13 Ways to Improve your Credit

The first step to getting good credit is to pull your credit report. Everyone gets free weekly access to their credit reports at www.annualcreditreport.com.

Take advantage of the free credit report to see what creditors report about you. There are many reasons to pull your credit report, including finding ways to improve your credit score and any errors reported on your report that must be corrected.

Late payments hurt your credit score the most. The credit bureaus count a payment late if you don’t make your payment for more than 30 days. So if you notice any 30, 60, or 90-day late payments on your credit report, work with your creditor to fix them immediately.

The faster you bring your payments current, the faster you can improve your credit score.

If you have revolving debt balances, such as credit cards, make sure your balances aren’t more than 30% of the credit line.

For example, if you have a $1,000 credit line, you shouldn’t have more than $300 outstanding. If you do, it can hurt your credit score considerably. So do what you can to pay the balance down quickly. Just making minimum payments isn’t enough – it can continue hurting your credit until you get the balance low enough.

New credit is a small portion of your credit score, but it’s enough to hurt it, especially if you have a borderline score. Each time you open new credit, it lowers your credit score slightly for two reasons – credit inquiries cost you a few points, and new credit decreases the average age of your credit lines, lowering your credit score.

Avoid applying for new credit unless necessary, and limit the number of applications you complete when you need credit.

It can be tempting to close old credit accounts, but this can hurt your credit score too. Your average credit age makes up a small part of your credit score. When you close old accounts, you lose that ‘old age’ and will shorten your credit length history, which can cause your credit score to fall.

If you have a close family member with good credit, consider asking to be an authorized user on his/her credit card. You don’t have to use a credit card to get credit for the good credit behavior on your credit report.

As long as the credit card company reports the credit card usage to the authorized user’s credit report, you’ll get credit for your family member’s good credit usage.

A secured credit card can help you build a solid credit history if you don't have good credit. A secured credit card is secured by your deposit, usually $200 - $500.

Your credit line equals the amount you put down on the card. The credit card company uses your deposit as leverage. If you miss your payments, they keep your deposit. But if you use the card correctly, you’ll pay your balance and build good credit.

Eventually, you can receive your deposit back and convert the secured credit card into an unsecured (standard) credit card.

A credit-building loan does just as the name suggests – it helps you build credit. If you don’t have credit or have bad credit and don’t qualify for any other financing, consider this type of loan.

Unlike standard loans, a credit building loan takes the funds and places them in a bank account. However, you make principal and interest payments like a standard loan and receive the loan proceeds after you pay the loan in full.

It’s like a forced savings account, except you get credit for it on your credit report.

If you can’t pay your credit card balances down to 30% or less of your credit line, consider asking for a higher credit limit.

If you have a good history of paying your credit cards on time and don’t abuse your credit line, you may be eligible for a higher credit limit. Don’t use the extra credit, though. Instead, let it help lower your credit utilization rate to increase your credit score.

When you pull your credit report, make sure all information reported is accurate. Unfortunately, much of the information provided is manually entered, so mistakes happen.

If you notice erroneous information, write a dispute to the credit bureau reporting the inaccurate information, and provide proof of the error. They have 30 days to respond to your request to determine if the information is inaccurate and fix it.

Consider signing up for Experian Boost if your credit score needs a boost. This program only helps your Experian credit score, but every little bit helps.

Experian Boost is a free program that reports utility payments to your Experian credit report. If you make your payments on time, your Experian credit score will increase, which may help you with certain lenders and creditors.

Ask your landlord if he/she will report your rent payments to the credit bureaus. If not, consider paying for a rent reporting service, such as Rent Reporters or Rental Kharma. You’ll pay a one-time or sometimes monthly fee but can get your rent reported to the credit bureaus, which can help improve your credit score.

Your credit mix is a small part of your credit score. For example, if you have all revolving debt (credit cards), you may not have as high of a credit score as possible.

Try adding an installment loan to your credit mix, even if it’s a credit builder loan, so you get the credit for having various credit types, allowing you to prove you are financially responsible.