Like most good things, building a good credit score takes time. But if you think you need to give up on your dreams of a new car or great travel rewards card, think again. Bringing up your credit score may not take as long as you're afraid it will.
If you want to improve your credit score, start with these three things. Depending on where your credit is now, you could see a higher number in just 30 days.
Focus on utilization
On-time payments get a lot of fanfare when we talk about credit scores — and for good reason. But there's another part of your credit score that deserves your attention: credit utilization. In fact, this one element makes up 30% of your credit score.
"Credit utilization" refers to the percentage of your credit limits that's being used on your credit card accounts. If you have a credit card with a $10,000 limit and a $5,000 balance, the account is 50% utilized (i.e., you're using half of your available credit).
Lower utilization ratios are good for your credit score. As you use more of your available credit and your utilization ratios climb, it has a negative impact on your credit score.
You can lower your credit utilization in two ways:
Pay down your credit card balances
This increases the amount of available credit on your account. In the same example where a $10,000 card with a $5,000 balance was 50% utilized, if you paid the balance down to $2,500, your new credit utilization rate would be only 25% once the account was updated on your credit report.
Ask for a credit limit increase
A credit limit increase can also help to lower your credit utilization ratio. If you can only afford to pay down your $5,000 card balance to $4,000 right now, but the card issuer increases your credit limit to $16,000, these two actions will net you a credit utilization rate of 25%.
Related: Should I ask for a limit increase?
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Fix errors on your credit report
The credit bureaus work to keep the information on your reports accurate, but credit reporting mistakes do occur. In fact, a study by the Federal Trade Commission found that 20% of consumers had an error on at least one of their credit reports with Equifax, TransUnion or Experian.
Not every error will wreck your credit score, but many credit reporting errors can cause severe damage. This is especially true of derogatory information like late payments and collection accounts.
Review all three of your credit reports often. If you find information that isn't correct, the Fair Credit Reporting Act gives you the right to dispute those mistakes with the credit bureaus. If an incorrect negative item is removed from your credit report, there's a good chance your credit score will improve once the error is fixed.
Related: 6 things to do to improve your credit
Become an authorized user
Your credit score might be able to benefit from someone else's good credit history. When a loved one adds you to an existing credit card account as an authorized user, the account will typically find its way onto your credit reports within a few months.
If someone in your family has made on-time payments and has a low credit utilization ratio, they can also help boost your credit score. If the account was opened some time ago, there is an added bonus for you because your loved one's account on your report might improve the average age of your credit — another move that might be very good for your scores.
Related: Everything you need to know about authorized users
Bottom line
The best way to earn and keep great credit scores is to practice smart credit management habits over a long period of time. Most simply, make your payments on time and don't charge more on a credit card than you can afford to pay off in a given month. And the sooner you start these good habits, the sooner you'll see your credit score climb.
Additional reporting by Benét J. Wilson.
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.
