Categories

Improve Credit

20 Ways to Improve Credit in 2020

Through April 20, 2021, Experian, TransUnion and Equifax will offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com to help you protect your financial health during the sudden and unprecedented hardship caused by COVID-19.

Heading into a new decade, it's natural to evaluate where you're at financially and consider what you want the next 10 years to bring. If it's a house, a new car, another degree or a trip abroad—which certain credit cards can help make happen—your credit score likely will come into play.

A good credit score is anything above 670 in the FICO credit scoring model, and will allow you to access more loan and credit card options with more favorable interest rates. But the closer your score is to the maximum of 850, the better.

Keep in mind that you likely have many credit scores, due to the various ways scoring models weigh information. But the principle that higher scores indicate stronger credit (in other words, less risk to the lender) generally holds true across the board.

Here are 20 strategies to get your credit score in tip-top shape, whether you're building it from scratch or hoping to propel it into the highest tier.

1. Set Up Automatic Bill Payments

The most important factor in your credit score is payment history. Help protect your score from the adverse effects of a missed payment by putting your bills on autopay. Make sure you have enough money in your checking account to cover each bill every month to avoid an overdraft. When you know you won't have to deal with a sudden score dip after a forgotten bill, you can focus on other ways to improve credit.

2. Pay Down Balances

The second-most crucial component in your score is how much debt you're carrying compared with your credit limit—your credit utilization ratio. In 2020, make it a goal to reduce any high interest credit card debt first, since that likely costs you more money in interest than, say, an auto loan or federal student loan does. Decreasing your credit card balances also shows potential lenders that you're responsible with credit. Experts suggest keeping your credit utilization ratio below 30% of your credit limit at all times; those with the highest credit scores have a rate in the low single digits.

3. Get a Credit-Builder Loan

If you're focused on building credit from scratch or recovering after a hit to your score, a credit-builder loan from a credit union could help. You'll make fixed payments for six to 24 months, and your money will sit in a savings account you'll be able to access at the end of the loan term. In the meantime, the lender will report your on-time payments to the credit bureaus, strengthening your score.

4. Seek Out a Secured Credit Card

Another option for building credit is to get a secured credit card. It requires a cash deposit, typically between $200 and $3,000, which becomes your credit limit. You can then use the credit card as you would any other, and the deposit protects the issuer from the possibility that you won't pay off your balance. If you use a secured card responsibly, you could upgrade to a traditional unsecured card down the line.

5. Join an Account as an Authorized User

You can also improve credit by joining a family member, friend or another trusted person's credit card account as an authorized user. You'll be able to use the card to make purchases, and the card's payment history will show up on your credit report. That makes it crucial to pick someone whose credit you will benefit from. Work with the primary cardholder to pay them for your purchases, as they'll be ultimately responsible for any balance on the card.

6. Dispute Credit Report Errors

You're entitled to one free credit report per year from each of the three main credit bureaus at AnnualCreditReport.com. Check them each carefully, and file a dispute with the appropriate bureau if you find something on your report you believe shouldn't be there, such as a late payment. Correcting any issues could give your credit scores a lift.

7. Register for Experian Boost

Experian Boost lets you add on-time telecom and utility payments to your credit report, which could lead to a hike in your FICO® Score . It's free, but it will only affect your Experian credit report and your FICO® Score 8, one of several credit scores lenders may look at, depending on the loan you're seeking. The average Experian Boost user sees a 13-point increase in their credit scores.

8. Keep Old Accounts Open

Even if you no longer use an old credit card, it's typically best to keep the account open. That's because your credit scores benefit from a long credit history and a high total credit limit. Closing established accounts will shorten the average age of your accounts and lower your total credit limit. It will take years before an account closed in good standing drops off your credit report, but the effects on your credit utilization rate are immediate. If a credit card comes with a high annual fee you can't afford, closing the account could be a good option—or ask your issuer to downgrade the card to a no-fee version if possible.

9. Limit New Lines of Credit

When you apply for a new credit card or loan, a hard inquiry will appear on your credit report. That may lead to a brief dip in your score. Plan to apply only for the credit you truly need, after you've done enough research to understand which accounts you'll likely qualify for. That means avoiding multiple hard inquiries cluttering your credit file.

10. Limit Loan Applications to a Short Time Period

Lots of hard inquiries in a short time could be an indication to lenders that you're searching for lines of credit you won't be able to pay. Smart borrowers, though, will apply for a few loans of the same type to compare rates. For that reason, credit scorers tend to treat multiple hard inquiries of the same loan type made around the same time as one, so submit applications within a short time frame. That will prevent your credit score from suffering.

11. Pay Off Credit Card Balances Every Month

In addition to lowering existing debt balances, minimize ongoing debt by making it a goal to pay off your credit cards each month. Zeroing out your balance each statement period keeps your credit utilization low, which is one of the best ways to strengthen credit. You'll also avoid incurring interest charges.

12. Track Your Credit Score

When you monitor your credit score, you can intervene quickly if it drops. You can address factors that influence your score, such as high balances, late payments or too many recent hard inquiries. There are many ways to check and monitor your credit score for free, including through your current credit card issuer or bank or through Experian.

13. Protect Your Personal Information to Avoid Fraud

Your credit can be affected by identity theft, which is when fraudsters access your personal information and open accounts in your name. To help keep your data safe, use a password manager to create and store unique passwords and avoid making financial transactions on public Wi-Fi networks, which could leave you vulnerable.

14. Responsibly Add to Your Credit Mix

Lenders look for a mix of accounts in your credit file to show that you can manage multiple types of credit. These include installment loans, for which you pay a fixed amount per month, and revolving credit, which comes with a limit you can choose to charge up to (as is the case with credit cards and home equity lines of credit). If you only have one type of credit in your file, adding something different could improve your credit mix. Credit mix accounts for just 10% of your FICO® Score, however, so don't apply for credit simply to improve your score. That could put you at risk of taking on debt you can't repay.

15. Create a Budget

To help pay off debt and keep your spending in check long term, take time in 2020 to make a budget. This process will offer clarity on the amount you're earning and how much you can safely spend on discretionary items. You'll then be more likely to make smart choices when you're tempted to use a credit card, and you can prioritize limiting your credit utilization.

16. Work With a Nonprofit Credit Counseling Agency

If you feel unsure how to set up a budget or start attacking debt, a certified credit counselor at a nonprofit agency can provide a free initial consultation to discuss first steps. Credit counselors also offer debt management plans, which can help some borrowers pay down overwhelming debt.

17. Avoid Credit Repair Scams

Some for-profit companies claim to be able to remove negative information from your credit report for a fee. But the truth is that no company can legally erase information from your file if it's accurate. Avoid spending money on credit repair and take tried-and-true steps to improve your score instead, like lowering debt balances and paying your bills on time.

18. Add Rent Payments to Your Credit Report

If you regularly pay rent on time, add those payments to your credit report to boost the amount of positive information reported to the credit bureaus. You can do so by signing up with a service like RentTrack or PayYourRent. In many cases, getting your landlord or property management company on board will limit the fees you'll be charged.

19. Get a Loan With the Help of a Cosigner

Making on-time payments toward an installment loan, similar to making timely payments on a credit card, helps build credit history. Besides using a credit-builder loan, getting a traditional one such as a car loan can add positive information to your credit report and improve your credit mix.

If you can't qualify for a loan on your own, a cosigner can help—but make sure the cosigner knows what they are getting into. If you can't afford to repay the loan, it becomes their responsibility. Also, as always, only seek out a loan if you really need it, not simply to improve credit. Potentially boosting your score should be an added bonus or motivation, not the central reason.

20. Have Patience

Improving credit isn't an immediate process. An excellent credit score is most often the result of years of conscientious financial behavior. While some strategies will let you see small improvements quickly, joining the ranks of those with the highest credit scores will take time.

How Good Is Your Credit Score?

300 credit score301 credit score302 credit score303 credit score304 credit score305 credit score306 credit score307 credit score308 credit score309 credit score310 credit score311 credit score312 credit score313 credit score314 credit score315 credit score316 credit score317 credit score318 credit score319 credit score320 credit score321 credit score322 credit score323 credit score324 credit score325 credit score326 credit score327 credit score328 credit score329 credit score330 credit score331 credit score332 credit score333 credit score334 credit score335 credit score336 credit score337 credit score338 credit score339 credit score340 credit score341 credit score342 credit score343 credit score344 credit score345 credit score346 credit score347 credit score348 credit score349 credit score350 credit score351 credit score352 credit score353 credit score354 credit score355 credit score356 credit score357 credit score358 credit score359 credit score360 credit score361 credit score362 credit score363 credit score364 credit score365 credit score366 credit score367 credit score368 credit score369 credit score370 credit score371 credit score372 credit score373 credit score374 credit score375 credit score376 credit score377 credit score378 credit score379 credit score380 credit score381 credit score382 credit score383 credit score384 credit score385 credit score386 credit score387 credit score388 credit score389 credit score390 credit score391 credit score392 credit score393 credit score394 credit score395 credit score396 credit score397 credit score398 credit score399 credit score400 credit score401 credit score402 credit score403 credit score404 credit score405 credit score406 credit score407 credit score408 credit score409 credit score410 credit score411 credit score412 credit score413 credit score414 credit score415 credit score416 credit score417 credit score418 credit score419 credit score420 credit score421 credit score422 credit score423 credit score424 credit score425 credit score426 credit score427 credit score428 credit score429 credit score430 credit score431 credit score432 credit score433 credit score434 credit score435 credit score436 credit score437 credit score438 credit score439 credit score440 credit score441 credit score442 credit score443 credit score444 credit score445 credit score446 credit score447 credit score448 credit score449 credit score450 credit score451 credit score452 credit score453 credit score454 credit score455 credit score456 credit score457 credit score458 credit score459 credit score460 credit score461 credit score462 credit score463 credit score464 credit score465 credit score466 credit score467 credit score468 credit score469 credit score470 credit score471 credit score472 credit score473 credit score474 credit score475 credit score476 credit score477 credit score478 credit score479 credit score480 credit score481 credit score482 credit score483 credit score484 credit score485 credit score486 credit score487 credit score488 credit score489 credit score490 credit score491 credit score492 credit score493 credit score494 credit score495 credit score496 credit score497 credit score498 credit score499 credit score500 credit score501 credit score502 credit score503 credit score504 credit score505 credit score506 credit score507 credit score508 credit score509 credit score510 credit score511 credit score512 credit score513 credit score514 credit score515 credit score516 credit score517 credit score518 credit score519 credit score520 credit score521 credit score522 credit score523 credit score524 credit score525 credit score526 credit score527 credit score528 credit score529 credit score530 credit score531 credit score532 credit score533 credit score534 credit score535 credit score536 credit score537 credit score538 credit score539 credit score540 credit score541 credit score542 credit score543 credit score544 credit score545 credit score546 credit score547 credit score548 credit score549 credit score550 credit score551 credit score552 credit score553 credit score554 credit score555 credit score556 credit score557 credit score558 credit score559 credit score560 credit score561 credit score562 credit score563 credit score564 credit score565 credit score566 credit score567 credit score568 credit score569 credit score570 credit score571 credit score572 credit score573 credit score574 credit score575 credit score576 credit score577 credit score578 credit score579 credit score
Resources