In this article:
- Steps to Improve Your Credit Scores
- How Long Does It Take to Rebuild a Credit Score?
- Establishing or Building Your Credit Scores
- How Credit Scores Are Calculated
- Credit Education Resources
It's possible to improve your credit scores by following a few simple steps, including: opening accounts that report to the credit bureaus, maintaining low balances and paying your bills on time. You can try to boost your credit score by getting credit for paying bills like your cell phone, utilities, and popular streaming service, free, with Experian Boost®ø. However, it can be difficult to know where to start. Whether you're building your credit from scratch or rebuilding after your scores have taken a hit, it's important to learn how your scores are calculated and the basic ways to improve them. Then, you can dive into more detailed guides based on your situation.
Steps to Improve Your Credit Scores
The specific steps that can help you improve your credit score will depend on your unique credit situation. But there are also general steps that can help almost anyone's credit.
1. Build Your Credit File
Opening new accounts that will be reported to the major credit bureaus—most major lenders and card issuers report to all three—is an important first step in building your credit file. You can't start laying down a good track record as a borrower until there are accounts in your name, so having at least several open and active credit accounts can be helpful.
These could include credit-builder loans or secured cards if you're starting out or have a low score—or a great rewards credit card with no annual fee if you're trying to improve an established good score. Getting added as an authorized user on someone else's credit card can also help, assuming they use the card responsibly.
If you're starting from scratch with no credit file at all, the most important step is simply getting a credit report with a bureau. With Experian Go™, you can sign up for a free Experian membership and create an Experian credit report. Then you can use options like becoming an authorized user or signing up for Experian Boost to build your credit.
Experian Boost is a tool you can use to add positive utility, cellphone and streaming service payments to your Experian credit report. These on-time payments wouldn't otherwise be added to your credit report, but using Experian Boost means they'll be factored into your Experian FICO® Scores☉ .
2. Don't Miss Payments
Your payment history is one of the most important factors in determining your credit scores, and having a long history of on-time payments can help you achieve excellent credit scores. To do this, you'll need to make sure you don't miss loan or credit card payments by more than 29 days—payments that are at least 30 days late can be reported to the credit bureaus and hurt your credit scores.
Setting up automatic payments for the minimum amount due can help you avoid missing a payment (as long as you're careful not to overdraft your bank account). If you're having trouble affording a bill, reach out to your credit card issuer right away to try and discuss hardship options.
Staying on top of accounts that don't generally appear on your credit reports (gym memberships and subscription services, for instance) can also be important. The on-time payments might not help your credit, but the account being sent to collections could still cause your scores to dip.
3. Catch Up On Past-Due Accounts
If you're behind on your bills, bringing them current could help. While a late payment can remain on your credit report for up to seven years, having all your accounts current can be good for your scores. Additionally, it stops further late payments from being added to your credit history as well as additional late fees.
For those having trouble with credit card debt, talking to a credit counselor and getting on a debt management plan (DMP) could be a good option. The counselor may be able to negotiate lower payments and interest rates, and get card issuers to bring your accounts current.
4. Pay Down Revolving Account Balances
Even if you're not behind on your bills, having a high balance on revolving credit accounts can lead to a high credit utilization rate and hurt your scores. Revolving accounts include credit cards and lines of credit, and maintaining a low balance on them relative to their credit limits can help you improve your scores. Those with the highest credit scores tend to keep their credit utilization ratio in the low single digits.
5. Limit How Often You Apply for New Accounts
While you may need to open accounts to build your credit file, you generally want to limit how often you submit credit applications. Each application can lead to a hard inquiry, which may hurt your scores a little, but inquiries can add up and have a compounding effect on your credit scores. Opening a new account will also decrease your average age of accounts, and that could also hurt your scores.
Inquiries and the average age of your accounts are minor scoring factors, but you still want to be cautious about how many applications you submit. One exception is when you're rate shopping for certain types of loans, such as an auto loan or mortgage. Credit scoring models recognize that rate shopping isn't risky behavior and may ignore some inquiries if they occur within the span of a couple of weeks.
How Long Does It Take to Rebuild a Credit Score?
There's no set timeline for rebuilding your credit. How long it takes to increase your credit scores depends on what's hurting your credit and the steps you're taking to rebuild it.
For instance, if your score takes a hit after a single missed payment, it might not take too long to rebuild it by bringing your account current and continuing to make on-time payments. However, if you miss payments on multiple accounts and you fall over 90 days behind before catching up, it will likely take longer to recover. This effect can be even more exaggerated if your late payments result in repossession or foreclosure.
In either case, the impact of negative marks will diminish over time. Most negative marks will also fall off your credit reports after seven years and stop impacting your scores at that point if not sooner. Chapter 7 bankruptcies can stay for up to 10 years, however.
In addition to letting time help you rebuild your scores, you can follow the steps above to proactively add positive information to your credit reports.
You may also hear about credit repair companies that offer to repair or "fix" your credit—for a price. It might seem tempting, but credit repair companies can't do anything that you can't do on your own for free. Similarly, you should be wary of so-called debt settlement companies that may encourage you to stop making payments in an attempt to try to "settle" the debt for less than you owe. Their plan can result in major credit score harm and may not even ultimately work to reduce your debt obligation.
Establishing or Building Your Credit Scores
Depending on your experience with credit, you might not have a credit report at all. Or, your credit report might not have enough information that credit scoring models are able to assign you a credit score.
With FICO® Scores, you need to have at least one account that's six months old or older, and credit activity during the past six months. With VantageScore, a score may be calculated as soon as an account appears on your report.
When you don't meet the criteria, the scoring model can't score your credit report—in other words, you're "credit invisible." As a result, creditors won't be able to check your credit scores, which could make it difficult to open new credit accounts.
Some people may be in a situation where they've only opened accounts with creditors that report to only one bureau. When this happens, they may only be scorable if a creditor requests a credit report and score from that bureau.
If you're brand new to credit, or reestablishing your credit, revisit step one above.
How Credit Scores Are Calculated
Credit scores are determined by computer algorithms called scoring models that analyze one of your credit reports from Experian, TransUnion or Equifax. Scoring models (and there are many) may use different factors, or the same factors weighted differently, to determine a particular score. However, consumer credit scores generally share a few similarities:
- Scores are calculated based on the information in one of your credit reports.
- Scoring models try to predict the likelihood that a borrower will be 90 days late on a bill in the next 24 months.
- A higher score indicates a person is less likely to fall behind on a bill, and vice versa.
The vast majority of lenders use credit scores calculated by FICO and VantageScore® scoring models. The most recent versions of their generic credit scores use a score range of 300 to 850—and a score in the mid-600s or higher is often considered a good credit score. (Generic means they're created for any type of lender. FICO also creates industry-specific scoring models for auto lenders and card issuers that range from 250 to 900).
Considering how different credit scores use the same underlying information to try and predict the same outcome, it might not be surprising that the steps you take to try to improve one score can help increase all your credit scores.
For example, making on-time payments can help all your credit scores, while missing a payment will likely hurt all your scores. There are several factors that can affect your credit scores. Here, we'll focus on the actions you can take to help improve your credit scores.
How to Get Your FICO® Score for Free
Understand the reasons that help or hurt your FICO® Score, including your payment history, how much credit you are using, as well as other factors that influence your overall credit.
Get Your FICO® Score
Credit Education Resources
Continue your credit education with our guides and resources:
- What Affects Your Credit Scores? Learn how different types of accounts and actions can impact your credit scores.
- How to Calculate Credit Card Utilization: Your credit utilization rate can have a big impact on your scores. The math is easy, but there are common misunderstandings about which numbers to use.
- Credit Repair: How to "Fix" Your Credit Yourself: Find out how you can improve your credit for free.
- 4 Simple Habits That Build Good Credit: Follow these simple rules for building and maintaining good credit.
- What Is a Bad Credit History and Rating?: If your credit needs some work, learn more about why you may have a bad credit score and what you can do about it.
- Which Debts Should I Pay Off First to Improve My Credit?: Prioritizing certain bills can be important when you're trying to increase your credit scores.
- Credit Myths: Learn the truth and don't get caught off guard.
Check Your Credit Score for Free
Knowing where you stand and watching your progress can be important. With Experian, you can check your FICO® Score for free. Your account gives you a breakdown of which factors are impacting your score the most, so you can take a focused approach to improving your score. Your credit score will also automatically be tracked and updated each month.
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Improving credit can take time, but there are some things you can do that can have an almost immediate impact on your score. Here’s what to know. - How to Get Your Credit Ready for a Mortgage
Prepare your credit for a mortgage loan by checking your score and reports and addressing potential issues. Read on for more specific steps to take. - How Soon Will My Credit Score Improve After Bankruptcy?
If you've recently gone through bankruptcy, it may take some time to improve your credit. However, with the right steps, you may be able to start quickly. - Steps to Improve Credit Score
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Steps to Improve Your Credit Scores
To improve your credit scores, there are several steps you can take:
-
Build Your Credit File: Opening new accounts that report to the major credit bureaus is an important first step in building your credit file. This includes credit-builder loans, secured cards, or becoming an authorized user on someone else's credit card [[1]].
-
Don't Miss Payments: Your payment history is crucial for determining your credit scores. Making on-time payments and avoiding late payments is essential. Setting up automatic payments can help you avoid missing payments [[2]].
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Catch Up On Past-Due Accounts: If you're behind on your bills, bringing them current can help improve your scores. Having all your accounts current can be beneficial for your credit scores [[3]].
-
Pay Down Revolving Account Balances: Maintaining a low balance on revolving credit accounts, such as credit cards, can help improve your scores. Keeping your credit utilization ratio low is important [[4]].
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Limit How Often You Apply for New Accounts: While you may need to open accounts to build your credit, it's generally advisable to limit the number of credit applications you submit. Each application can result in a hard inquiry, which may have a minor negative impact on your scores [[5]].
How Long Does It Take to Rebuild a Credit Score?
The time it takes to rebuild a credit score varies depending on the individual's credit situation and the steps they take to improve it. If you have a single missed payment, it may not take too long to rebuild your score by bringing the account current and making on-time payments. However, if you have missed payments on multiple accounts and fall significantly behind, it may take longer to recover. Negative marks on your credit report generally diminish over time, and most negative marks will fall off your credit reports after seven years [[6]].
Establishing or Building Your Credit Scores
If you don't have a credit report or your credit report lacks sufficient information, you may be considered "credit invisible." To establish or build your credit scores, you need at least one account that's six months old or older, along with credit activity during the past six months. Credit scoring models, such as FICO and VantageScore, require this information to calculate your credit scores [[7]].
How Credit Scores Are Calculated
Credit scores are determined by computer algorithms called scoring models, which analyze your credit reports from bureaus like Experian, TransUnion, or Equifax. These models use various factors to calculate your credit score, such as payment history, credit utilization, length of credit history, types of credit, and new credit applications. The most commonly used scoring models are FICO and VantageScore, which have a score range of 300 to 850. A score in the mid-600s or higher is generally considered a good credit score [[8]].
Credit Education Resources
If you're interested in learning more about credit scores and how to improve them, there are several resources available:
- "What Affects Your Credit Scores?" provides insights into how different types of accounts and actions can impact your credit scores.
- "How to Calculate Credit Card Utilization" explains the concept of credit utilization and how it can affect your scores.
- "Credit Repair: How to 'Fix' Your Credit Yourself" offers guidance on improving your credit without the need for credit repair companies.
- "4 Simple Habits That Build Good Credit" provides rules for building and maintaining good credit.
- "What Is a Bad Credit History and Rating?" explores the reasons behind a bad credit score and what you can do about it.
- "Which Debts Should I Pay Off First to Improve My Credit?" offers advice on prioritizing bills to increase your credit scores.
- "Credit Myths" dispels common misconceptions about credit.
- "Check Your Credit Score for Free" explains how you can check your FICO Score for free and track your progress over time [[9]].
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