Your credit score isn’t just a number—it’s your ticket to financial opportunities. Whether you’re looking to secure a loan, buy a home, rent a better apartment, or lower your insurance rates, improving your credit can open doors. If your score could use a bit of a credit score glow up, we’ve got a step-by-step guide to help you tackle your debt and forge a path to financial health.
1. Know Your Starting Point
Before you can improve your credit, you need to know where you stand. After all, understanding your score and what’s impacting it—like late payments or high balances—is the best way to tackle the specific issues that are holding you back. Get a free copy of your credit report from AnnualCreditReport.com or check your score through your bank or one of the three credit reporting agencies (CRAs), Equifax, Experian, and TransUnion.
Tip: You can also check your credit score anytime for free via Credit Karma. If you do, be aware that Credit Karma pulls information from two of the three major credit bureaus—TransUnion and Equifax—to give you a VantageScore. It’s a good way to track your progress, but your VantageScore may vary greatly (often by 20 to 25 points) from your FICO score (the metric the top 90% of lenders use to determine creditworthiness).
2. Pay on Time, Every Time
Your payment history is the biggest factor in your credit score. In fact, it makes up a whopping 35% of your score. So, the most important step you can take toward healthier credit is to make sure you never miss or delay a payment. If you struggle to remember due dates:
- Set up autopay.
- Pay at least the minimum amount.
- Use calendar reminders or budgeting apps to keep track and make sure you have funds available for the autopay.
If you have a history of missed payments, stay on track and be patient. Missed payments can stay on your credit report for up to seven years. But every month of on-time payments will boost your credit score. So, set a routine. In this case, consistency matters.
3. Lower Your Credit Utilization Ratio
Your credit utilization ratio is how much credit you’re using compared to your limit. Experts recommend keeping it below 30%, but aiming for under 10% can give you an extra boost! To get your credit utilization in check:
- Pay down balances and focus on high-interest cards first.
- Ask for a credit limit increase. If you’re in good standing, a credit increase can instantly improve your utilization ratio. Just don’t use the extra credit to overspend😉!
4. Dispute Errors on Your Credit Report
Mistakes on your credit report can drag your score down. When you get your credit report, check for errors like:
- Accounts you didn’t open.
- Incorrect late payments.
- Incorrect balances.
If you find a mistake, dispute it with each of the three credit bureaus online, over the phone, or by mail. If they find in your favor, the correction could immediately raise your score.
5. Avoid Opening Too Many Accounts at Once
Each time you apply for credit, it triggers a hard inquiry, which can temporarily lower your score. Hard inquiries stay on your credit report for two years (but typically affect your credit for just the first year). Space out credit applications and only open new accounts when necessary.
6. Become an Authorized User
If a trusted family member or friend has a strong credit history, ask if they’ll add you as an authorized user on their account. Even if you never use the card, piggybacking on the primary account holder’s good habits can help boost your score. (Of course, this method can also backfire if the primary cardholder pays the bill late or runs up a big balance.)
7. Diversify Your Credit Types
Credit mix—having both installment loans (like a car loan) and revolving credit (like a credit card)—makes up 10% of your score. If you only use one type, consider adding a different type responsibly.
- Examples of installment loans include mortgage loans, personal loans, auto loans, and student loans.
- Traditional credit cards, retail credit cards, lines of credit, and home equity lines of credit (HELOCs) are examples of revolving credit.
8. Stay Patient and Consistent
Remember, building credit is a marathon, not a sprint. Small, positive steps over time will lead to big changes. Commit to good habits, monitor your progress, and celebrate milestones along the way.
Want more tips on how to prep your finances for 2025?
- Check out our Financial Advent Calendar with bite-sized tips for improved financial health (coming soon).
- Learn how to boost your financial IQ (coming soon).