How to improve your credit scores: 7 tips that can help

Doing things you want to do. Seeing places you want to see. Living life with a little less worry and a little more freedom. The flexibility that comes with higher credit scores can make decisions about money a little easier. 

So when setting financial goals, you might want to think about ways to improve your credit scores. Increasing your credit scores may not happen overnight. But these tips can help you start moving in the right direction.

Key takeaways

• Monitoring your credit can give you an idea of your creditworthiness. It’s also a chance to check for errors.
• Making payments on time, keeping credit utilization low and avoiding unnecessary credit inquiries can help you improve your credit scores.
• Focusing on good credit-building habits, rather than quick fixes, can help you improve your credit over time.

There are plenty of benefits to having good credit scores. A good score might help when it comes to lending decisions, among other things. Here are a few examples of what a good credit score might get you:

• Lower credit card interest rates
• Better credit card approval odds
• Better insurance rates
• Higher credit limits
• Good terms on utility services

There’s no single answer to what a good credit score is. It depends on where a score comes from, who calculates the credit score and who’s judging it. Lenders set their own credit policies and standards to determine creditworthiness. That means everyone has different ideas about what’s considered good, including credit-scoring companies like FICO® and VantageScore®. 

However, there are a few factors the Consumer Financial Protection Bureau (CFPB) says make up a typical credit score:

• Payment history
• Total debt and outstanding balances
• Amount of credit being used, or credit utilization
• Types of credit accounts or loans, or credit mix
• Length of credit history
• New accounts that have been opened

Using credit responsibly and practicing good financial habits can help you get and maintain good credit scores.

Building credit takes time. But there are a few ways you may be able to steadily improve your credit scores.

First things first, you’ll likely want to monitor your credit regularly. That way, you can have an idea of where your credit stands and make sure there aren’t any errors on your credit reports. Mistakes may not be common. But if they’re on your credit reports, they could negatively impact your credit scores. 

There are a couple of ways you can check your credit reports and credit scores: 

1. You can visit AnnualCreditReport.com to learn how to get free copies of your credit reports.
2. You can use a free credit-monitoring tool like CreditWise from Capital One, which lets you access your TransUnion credit report and VantageScore 3.0 credit score. Using CreditWise won’t hurt your credit scores. And it’s free and available to everyone, even if you don’t have a Capital One account.

The percentage of total available credit you’re currently using can impact your credit scores. This is sometimes called your credit utilization ratio. 

Paying only the minimum amount due or maxing out credit cards can keep your credit utilization high and negatively affect your credit scores. The CFPB recommends keeping your credit card utilization ratio below 30%. That can help show creditors you’re managing your credit responsibly.

There are a few ways to improve your credit utilization, including paying off your balances. A credit limit increase might also help, as long as you use your increased limit responsibly.

There are two main categories of consumer credit: installment loans and revolving credit. 

Car loans, mortgages and student loans are examples of installment loans. In general, the monthly payments on installment loans are fixed month over month. Once the loan is paid back in full, the account is closed permanently.

Revolving credit accounts may include credit cards, home equity lines of credit and business or personal lines of credit. Revolving credit allows borrowers to access credit up to a certain limit. It can be used and paid down repeatedly for as long as the account remains open and in good standing. 

Information from both types of credit accounts can affect credit scores. And making on-time payments each month could help you build credit and improve your scores. But late or missed payments could make your credit scores drop.

Setting up reminders on your phone or computer or setting up automatic payments can help you make payments by your due date.

Payment history is an important part of your credit reports and can impact your credit scores. Here are some factors that make up payment history information:

• Number of times that past-due items appear in your credit report
• How much money you owe to delinquent accounts
• How long overdue your payments are or have been in the past

This is why catching up on accounts that are past due may help your credit scores, even if you have existing late payments on your credit report. Paying down debt on revolving accounts can result in a lower credit utilization ratio and less total debt. 

Keep in mind that you may see temporary dips in your scores as you pay down debt. And paying off debts that are in collections doesn’t guarantee a score increase. 

When you apply for a new line of credit or credit card, it can trigger a hard inquiry, which can temporarily impact your credit scores. Having too many hard inquiries on your credit reports, especially in a short period of time, can have a bigger impact. Be sure to keep that in mind if you’re thinking about applying for a new credit card or another type of loan.

Hard inquiries might occur when you apply for a new:

• Credit card
• Loan
• Mortgage

If you’re having trouble getting approved for credit, a secured credit card might be a good place to start. Secured cards work similarly to unsecured cards. But secured cards typically require a security deposit to open an account.

Remember, new credit inquiries can cause your credit scores to dip temporarily. But credit cards are one tool that can be used to build credit when used responsibly. Responsible use of credit cards, like paying your bills on time every month, can help improve your scores.

A quick fix for your credit scores sounds enticing. But be wary of credit repair services that claim they can boost your credit scores quickly. As the CFPB says, no one can guarantee this. lt just takes time. 

If you’re looking for help managing your finances, you could consider credit counseling services or other credit card debt relief options.

How long it takes to repair bad credit depends on your individual circumstances, including where you’re starting from and how you got there. 

If you think your scores are being dragged down because of an error, you have a right to dispute them with the credit bureau that’s reporting it. Unless the bureau considers your dispute frivolous, it has to investigate, usually within 30 days.   

If negative information like late payments and charge-offs is lowering your scores, it might take a little longer to repair. As the CFPB explains, most negative information can remain on your reports for up to seven years. And certain types of negative information can stick around for even longer, though the effects of it might lessen over time.

Improving your credit scores can lead to great things. In fact, you can start right now and use CreditWise from Capital One to track your progress. 

Even if your credit scores are still a work in progress, you may still be able to get a credit card and use it responsibly to improve your scores. Check out these Capital One credit cards for fair credit. And before you apply, you can check for pre-approved card offers. It’s quick and won’t hurt your credit scores.