Tips to Increase Your Credit Score
Trying to maintain a healthy credit score can cause some individuals anxiety, stress, and even depression. It’s important to gain a clear view of where we are financially so that we can set a goal and make a practical plan of where we want to be in the future.
Related Topics
It’s safe to say that most of us understand the importance of credit in today’s world. Not only does it affect your buying power, but it can also affect your ability to rent or own a home, get a job, and even what you’ll pay for insurance coverage. Trying to maintain a healthy credit score can cause some individuals anxiety, stress, and even depression. It’s important to gain a clear view of where we are financially so that we can set a goal and make a practical plan of where we want to be in the future.
Fortunately, no matter where you’re starting, there are a few things you can do to increase your credit score. Below, are some basic steps that you can take to get started on a path to a healthier credit score (and less worry):
1. Make All Payments in Full and On Time.
Payment history is the largest factor that determines your credit score. It accounts for 35%. Therefore, making payments on time is the most effective way to increase your credit score and build a good credit file.
Missing a payment or two can happen in times of financial difficulty and can add to any financial stress you may already be experiencing. However, no other strategy to improve your credit score will work if you are missing payments or paying late.
Late and missed payments start reporting to the credit bureaus once they are over 30 days past due and can stay on your credit report for 7 years. (That’s a long time for a bump in the road to follow you) To minimize the damage late and missed payments can do to your score, reach out to your lender or creditor, and make arrangements to pay as soon as possible. Some will offer payment plans that will stop late fees or higher interest rates from hitting your account. Addressing them can also give you some peace of mind, knowing that you are handling them the best you can for your current situation.
Saver Tip: You can also ask the creditor if they will consider removing the late payment from your credit reports. They are often willing to do so for customers who have been in good standing in the past (and if they ask nicely 😉).
2. Use a Credit Builder Loan or Secured Credit Card
Adding on to the first step above, payment history makes up 35% of your score, therefore, good payment history is what builds healthy credit files. If you lack a “positive pay history” on your credit report, it’s time to start creating some by opening a credit builder loan and/or a secured credit card.
A credit builder loan works by allowing you to make payments to an account that are then reported as “loan payments” to the credit bureaus. These payments usually accumulate in an account during a set timeframe. In the end, the lender will take their fee and return the remaining balance to you. (another way to save too)
A secured credit card is one that requires an upfront “security deposit” or collateral. Most start with credit limits as low as $200. You put the cash up and then the company will extend a credit card account to you in the same amount. Many will return the security deposit (aka collateral) and convert the account to a regular credit card (often with a higher limit) after being in good standing for 6 months to a year.
Saver Tip: It’s recommended to have two to three credit lines reporting a good payment history at a time. These should also be different types of accounts, like a credit card and an installment loan. Your credit “mix” accounts for 10% of your score.
Although you need more than one tradeline reporting, it’s best to stick to just a couple to start. Adding too many new accounts to your report at once can lead to more debt if you're not careful and can result in lenders questioning your ability to repay them all. Work to build a good payment history on just a couple of accounts in the beginning, then add accounts (possibly with higher limits and lower interest rates) as your credit file grows and your score increases.
2. Maintain Low Overall Credit Utilization.
Which means that you need to keep a low balance at all times. The credit equation wants you to maintain low credit balances – especially the FICO 8 scoring model. The balances you carry on credit lines account for 30% of your credit score and are the 2nd largest contributing factor.
A general rule of thumb is to maintain a balance below 30% of your overall available credit. Carrying any balance will affect your score, but anything over 30% is when the amount it affects begins to increase.
Paying down balances is one of the best (and quickest) ways to increase your credit score. The key is having the lowest possible balance each month when your creditor reports to the credit bureaus. You can find this date in two places – on your credit report and your billing statement. On the credit report, the date will show as “date updated” or “last reported”, on your billing statement it will be your statement closing date. Make a plan to pay down the balance as much as possible right before this date each month.
Saver Tip: You can also request a credit limit increase to lower your overall utilization. However, be cautious – increased credit limits can lead to more spending (and more stress) so only choose this option if you can ignore the temptation.
3. Address Debt Collections, Charge Off Accounts, and Errors
An account in collections, a charged-off status, or reporting incorrectly can do some real damage to your credit score, so it’s best to address them as soon as you can.
There are a few ways to do that and how to handle it will depend on several things like what type of debt it is, how old the debt is, and who is attempting to collect it. It’s typically best to start with the entity reporting first and request debt verification to ensure that it is your debt and reporting correctly. You can then decide whether to work out a plan to settle the account or dispute it.
Stopping negative reporting each month can make a significant impact on your credit score.
Saver Tip: Check out the Consumer Financial Protection Bureau’s tips on debt collection here. There you will find articles, reports, and form letters that can be used to help you in the process.
Get started on your savings journey today by taking the America Saves Pledge. Choose your savings goals and we’ll be your partner along the way and will send emails and texts full of tips, tools and resources to keep you motivated.
Check out these related insights!
12.21.2021 By Breanna Johnston, AFC® Candidate
Tips To Help You Reduce Debt and Pay it Off For Good
Related Tags
CHECK OUT OTHER SAVINGS JOURNEYS FROM SAVERS JUST LIKE YOU
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “when I started encouraging them to save because that’s when they started receiving small bills from family on the holidays.”
Saving Early: Key to Successful Future
By Johnnie Lovett
For Johnnie Lovett, a Young Illinois Saver, saving has been a habit since he was a teenager. “As a teenag...
The Gift of Homeownership
By Quaneka Willis
Quaneka Willis, a single mother of three children, was receiving rental assistance through the Housing Au...
Another Dream Realized
By Mary Brown
Mary Brown was already a disciplined individual when she came to Wisconsin Women’s Business Initiative Co...
Taking Steps Toward Financial Fitness
By Nicky Vasquez
Nicky Vasquez learned about Virginia Saves when she attended her first class with Bank On Virginia Beach....
Saver Story: Set a Goal, Make a Plan!
By Shannon
We've chosen Shannon as our Saver of the Month! Her approach to saving for her family’s dream home is a great example of how #ThinkingLikeASaver can look different for everyone, but has great payoffs and rewards.
Saving Early: Key to Successful Future
By Johnnie Lovett
For Johnnie Lovett, a Young Illinois Saver, saving has been a habit since he was a teenager. “As a teenager, I was responsible for buying certain things with my allowance,” the Illinois State University junior said.
Saving for a Bright Future
By Kristin Hendricks
Kristin Hendricks, a single mother from Texas, understands the importance of saving money and following a...
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “w...
Transforming “I Can’t Save” to “I Will Save”
You will not believe what it took to completely change my life. About three years ago, the HR Administrat...
Budget like Nohemi
By Nohemi
Nohemi found out about America Saves a few years ago as an undergraduate at the University of Illinois at...
A Think Like A Saver Attitude
By Melissa
Melissa has always been thrifty with a #ThinkLikeASaver attitude. This served her family well when her husband lost his job in 2014. Using their savings, Melissa’s family stayed afloat while her husband found a new job.
Jump-Starting a Financial Makeover
By Nichelle Johnson
Nichelle Johnson, a single mom with two teenage children, knows what it’s like to stretch a dollar. When she moved back to Virginia Beach in 2008, she provided for her family with just a part-time library position.
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “w...
Saving is a Family Affair
By Jeff
Saving is truly a family affair for Jeff’s household. During America Saves Week 2019, he pledged to save ...
Don’t Laugh at Saving Spare Change
By Brittany
Virginia Saves saver, Brittany, decided to start saving again when she became a single mother. She thinks...
Put 20 Percent Away
By Melissa
“I am a single mother, and I make ends meet for me and my daughter, but I wanted to put money away for my...
Starting and Continuing a Savings Journey
By Kiara Hardin
When Kiara Hardin, now a junior at Western Illinois University, became an intern with the Chicago Summer Business Institute during her sophomore year of high school, she began her savings journey.
Saving With My Boys
By Kelly
Kelly has made saving a family effort. She started her boys saving early. “Probably 3,” Kelly told us, “w...
Put 20 Percent Away
By Melissa
“I am a single mother, and I make ends meet for me and my daughter, but I wanted to put money away for my...
Saving is a Family Affair
By Jeff
Saving is truly a family affair for Jeff’s household. During America Saves Week 2019, he pledged to save ...
Budget like Nohemi
By Nohemi
Nohemi found out about America Saves a few years ago as an undergraduate at the University of Illinois at...
Getting Out of Debt
By Tonya Shelton
In 2004, Tonya Shelton was facing financial ruin. Barely making more than minimum wage and having lost her home to an unexpected family crisis, Shelton and her family were forced to live in a rundown hotel.
Taking Back Control Over Finances
By Nadine Bialo
After becoming a Virginia Saver and getting help from BankOn classes and coaching, Nadine Bialo took back...
Developing a Savings "Game Plan"
By Eunice Diaz
Eunice Diaz, a teacher in Colorado Springs, had been noticing a pattern. Despite the fact that she and he...
From Overwhelmed to In Control
By Debi
In 2017 Debi felt overwhelmed. Her credit cards were maxed, and she wasn't exactly sure how to handle it....
Inspired to Build Savings By Starting Small
By Sharon
With little-to-no money in the bank and living on a limited income with her adult daughter, Sharon wasn’t...
Savings #ImSavingForSweepstakes
#ImSavingFor Winner Story
By Pedram R.
America Saves awarded one lucky saver, Pedram R. from California, $750 for sharing his #ImSavingFor story. Pedram said, “Saving is important to me because it proves I am not willing to buy unnecessary things to please others or to be perceived as successful.”
Saving is a Family Affair
By Jeff
Saving is truly a family affair for Jeff’s household. During America Saves Week 2019, he pledged to save for retirement. But making a commitment and creating a plan to save isn’t a new concept for him.
If we feature you in our newsletter, you get $50.
You May Also Be Interested In...
Take the America saves pledge
Make a pledge to yourself and create a simple savings plan that works. Complete the Pledge and America Saves will send you short email and text reminders, resources and tips to keep you on track towards your savings goal. Become part of an entire community of savers. Get started now!
creative ways to fund your savings
Those with a savings plan are twice as likely to save successfully. Taking the America Saves Pledge is a pledge to yourself to start a savings journey and America Saves is here to encourage you along the way. Take the first step toward creating a better financial future. Make a plan, set a goal, and pledge to yourself to start saving, today.
![](https://americasaves.org/media/cydfwlsq/logo-as.png)
Congrats on completing the pledge!
Take the America Saves Pledge
Make a pledge to yourself and create a simple savings plan that works.