6 Steps You Can Take Now to Improve Your Credit Score by 20 Points

Have you maxed out your credit card or missed a payment? Do you have a lot of debt? Don’t worry; we have solutions.

We’ve all heard the saying, “Your credit score is your financial report card.” Well, it’s a pretty important report card. Unlike a school report card, your credit score can open doors to favorable interest rates on loans, better housing options, and even insurance. As someone who’s been on the credit rollercoaster, I understand its ups and downs.

If you’ve made a few mistakes with your credit, that’s okay! The great thing about these mistakes is they don’t last forever, even a bankruptcy filing only stays on your record for 7–10 years. The good news is there are ways to fix and prevent mistakes going forward.

And here’s a stark reality check: According to data released by the Federal Reserve Bank of New York, Americans’ credit card debt levels have just surpassed $1 trillion for the first time ever, reminding us of the importance of managing our credit wisely.

What makes me qualified to give these tips? I have maintained an above 800 credit score for over 5 years and have been using credit cards since I was 18. I’ve made all sorts of mistakes related to credit for the 15+ years I’ve been using credit cards.

I’m sharing this information because financial literacy, including how to use credit cards responsibly, is not common knowledge. Especially during these uncertain economic times, I believe that sharing this knowledge and creating a community around financial transparency will benefit us all.

Credit cards have a variety of benefits, such as purchase protection, rewards, and insurance. When used wisely, they can prevent major losses such as fraud, and give you cash back.

In this article, I want to share six steps that have worked for me and countless others in the pursuit of a better credit score.

6 Steps You Can Take Now to Change Your Credit Score for the Better

1. Check Your Credit Report and Fix Inaccuracies

This first tip is obvious: before you can improve your credit score, you must know where your score currently stands.

• Start by pulling your credit reports from the three major credit bureaus (Experian, Equifax, or TransUnion). I do this annually to keep tabs on my financial standing using Experian.
• Even better, if you have a Capital One or Chase credit card, you can use their built-in credit tracking tools.
• Give those reports a thorough review. Look for any inaccuracies, errors, or fraudulent accounts. I’ve had my fair share of surprises in the past! You might be able to remove some of the inaccuracies, like a missed payment. I did this and my credit score jumped by a hundred points. I talk about how I did this in a previous article, below.

• If you spot any discrepancies, don’t hesitate to dispute them with the credit bureaus. It’s your right to have an accurate report.

2. Continue Paying Bills on Time by Setting Up Autopay

One of the golden rules is: pay your bills on time! If you’ve missed a payment, don’t miss another one.

According to myFICO, timeliness of payments accounts for 35% of your credit score.

• Set up reminders and automatic payments for at least the minimum payment amount to never miss a due date. It’s a lifesaver and helps maintain a positive credit history.
• To prevent overdrafts, I’ll sometimes set my auto-pay to the minimum payment and then a calendar reminder to go in and pay off the statement balance so I don’t pay interest.
• Late payments can really sting your credit score, so staying on top of them is essential.
• If you can’t get the missed payments removed, you will have to wait 7 years for the delinquencies to fall off the report. Luckily, the longer time has passed, the less it impacts your credit score.

3. Reduce Credit Card Balances

Carrying as small a credit card balance as possible is crucial.

According to myFICO, Amounts owed on accounts determines 30% of a FICO® Score

• Prioritize lowering your credit card balance. This may mean looking at recent purchases and returning items that you don’t need. Credit cards can give people the illusion that they can afford more than they can. There’s no shame in returning unused items you don’t need! Would you rather put in effort to make a return or let your credit take a hit?
• It’s essential to prioritize lowering your credit card balance and keeping your credit utilization rate below 30% of your credit limit. This means that your statement balances should not exceed 30% of your available credit limit, applying across all accounts. For example, if you have one credit card with a $1,000 limit and your last statement balance was $200, your recorded utilization is 20%. If you have multiple cards, calculate the total balance across all cards against your total credit limit.

4. Build Positive Credit History

Easier said than done, right? Well, credit fixes don’t work if they’re temporary. You’ll need to continue with these positive habits for the long term.

• Credit card payments should never exceed what you can afford to pay in full each month. This will help keep your utilization low.
• Everyone starts with limited credit history, and if you’re a student, new to credit cards, or currently repairing your credit, consider opening a secured credit card, or becoming an authorized user on someone else’s card to establish good history (practice caution with this option). If you fall in this boat, here are cards I recommend for beginners:

• It’s all about taking those baby steps and making sure every payment is on time.

While we’re on this topic, want to hear a secret to a positive credit history that most people don’t think about? It’s not just about swiping less, it’s also about making sure your credit card spending doesn’t exceed how much you bring in each month.

You may be thinking, what? Why? Well, credit card payments are due each month. If you swipe less than your monthly income, it’s almost guaranteed you’ll have enough cash to pay off the card (barring exceptions like other bills such as medical, etc). You won’t have to worry about your auto-pay over-drafting your account, and you’ll maintain good history.

When people say they can pay their credit cards in full, what they really mean is that at a minimum, they accrued monthly debt that is less than the amount of income they brought in that month.

5. Request a Credit Line Limit Increase

This is one of my favorite ways to improve credit score. Don’t be shy about asking your credit card issuers for a credit line increase; some banks will let you request one every six months. A higher credit limit can improve your credit utilization ratio.

• How? Well, using our previous example, if you have one credit card with a $1,000 limit and your last statement balance was $200, your recorded utilization is 20%. However, if your credit was increased to $2,000 and your last statement balance was the same, then your utilization would be 10%, which is a much better figure.
• Many banks allow you to submit a credit line increase application online without impacting your credit score, but do check beforehand. Another inquiry will temporarily reduce your credit score, as covered in #6.
• In my experience, it’s been the easiest to request a credit line increase with Citibank, American Express, and Capital One. The best way to find this page is by googling the credit card company and the keywords, “credit line increase”.
• Before you submit the request, make sure you have a good payment history and stable income. If you try to submit the request when you’ve had a recent string of missed payments or maxing out your credit limit, then your chances of getting approved are low.

And last but not least:

6. Avoid Opening Too Many New Accounts

Opening new credit accounts should be done sparingly. Why?

• Multiple credit inquiries can have a temporary negative impact on your credit score.
• Each time you apply for a new account, a hard inquiry is made on your credit report, and this doesn’t go away for two years unless you’re shopping for rates, like a mortgage.
• I’m cautious about how many new accounts I open because multiple inquiries in a short time can ding your credit score. Remember, quality is better than quantity.

And that concludes the list of six things you can start on today to improve your credit!

Takeaways

But remember, improving your credit isn’t a one-time sprint; it’s a lifelong marathon that champions those who persist! Just like marathon training, building a strong credit score requires steady, consistent effort.

Responsible financial habits — like making on-time payments, keeping a low credit card balance, and cultivating a positive credit history — are nurtured over time through unwavering dedication. By consistently paying your bills on time and avoiding maxing out your credit cards, you’re laying the foundation for a solid financial reputation that reflects positively on your credit report.

Embrace patience! Credit enhancement isn’t an overnight miracle, it’s a gradual transformation. It takes time for your responsible habits to leave a lasting mark on your credit history.

Your payment history, for example, may need several months to reveal a consistent streak of on-time payments. Likewise, the impact of maintaining a low credit utilization ratio may take a while to show up on reports.

In today’s world of instant gratification, it’s crucial to understand that the credit repair process takes time. There are no shortcuts or quick fixes, but there are steps you can take immediately to get on the right path. You got this!

I hope you all found this helpful, thank you for reading!

Hey everyone, thanks for reading. I’m a writer for Small Steps. I’m a former corporate management consultant writing about work, culture, and personal finance. I’m just a normal person wanting to help people find their wealth.

This article is for informational purposes only and should not be considered financial or legal advice. Consult a financial professional before making any major financial decisions.

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