Having a poor Credit score is one of the most challenging things that you can face in life. It makes it harder for you to get an apartment, take out a mortgage, or even get a credit card for yourself.

Additionally, having bad credit also entails getting higher interest rates. Having higher interest rates for loans and credit lines means that paying them off becomes even more expensive because of your credit score.

A FICO score of 669 or below defines having bad credit. If your credit score falls in that category, you may be wondering how to increase your credit score. As hopeless as the situation might seem, it is possible to improve your credit score. We are going to discuss how you can improve your credit score and get your life back in order.

10 Things To Do To Build Your Credit Score

Improving your credit score is not something you can do overnight. It takes a lot of careful planning and deliberation on your part to pull off. In this post, we will discuss the top ten things to do on your journey to build your credit score.

1. Reduce your credit card utilization ratio

It might be impossible to completely stop using your credit card to make purchases. In fact, not using your credit card might not even help you build your credit score. You can, however, reduce your credit card utilization ratio. This ratio is an important metric that affects your credit score.

The ratio is simply how much credit you use divided by the total amount of credit you have access to. Suppose that you charged $20,000 to your credit card and your total credit limit is $100,000. In that case, your credit card utilization ratio will be 20%. Credit bureaus use your statement balance in this calculation. It means that you will have this ratio even if you pay off your entire balance each month.

2. Request credit limit increase

You should request an increase to your credit limit from your credit card provider periodically. Each credit card company has a different process for increasing credit limits, but it is typically a straightforward process. Most credit card companies can even let you do this online.

Increasing your credit limit also lowers your credit utilization ratio. Make sure you do not ask for a limit increase on a new credit card because most companies do not increase the limit if your credit card is new. Make sure that you are subtle about your request and ask for a relatively small increase. Otherwise, you could prompt a hard inquiry on your credit report, and that is bad for your credit score.

3. Dispute any credit report errors

It is possible for banks to make reporting errors that can hurt your credit score. Many consumers overlook the benefit of reviewing their credit card reports periodically. You can easily request an absolutely free credit card report from Equifax, Experian, and TransUnion.

If you find any error, you should file a dispute with the credit bureau. Remember that no error is too small to dispute when it comes to your reports. There is a chance that some error made by the bank is affecting your credit score. If any error affected your credit score, you can see a quick improvement once the credit bureau corrects the mistake.

4. Become an authorized user on a credit card

Suppose you have a family member with a much higher credit score than yours. Being an authorized user on their credit card can be a great trick to improve your credit score. If your relative’s credit card has a long account history, on-time payments, and a low credit utilization ratio, becoming an authorized user on the credit card can significantly improve your credit score.

5. Occasionally use dormant credit cards

Many people close the accounts on their older credit cards. Instead of closing it, you should consider using it for occasional purchases so that it remains active. Keeping an old credit card active will make it less likely for the bank to close the card or reduce your credit limit.

Credit bureaus consider each revolving credit account’s credit utilization ratio. Closing your credit card can decrease your credit line and impact your total credit utilization ratio.

6. Pay off cards with the highest balance first

Limiting your future spending can help you regain your credit score. Additionally, you should pay off your credit cards. Focus on paying off the credit cards with the highest balance first to reduce your credit utilization ratio.

Paying down outstanding debt also improves your debt-to-income ratio, a factor that many lenders use but is not a factor in your credit score.

7. Make payments on time

Improving your credit score requires you to start making payments on time. Your payment history has a significant impact on your credit score. Even if you can manage to make the minimum payment, you should do it within the due date. It keeps your account in good standing, and you can avoid late payment fees.

8. Use a variety of accounts

We recommend that you never borrow money unless it is completely necessary. However, having a variety of credit accounts can show how you can manage your credit responsibly. You might have one credit card, a home mortgage, and a car loan. Each type of account can benefit your credit score differently. Repaying loans in full can remain on your credit report for up to ten years, making it easier for you to qualify for a similar loan.

9. Sign up for a credit boost service

Having a credit card and installment loans can improve your credit score. You can also sign up for credit boost services to improve your credit score further. Credit boost services can report your monthly bill payments like cell phone plans and utilities. You can receive credit by linking your bank account to improve your credit score.

10. Try getting a credit builder loan

Another quick way to get a small boost to your credit score is getting a credit builder loan. Credit builder loans let you improve your credit score by lending money to yourself. You will need to make monthly payments into an interest-bearing certificate of deposit for up to two years.

The bank will report your monthly payments to credit bureaus. You can receive the certificate of deposit balance (minus administrative fees) at the end of the loan term and improve your credit score.

Final Thoughts

These are some of the most effective ways you can quickly increase your credit score. Consider trying these tips out, and you will see that they can make a significant difference. We highly recommend that you keep these tips in mind even when you can manage to build your credit score.

Rebuilding your credit score is one of the most challenging things you can do. However, maintaining a good credit score also requires due diligence and better spending practices. We hope that this list of the top ten ways to build your credit score helps you achieve better financial security.

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