

Most credit scoring formulas factor in the length of your credit history. For instance, a person who has had a credit history of ten years generally will be looked on more favorably than someone with only new credit accounts. A higher average credit age gives a credit bureau a better idea of your history with finances.

Thus, keeping credit cards open, even if they’re rarely used, can improve your credit score.

Note one important factor, however: you may still want to close cards you’re not using if they charge an annual fee. This also applies to store credit cards you might have opened for a one-time or very rarely used discount. Consider gradually closing them to protect yourself from serious damage to your credit.

3. Report rent payments

Some credit scoring models take rent payments into consideration, and a strong payment history can help raise your credit score. 

If you’d like your rent payments to be reported and ultimately factored into your credit score, you should ask your landlord or property manager to do so. There’s no guarantee they will comply, but it may be worth approaching them, especially if you always pay in full and on time.

4. Become an authorized user on someone else’s credit card

Becoming an authorized user on someone else’s credit card account can be a good, low effort way to build a positive payment history. There are generally no credit requirements to be added as an authorized user, making this an accessible option to users whose credit history isn’t great. 

Another benefit of this approach is that the authorized user doesn’t even need to use the credit card; the account’s activity is automatically reported in the user’s name once they’re on the account.

This approach does come with one important consideration, however: this method will only benefit you if you become an authorized user on the credit card account of someone who’s exceptionally responsible with their credit. For instance, young adults looking to build their credit may seek help from a parent with strong credit. Alternatively, if the parent does not pay their credit card on time, it can negatively affect the child trying to build credit.

5. Apply for a secured or low-limit credit card

For people with less-than-optimal credit scores, a secured or low-limit credit card can be a good strategy for improving credit.

A secured credit card requires a deposit the financial institution can use to pay off the card's balance in case the cardholder can't or doesn't pay it. Unlike some unsecured credit cards, low-limit cards may be easier to be approved for if you have bad or no credit, making them a good way to prove you can make on-time and in-full payments.

If you choose this option, you can find secured and low-limit options via most major credit card companies.

6. Ask for a credit limit increase

A higher credit limit could positively affect your credit utilization ratio, a key component of your credit score. A higher limit will give you a larger amount of available credit, and decrease your credit utilization ratio, assuming you don’t actually access more credit. For example, if you utilize $2,500 of a total $10,000 limit, your ratio is 25%; however, if you use $2,500 of $20,000, your ratio is only 12.5%.

You can usually verbally request a credit limit increase from your credit issuers by calling their customer service line. Some also let you do it online. The odds of receiving an increase will likely be higher if you have a history of responsible credit card use and/or have received a pay increase. Sometimes the credit card company will ask to pull your credit to make a decision regarding a limit increase. This won't affect your credit much if it's not done too often.

7. Identify and resolve credit reporting errors

A close look at your credit reports can help you: 34% of consumers discovered at least one error within their credit reports, according to a 2021 Consumer Reports survey. Some errors may affect credit scores, even if they’re only on one credit bureau's report. 

You can get an error corrected, however. You’ll need to contact every credit bureau (e.g., Equifax, Experian, TransUnion) with which the error or errors appear and work through their individual processes to prove the inaccuracy.

To help identify inaccuracies in your credit report, consider using a credit card monitoring service. It may not be 100% accurate, but it may help you determine if something looks wrong, or if someone has opened a card in your name without your permission.

8. Diversify your credit mix

The variety of account types in one’s name — for instance, home loans, auto loans and credit cards — can positively affect credit scores.

If you would like to borrow money and already have several revolving accounts in your name (such as credit cards), you may want to consider an installment loan but only if it makes practical sense for your situation. A financial professional can help you decide. In fact, some types of loans (such as a mortgage), require you to already have a history of an installment payment on your credit report (such as a student loan or auto loan).

9. Don’t have your credit report pulled too often

When a lender pulls your credit for a loan application once or twice in a short period of time, it's unlikely to cause serious damage to your credit score. However, if multiple lenders pull your credit over a short period of time, it may look as if you are being denied credit or are in desperate need of more money, which can adversely affect your credit. Consider learning about loan options and terms before allowing a lender to pull your credit, to help improve your odds of being approved.

Onward and upward

Following these key tips should help put you in a good position to improve your credit score — including both your FICO score and VantageScore, the two most common credit scoring models.

Part of a good credit score is maintaining good credit practices over time through the adoption of financial wellness practices. Smart financial practices can include both spending wisely and learning about all the elements that factor into your credit score.

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