How can I improve my credit score?

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If your credit score is low and there aren’t any errors on your report, there are several steps you can take to improve your credit score.  But there is no quick fix: improving your score is largely a matter of time (so don’t let it go south in the first place!).

  1. Keep your credit utilization below 25%.
    • Pay down your credit cards to at most 25% of their limit.
    • Your credit utilization for each account is relevant, as well as your overall debt-to-credit ratio.
    • If you are approaching using 25% of your credit limit, use a different form of payment. 
    • If you receive a pre-approved credit card offer in the mail, open a new account to increase your total credit limit, but don’t charge anything to it so that your credit utilization decreases.  By the same token, don’t close existing accounts that you aren’t using.
    • Revolving account (e.g., credit cards) utilization is weighted more heavily, so pay those debts down before other debts such as installment loans.
    • Business cards are jointly backed by the individual to whom they are issued, and thus treated exactly the same way as an individual card.  Keep the balance down.
  2. Don't use credit card issuers that don't report your credit limit.
    • Some Credit Card Issuers don’t report credit limits for their cards.  As a result, the credit agencies typically use the highest balance that has ever been reported on an account as a proxy for the credit limit.  Unless you have ever maxed out the card, this will result in the credit agencies overestimating your utilization for that account.
  3. Become an authorized user on a credit card account that has been open and in good standing for a long time.
    • If you are an authorized user on someone else’s account, that account will show up in your credit report as if it were your own.  No one will know the difference, and your credit score will benefit from all the positive factors associated with that account.
    • Lengthier credit history helps your credit score more, so get added to accounts that have been open for a long time. 
    • Getting added to accounts with low utilization will help your score more.
    • This can give your credit a huge boost in a short time, and all it takes is a simple phone call.  Ask a friend or family member with good credit history to call their card issuer and add your name to the account.  You can tell him or her you do not need physical possession of a card or any information about the account. 
    • There’s no need to stop with one account!
  4. Ask a creditor for forgiveness.
    • You can always ask a credit card company or other creditor to have negative information removed from your account.  They want to keep their customers happy, so they will commonly oblige your request if you have regularly made your payments on time and just made a few errors.  
  5. Get your student loan payments back on track.
    • Even if you have missed student loan payments or defaulted, you can return your Sallie Mae-backed student loan accounts to good standing by making approximately 12 consecutive on-time payments.
  6. Dispute old negative accounts.
    • If you have any old unpaid bills and a reason to dispute their legitimacy (e.g., a medical expense that you contend your insurer should have paid), you can contact the credit reporting agencies and tell them the debt is not yours.  Older debts will be more difficult to verify and are more likely to be removed from your credit report.
  7. Settle debts will collection agencies.
    • Particularly for debts smaller than $500, you can often get the collection agency to agree to have the debt deleted from your credit report in exchange for payment in full.
    • Before paying, get a written agreement from the collection agency in which they promise to contact the credit reporting agencies and have the debt deleted.
  8. Correct errors.
    • Initiate disputes through the credit reporting agencies or the original creditor if you find any of the following:
      • incorrect late payments, collection accounts, or charge-offs (debts written off as unlikely to be collected)
      • accounts incorrectly listed as anything other than “current” or “pays as agreed”
      • old negative items that should have been erased from your credit report after seven years (10 if related to bankruptcy)
      • accounts incorrectly listed as "closed by the credit grantor" when they were in fact closed by mutual agreement
  9. Preserve the length of your credit history.
    • If for some reason you feel compelled to close some of your accounts, try to close newer ones and keep the older ones, which reflect more positively on your creditworthiness.
    • Also, be aware that if you don't use a particular credit card for a number of years, the issuer might without warning notify you that they have closed the account.