How to improve your credit score: what actually works

What goes into a credit score

The most widely used scoring models weigh roughly the same five things, in roughly this order of importance:

• Payment history: whether you pay on time. The single biggest factor.
• Amounts owed: especially credit utilization, how much of your card limits you use.
• Length of credit history: the age of your oldest account and the average age of all of them.
• Credit mix: having different types of credit, such as cards and installment loans.
• New credit: recent applications and newly opened accounts.

Step 1: check your credit reports

Your score is calculated from your credit reports, so start there. In the U.S. you can get your reports from each of the three major bureaus, Equifax, Experian and TransUnion, free at AnnualCreditReport.com, the official site for free reports.

Look for errors: accounts you do not recognize, payments marked late that were on time, balances that are wrong, or old negative items that should have aged off. Disputing errors with the bureau that reports them is free, and fixing a genuine mistake can raise a score quickly.

Step 2: never miss another payment

Because payment history is the biggest factor, the most important habit is paying at least the minimum on every account, on time, every month. Set up autopay for the minimums so it happens even when you forget.

A payment generally is not reported as late until it is 30 days past due. If you have just missed a due date, pay it immediately; you may only face a late fee rather than credit damage. If you have a long record of on-time payments, it is worth asking the lender to waive a single late payment.

Step 3: bring your utilization down

Utilization is the fastest factor to improve, because it is based on your current balances. Paying cards down, especially any near their limit, can lift a score within a month or two once the lower balances are reported. Our guide to credit utilization covers the details, including the statement-date timing that catches people out.

Step 4: protect the age of your history

Keep your oldest accounts open, even if you rarely use them. Closing an old card shortens your history over time and removes its limit, which raises utilization. A small recurring charge on an old card, paid off automatically, keeps it active.

Step 5: apply for new credit sparingly

Each application for credit usually triggers a hard inquiry, which can lower your score slightly for a while. Several in a short time look riskier. Space out applications, and avoid opening new accounts in the months before a big loan like a mortgage.

Shopping around for the best rate on one mortgage, car loan or student loan is treated differently: scoring models generally count multiple inquiries for the same type of loan within a short window as one.

If you have little or no credit history

You need some credit to build a score. Common starting points:

• A secured credit card, backed by a deposit that usually becomes your limit. Use it lightly and pay in full every month.
• Becoming an authorized user on a family member's long-standing, well-managed card.
• A credit-builder loan from a credit union or community bank, where your payments are held in savings and released when the loan is paid.

How long it takes

Lower utilization can show up within a month or two. Correcting a report error can be similarly fast. Recovering from late payments takes longer: their impact fades over time, and most negative items fall off a report after about seven years. Building a strong history from scratch takes consistent use over several years.

Myths to ignore

• Checking your own score hurts it. It does not; that is a soft inquiry.
• You need to carry a balance and pay interest to build credit. You do not; paying in full works just as well.
• Paying off a debt removes its history. On-time history stays and keeps helping. Past late payments also stay until they age off.
• Income affects your score. It does not appear on credit reports, although lenders consider it separately.
• Credit repair companies can remove accurate negative information. They cannot. Anything they can legally do, such as disputing errors, you can do yourself for free.