Personal Resource Center

How to Improve Your Credit Score

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Your payment history accounts for 35% of your credit score. So if you've been paying bills late, your credit score will suffer.

Pay your bills on time

Your payment history accounts for 35% of your credit score. So if you've been paying bills late, your credit score will suffer.

To improve it, you'll need to start paying bills on time. If the problem with timely payments is forgetfulness not cashflow, set up autopay — at least on bills with a relatively stable monthly charge.

But it's not just paying bills late that will impact this portion of your credit score. It can also be affected if you lack proof that you are paying bills promptly. This is especially likely to be a problem if your utilities are included in your rent, or the utilities on your rental are in someone else's name. (The credit score boost of paying your utilities on time only goes to the person whose name is on the bill, even if you also live in the unit and contribute towards payment.) This lack of proof of fiscal responsibility is also more likely to be a problem if you don't have a credit card — and therefore little credit history.

The good news: There is a way to boost this part of your credit score by getting credit for those bills you are paying on time but that aren't typically tracked by the credit bureau. For a small fee, companies such as Rental Kharma2 and RentTrack3 can report your rental payments to the major credit bureaus.

If you don't have a credit card, consider getting one. Even if you charge very little on it, paying it off every month will help strengthen your credit score. If you can't qualify for a regular credit card, consider a secured credit card,4 wherein the card issuer holds a portion of your credit limit (say, $100 of your money on a $200 credit limit) as a sort of security deposit. You make payments every month, just as you would with a regular credit card. If you can successfully manage a secured credit card, you'll often be able to upgrade to an unsecured card.


Reduce amount owed

How much debt you have — and what percentage of your available credit is tied up in debt — accounts for 30% of your credit score. So if you're maxing out credit cards or have a lot of debt relative to your available credit (the sum total of the maximum you're allowed to charge on all your credit cards combined), your credit score will take a hit.

To improve your credit score, focus on paying down debt, especially credit card debt. Not only does this debt carry a higher interest rate, many lenders see maxing out your credit cards as a red flag and will be less likely to lend you money.


Boost your available credit

While it is always a good idea to pay off as much of your outstanding credit card debt as you can, sometimes the problem is that you are simply using too much of your existing credit. Using all — or a large part of — your available credit will hurt your credit score. Experts recommend using no more than 30%5 of your total available credit.

To improve this, call your current credit card companies to see if you can increase your credit limit. If you can, you will have reduced the percentage of your available credit that you're using (your credit utilization rate).

If you can't increase the credit limit on any of your cards, another alternative is to strategically apply for a new credit card with a relatively hefty credit limit.

Whatever you do, be sure that you don't use this increase in credit as an excuse to charge more. The goal is to reduce the total amount of debt you have while decreasing the percentage of your available credit that you're using.


Stop opening new accounts

It can be tempting to open a lot of new credit card accounts. After all, it seems like every store, airline, or gas station is willing to give you discounts and other perks for opening a new credit card account and using it when you purchase things from them.

However, opening multiple new credit accounts, especially over a short period of time, can be a sign that you're having trouble living off your income and keeping up with your bills. Since 10% of your credit score hinges on whether or not you're opening up new credit, it's wise to limit or even stop opening new accounts.


Stop taking on new credit card debt

Acquiring more credit card debt is never good for your credit score, but it could become even more problematic once lenders start using the new FICO 10 models for calculating credit scores. Here's why: There's a growing trend of people consolidating higher-interest credit card debt (often from multiple cards) into one monthly payment through an unsecured personal loan, typically with a lower interest rate. That makes a lot of financial sense for borrowers, and it also streamlines the bill-paying process. However, the new FICO 10 models are looking to see what borrowers do after they consolidate their credit card debt. Specifically, do borrowers stay focused on paying down their debt, or do they use the newly-available credit on their credit cards to grow their outstanding balance once again? Borrowers who do the later will see their credit scores penalized even more strongly with this new model.


Correct errors on your credit report

Sometimes your credit score suffers due to errors or inaccuracies on your report. Be sure to check your credit report regularly for any errors that could negatively impact your credit score.

You are entitled to one free credit report from each of the three major credit bureaus – Experian, Equifax, and Transunion – each year. You can access these at annualcreditreport.com.6  But now, due to the increased risk of fraud during COVID-19, these three credit bureaus are now offering free weekly credit reports through the end of 2022.7 By checking your credit report regularly, you're more likely to catch problems fast.

Review your credit reports for any errors that could negatively affect your score. If you do find an error, you can dispute it online through that credit bureau's website or give them a call:

    If you've been the victim of a data breach, you may qualify for free monitoring throughout the year.

    Important Disclosure Information

    This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

    1. Consumer Reports, "The Secret Score Behind Your Rates," published July 30, 2019. Accessed December 3, 2019. Back
    2. Rental Karma, "Rental Karma," accessed December 3, 2019. Back
    3. RentTrack, "RentTrack," accessed December 3, 2019. Back
    4. Paul Soucy, "9 Best Secured Credit Cards," Nerdwallet.com. Published December 2, 2019, accessed December 3, 2019. Back
    5. Latoya Irby, "What Is a Good Credit Utilization Ratio?" The Balance. Updated November 30, 2019, accessed December 3, 2019. Back
    6. AnnualCreditReport.com, "Annual Credit Report," accessed December 3, 2019. Back
    7. "Equifax, Experian and TransUnion Announce Extension of Free Weekly Credit Reports to Help Americans During COVID-19," accessed April 21, 2022. Back
    8. Equifax.com, "Dispute information on your Equifax credit report," accessed December 3, 2019. Back
    9. Experian.com, "Dispute online," accessed December 3, 2019. Back
    10. TransUnion.com, "Credit Dispute," accessed December 3, 2019. Back