Easy Ways to Boost Your Credit Score

The average credit score dropped for the first time in a decade, to 717 from 718, as more consumers missed making monthly payments on mortgages, auto loans and credit cards, according to FICO, a data-analytics company that specializes in credit scoring.

More than 18% of the population had at least one payment that was 30 days overdue as of October, 2023 compared with 14% six months earlier. While missed payments on mortgages and car loans have been rising, they are still below pre-pandemic levels. Not so for missed credit card payments, perhaps because they are most directly affected by higher interest rates and consumer prices.

Lower credit scores translate into higher interest rates on new or adjustable-rate loans, which is why financial advisers urge clients to make raising their scores a priority.

Improving your credit score does not have to be difficult. Here are some of the simplest, most straightforward things you can do.

1. Pay down credit card debt. Reducing credit card balances is the quickest way to lift a credit score. So make room in your budget for this important step.

"Normally the easiest way to improve your credit score also happens to be the fastest way to improve your credit score . . . pay down or pay off credit card debt," says John Ulzheimer, credit expert and president of the Ulzheimer Group in Atlanta.

"If you have negative information depressing your credit scores, you are going to have to wait perhaps years for those to fall off your credit reports," he adds. "But if your scores are lower because of credit card debt, all it takes is you paying them down or off. Of course, this assumes you have the capacity to do so."

What does Ulzheimer recommend as a good strategy for paying down credit card debt with the aim of boosting credit scores in mind?

"The best way to attack credit card debt with the goal of improving your scores is to pay off the smaller balances first. This will kill two birds with one stone . . . reducing your utilization ratio while also eliminating credit cards with balances. That second one (the number of cards with a balance) always flies below the radar but it is a very important component in your credit scores. Your scores could improve in less than 30 days with this approach," Ulzheimer says.

Other strategies for clearing away credit cards include taking out a personal or home-equity line of credit (HELOC), he says.

"You could take out a personal loan to pay off credit card debt, thus converting score-damaging credit card debt into score-benign installment debt," he says. "You could take out a HELOC to pay off credit card debt, again reducing your credit card debt. You could open a new credit card and leave it largely unused, thus lowering your utilization ratio without taking on any new debt or paying off any old debt," Ulzheimer says.

2. Check credit reports for errors. Having a mistake on your credit reports could lower your credit score but fixing a mistake will improve it.

"Review your credit report regularly and dispute any errors you find," says Bruce McClary, senior vice president at the National Foundation for Credit Counseling, in Washington. Inaccurate information can bring your score down. You can obtain a free credit report from each of the three major credit bureaus weekly by visiting annualcreditreport.com. Although the URL implies an annual report, they now allow free weekly access.

3. Include non-traditional accounts in your credit score. Ask about ways to include your rent, cell phone and cable bills in your credit score.

"If you lack a credit history for loans and credit cards but have rent or subscription accounts, your score may benefit from the inclusion of those accounts," McClary says. "Tools like Experian Boost are offered at no cost and can consider your positive payment history for things like rent, cell phone bills and cable.

"Note that not all of these score booster tools are the same," he adds, "so be sure to understand the details to clearly understand what scores are impacted and how you might benefit."

4. Resolve past-due accounts quickly. Credit card payments that are more than 30 days overdue are considered delinquent. Account delinquencies hurt your credit score, so if you have one you should resolve it as soon as possible.

You can negotiate with creditors on your own or seek help from a credit counseling agency. The nonprofit National Foundation for Credit Counseling can steer you to a member near where you live or work; it says "the majority" of members provide their services "at no or low cost to clients."

"Unresolved account delinquencies can tank your credit score and make it hard to qualify for new loans or credit cards," McClary says. "Find ways to resolve past due accounts by working with a nonprofit credit counseling agency that can help you identify practical solutions for getting back on track.

"The sooner those accounts start reporting as paid in full or otherwise resolved, the sooner you can put them in your past and focus on improving your credit health.

5. Keep a low credit utilization rate. How much you charge on your credit cards affects your credit score. Keeping usage low will raise your score.

"Credit utilization measures the amount of available credit you're using on your credit cards," says Christina Roman, consumer education and advocacy manager at Experian, one of the Big Three credit-rating agencies (the others are Equifax and TransUnion).

It's the ratio of your outstanding balance to your overall credit limit. In FICO's most commonly used credit-scoring model, debt and credit utilization account for 30% of your overall score, second only to payment history. This means the closer you are to your credit card limit, the lower your credit score might be.

"Aim to pay your balance in full each month or to keep your utilization per credit card as low as possible to safeguard your score," Roman advises. "As your utilization ratio approaches 30% of your limits, your scores will begin to decrease much more rapidly. People with the best scores generally have utilization of less than 10%, and you never want it to exceed 30%."

6. Pay your credit card bills on time. Payment history is a top factor in determining a credit score. Steady on-time payments will lift your credit score.

"People with the best credit scores make their payments on time every time and pay their balances in full," Roman says. "This is because your payment history and utilization rate are the two most important factors in determining your credit score. A single missed payment will stay on your credit report for seven years and can impact your credit scores the entire time it's there."

Paying your credit card balance in full is good for your credit score, so do it whenever you can.

"Many people mistakenly believe you need to carry a balance month-to-month to build credit, but this is not true," Roman says. "The best thing you can do to protect your  credit standing is to make your payments on time every time and keep your card balances as low as possible.

"Ideally, you want to pay off your balances in full every month. Carrying a balance just means you'll spend more in interest each month. It won't help your credit scores."