Your credit score impacts everything from getting a favorable interest rate on a credit card to buying a home, paying for insurance, and more.
1. Dispute Errors on Your Credit Report
Because of your credit report’s far-reaching impact and the countless ways it affects your everyday life, it must be accurate.If there’s an error on your credit report, you’ll want to dispute it immediately to clear the issue up to avoid bad credit.
So how do you do this?
Everyone is entitled to a free copy of their credit report every 12 months.
If you find an error on your credit file, you’ll need to dispute it with the credit bureau that made a mistake.
After filing a dispute, the credit bureau has 30 days to investigate the issue. If the information is found to be inaccurate, your credit report should be updated within those 30 days.
2. Pay Your Bills on Time
This may sound like a no-brainer, but it’s hard to stress the importance of being prompt with paying your bills enough.To quantify, debt payment history accounts for 35 percent of your credit score, making it the most critical credit scoring factor overall.
And research has found that a single late payment can lower your credit score by as much as 180 points.
Not only will always paying your bills on time help quickly build credit, but it can also save you money, as you’re less likely to encounter late fees with your credit accounts.
If you struggle with this, we recommend signing up for automatic payments or setting up reminders through email or on your phone.
3. Reduce Your Credit Utilization Ratio
Your credit utilization ratio, simply put, is the percentage of your available credit that you’re currently using.If, for example, you have $10,000 of available credit and you have $2,000 of debt on your credit card bill, your credit utilization ratio would be 20 percent.
This accounts for about 30 percent of your credit score, making it the second most significant factor after payment history.
And that’s precisely why you should strive to reduce your credit utilization ratio.
If you’re currently sitting at 31 percent or higher, you’ll want to make every effort to get that number down to a max of 30 percent.
4. Request Credit Limit Increases
This ties into our previous credit score hack.A simple way to reduce your credit utilization ratio is to get a credit limit increase.
Say, for example, you had $2,000 of debt with $5,000 in available credit.
You would have a credit utilization ratio of 40 percent, which is higher than it should be.
But let’s say you requested a credit limit increase of $3,000 for a new total of $8,000.
In that case, having $2,000 of debt would only mean a credit utilization ratio of 25 percent.
Just like that, you would use a smaller percentage of available credit, which should help improve your credit score.
5. Avoid Opening New Lines of Credit
The length of your credit history accounts for 15 percent of your credit score.The longer your credit history, the better your credit score should generally be, and vice versa.
Following this logic, you should avoid opening new credit lines because, by default, it reduces the length of your credit history.
As a result, it’s likely to affect your credit score adversely.
This isn’t to say you should never do so, as it’s often unavoidable, and opening a new credit line is necessary for establishing yourself long-term.
6. Pay Off Your Balance
Let’s go back to the credit utilization rate, where the less percentage of available credit you use, the better.If keeping your credit utilization ratio no higher than 30 percent is good, paying off your credit card debt is even better.
And it’s a win-win because not only does paying off your debt help build credit, but it also prevents you from paying interest.
So having a zero credit card balance goal is a massive two-pronged attack for improving your credit rating and keeping you out of unnecessary debt.
7. Become an Authorized User on a Credit Card
Becoming an authorized user on another person’s credit card (the primary cardholder) means you can make purchases with the card as if it was your own.Also, it means you’re responsible for repaying any debt that accumulates with the credit card.
This is another relatively simple but effective way to lift your credit score, especially if it’s on a card with a high credit limit, low credit utilization ratio, and good payment history.
Some experts even say this can help you achieve a credit score of 700 or higher after a few years.
And this is a popular way to help teenagers start to build credit.
As long as you and the primary cardholder pay off your debt quickly, this can help boost both of your credit scores at once.
In terms of who’s eligible to become an authorized user, it can be anyone who meets the age requirements of the credit card issuer, with examples being a spouse, partner, child, or close friend.
8. Have a Variety of Credit Accounts
Your credit mix contributes to 10 percent of your credit score, which means it’s helpful to use a variety of credit accounts.- Revolving credit—Accounts where you can repeatedly borrow and repay up to a specific limit (unsecured credit card, secured credit card, and credit lines)
- Installment credit—Accounts where you borrow money in one lump sum and repay it, typically with interest, in installments (mortgage loan, auto loan, student loan, or any type of installment loan)
- Open credit—Accounts where the debt balance has to be paid in full each month
Note that you can also turn everyday expenses like paying rent into credit accounts of sorts.
9. Get a Credit Builder Loan
To put your foot on the gas pedal, you can get a credit builder loan that strategically aims to increase your credit score.Unlike a traditional loan, where you get the money upfront and gradually pay it back over time, a credit builder loan is different.
With it, a lender holds the amount borrowed in an account, and you make fixed payments.
As you make payments, you gain more access to the funds—all the while, everything is made known to a credit reporting agency.
10. Avoid Closing Old Credit Cards
Let’s say you just got a new credit card, and you’re no longer using an old one.You should close it out, right? Actually, no.
There are two main reasons why having multiple credit card options is wise.
Keeping old credit cards means having more available credit and extended credit history.
A lower credit utilization ratio often comes with a higher amount of available credit.
And with a longer credit history, you’re more established—something lenders prefer over borrowers with little to no credit.
While there might be exceptions, such as paying high annual fees, you’ll generally want to keep it around, as it should help you achieve better credit.
Wrapping Up
Many people’s credit scores aren’t nearly as high as they’d like them to be.Fortunately, there are several ways to raise yours and achieve a good credit score quickly.
From disputing errors on your credit report to paying your bills on time to having a healthy credit mix, these are all integral to credit repair and should put you on your way to good credit.
