By There are various ways to enhance your credit score, including making on-time payments, paying down amounts, avoiding excessive debt, and more. However, depending on your own scenario, it may be tough to know where to begin.
Understanding the aspects that contribute to your credit score will help you decide which steps to take, whether you’re starting from zero or rebuilding after past credit mistakes. With that in mind, here are seven ways to increase your credit score, their impact, and how long it may take to see gains.
1. Make on-time payments.
Credit impact: Your debt payment history is the most important credit scoring factor, accounting for 35% of your Score. Payment history comprises on-time, late, and missed payments, which are all reported to one or more major consumer credit agencies (Experian, TransUnion, and Equifax). Making on-time payments is the most effective strategy to repair your credit.
Actions you can take: If you’re having problems paying payments on time, set up autopay for at least the minimum amount due and set up calendar reminders and alerts through your online account. Experian Boost allows you to receive credit for non-traditional payments, such as rent, utilities, mobile, insurance, and streaming subscriptions. Adding these payments could instantly boost your Experian credit ratings.
How long it takes: As you pay your payments on time, your credit score may gradually improve. If you make a payment more than 30 days late, it will remain on your credit report for seven years and lower your scores, but the bad influence will fade as you catch up and pay on time in the future.
2. Pay down revolving account balances.
Credit impact: How much you owe makes up 30% of your FICO® Score, and your credit utilisation rate—the amount of available credit you use on revolving credit accounts like credit cards—is an important factor. While some experts suggest maintaining your utilisation rate around 30%, there is no hard and fast rule. Try to keep it as low as possible.
Actions to take: If you have one or more significant credit card balances, make paying them off a priority. Consider many ways to pay down your credit card debt. including a:
- A debt repayment approach, like the debt snowball or avalanche method.
- Debt consolidation loan.
- Credit card for balance transfers
- Debt management plans.
If you pay your credit card account in full regularly but still have a high utilisation rate due to limited credit limits, consider paying your bill close to your monthly statement date or making multiple payments to keep your balance low throughout the month.
How long does it take? Credit card issuers normally submit balance and payment information to credit bureaus once per month. As you pay off your credit card debt, you may notice the results of your efforts within a few months.
3. Do Not Close Your Oldest Account.
Credit impact: When you shut a credit card account, you immediately lose the card’s available credit, which may raise your credit utilisation rate and lower your ratings. Additionally, the duration of credit history accounts for 15% of your Score and is significantly influenced by the age of your oldest and newest accounts, as well as the average age of all of your accounts. Loan accounts are normally terminated once the obligation is paid off, whereas credit cards can be kept open permanently.
Closing a credit card might lower your credit score, especially if it is one of your few revolving credit accounts. That’s because you lose your available credit line, which has a significant impact on your credit utilisation ratio. If you close the card in good standing (no late payments), the payment history will remain on your credit record for ten years; however, you will forfeit any available credit instantly.
Actions You Can Take: Even if you no longer use your oldest credit card, consider using it every few months or charging a small recurring fee to keep it active. If the card no longer meets your needs or has an annual fee, contact your card issuer to see if you may upgrade or downgrade to a better option. This may allow you to preserve your credit history while switching to a card that better suits your needs.
How long it takes: If your oldest credit card is also one of your only credit cards and has a high credit limit, it may have a quick impact on your scores—especially if you have large balances on your other cards. Also, while it will take some time for the card to be removed from your credit report, you will eventually lose a card with a significant credit history, which may harm your credit.
4. Diversify Your Credit Types.
Credit impact: Credit mix makes up 10% of your Score and entails managing several types of credit. For example, someone with two credit cards, an auto loan, and a mortgage loan will have a better credit mix than someone with only one credit card.
It’s worth noting that your credit mix is unlikely to be a big factor in deciding your eligibility for a loan or credit card, but it can help boost an excellent credit score.
Actions You Can Take: Your credit mix will most likely improve over time as you apply for various types of credit to fulfil your financial needs. If you’re just getting started with your credit, applying for a beginner credit card and a credit builder loan can be beneficial.
Once you get started, try not to take on more debt than you need solely to develop credit.
How long it takes: Because your credit mix has a minor impact on your credit score, there’s no need to rush. Diversifying your credit mix can take years, as you apply for new credit accounts as needed.
5. Limit new credit applications.
Credit impact: Almost every time you ask for credit, the lender will conduct a hard inquiry into one or more of your credit reports. These enquiries, combined with the time since you opened a new account, account for 10% of your Score.
Each hard inquiry normally reduces your credit score by fewer than five points, but multiple inquiries in a short period of time, particularly when applying for credit cards, can have a compounding negative effect.
Actions You Can Take: To avoid too many hard enquiries, only apply for credit when necessary. Before applying for a loan or credit card, verify if the lender offers prequalification, which can give you an indication of your eligibility and prospective terms through a soft credit check that will not affect your credit score.
Hard enquiries can stay on your credit report for up to two years, but they only affect your Score for one year.
6. Dispute inaccuracies on your credit report
Credit impact: Inaccurate credit report information can have a major negative influence on your credit score, particularly if it is a serious issue, such as a late payment or a large credit card bill. If you’ve been a victim of identity theft, you may have several negative marks on your credit reports, such as false accounts.
Actions You Can Take: If your credit reports contain false or fraudulent information, you have the right to dispute it with the credit reporting companies. Begin by obtaining your free Experian credit report, then get your free weekly Equifax and TransUnion credit reports.
Examine your reports for any information you do not recognise. If you discover false information, use the dispute process with Experian and the other credit bureaus to start an investigation.
How long does it take? Credit disputes are usually settled within 30 days. If the credit bureau judges that your dispute is justified, the negative information will be corrected or removed.
7. Become an authorised user.
Credit impact: If you’re new to credit or looking to restore your credit, having a financially competent loved one add you as an authorised user to their credit card can have an instant positive influence on your credit score.
However, the impact varies depending on how you manage your credit card and the overall structure of your credit profile.
Actions You Can Take: Ask a parent or other loved one to add you as an authorised user to their account. Before you do, however, ensure that the account has a good payment history and a low credit utilisation rate.
How long it takes: Once you’ve been added as an authorised user, the card issuer will usually submit the entire account history to the credit bureaus within a month or two.
