Terms apply to American Express benefits and offers. Visitamericanexpress.comto learn more.
Establishing a good credit score isn't a complex process, but it's a vital piece of your financial picture. Having a high score gives you access to the best credit cards, a lower interest rate on personal loans and can even come into play when you apply for a new job or rent an apartment.
It's important to raise your credit score so you receive the best rates and can qualify for more credit cards. If you're building credit, secured cards, such as the Discover it® Secured Credit Card, are often your best option. Once you work your way up to good or excellent credit, you may qualify for cards with generous welcome offers and robust rewards programs, such as the American Express® Gold Card and the Chase Sapphire Reserve®, two of CNBC Select's top-rated rewards cards. Thankfully, there are some easy and proactive steps you can take to improve your credit score.
Read on for CNBC Select's six easy tips to help you raise your credit score.
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1. Make your payments on time
Paying your bills on time is the most important thing you can do to help raise your score. FICO and VantageScore, which are two of the main credit card scoring models, both view payment history as the most influential factor when determining a person's credit score. For lenders, a person's ability to keep up with their credit card payments indicates that they are capable of taking out a loan and paying it back.
But your credit score isn't just impacted by your credit card bills. You need to pay all your bills on time. That includes all your utilities, student loan debt and any medical bills you might have.
2. Set up autopay or calendar reminders
If you struggle to remember to pay your bills each month (so many different due dates, so little time), there's an easy fix: autopay. If you're not sure you'll be able to pay your bill in full, you can set it so you just pay the minimum. And the same goes with your utilities: Most major providers will let you set up autopay that withdraws automatically each month from your checking or savings account (or charges your credit card). In the case of student loan companies, some give you a discount on your interest rate if you set up autopay.
If you don't want to use autopay, another easy option is setting up a payment reminder. Many banks and card issuers will let you schedule reminders through their websites, including sending you email reminders or push notifications (or both). You can also set up Google or Outlook calendar invites or make a note of the due date on a physical calendar. It doesn't really matter what notification system you use so long as you pay on time.
The sooner you start paying on time, the sooner your score will begin to improve. And just as a bit of motivation, older credit penalties, such as late payments, matter less as time passes. So start now and stay consistent.
3. Don't open too many accounts at once
FICO and VantageScore look at the number of credit inquiries, such as applications for new financial products or requests for credit limit increases, as well as the number of new account openings. Making these kinds of inquiries frequently dings your credit, so only apply for what you really need in order to avoid damaging your score. Plus, even if you have a good credit score, some issuers will automatically deny you if you've recently opened too many accounts. For example, you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.
If you want a new card, but you're not sure you'll qualify, you can submit a pre-qualification form online. You can submit as many pre-qualification forms as you want, as they won't impact your credit score.
Find the best credit card for you by reviewing offers in ourcredit card marketplaceor get personalized offers viaCardMatch™.
4. Get credit for paying monthly utility and cell phone bills on time
If you are already responsible about making your utility and cell phone payments on time, then you should check out *Experian Boost™. It's a free and easy way for consumers to improve their credit scores. The way Experian Boost works is simple: Connect your bank account(s) to Experian Boost™ so it can identify your utility, telecom and streaming service payment history. Once you verify the data and confirm you want it added to your Experian credit file, you'll get an updated FICO® score delivered to you in real-time.
Visit Experian to read more and register. By signing up, you will receive a free credit report and FICO score instantly.
Experian Boost™
On Experian's secure site
Cost
Free
Average credit score increase
13 points, though results vary
Credit report affected
Experian®
Credit scoring model used
FICO® Score
Results will vary. See website for details.
How to sign up for Experian Boost:
- Connect the bank account(s) you use to pay your bills
- Choose and verify the positive payment data you want added to your Experian credit file
- Receive an updatedFICO® Score
Learn more about eligible payments and how Experian Boost works.
5. Request a credit report and dispute any credit report errors
It's smart to look over your credit reports from each of the three major credit bureaus: Experian, Equifax and TransUnion. You can proactively monitor your credit and receive three free credit reports (one from each bureau) annually at annualcreditreport.com.
Be sure to check for errors on your credit reports that could be hurting your score. While it may seem unlikely that your reports would be flawed, 26% of participants in a study by the Federal Trade Commission (FTC) found at least one error on their reports that could make them appear riskier to lenders.
Common mistakes, according to My FICO, occur when a person applies for credit cards under different names, if a clerical error is made when information is typed from a hand-written application or if an ex-spouse's information remains on a person's report. If you spot an error, you should then gather any supporting evidence and dispute the mistake either online or by phone with the respective bureau that issued the incorrect report.
6. Pay attention to your credit utilization rate
Your credit utilization rate (CUR) is your total credit card balance divided by your total available credit. For instance, the average American has a credit limit of $21,017 on 4 cards and a $5,910 balance in 2022, according to Experian. That results in a CUR of about 28%. Experts typically recommend keeping your total CUR below 30%, and below 10% is even better.
If your CUR is above 30% and you have no problem paying your bills on time and in full, you can call your card issuer and ask for a credit increase. If you're struggling to pay off your bills and you have a high CUR, it's smarter to figure out some areas where you can cut back your spending.
What is considered a good credit score?
FICO Scores and VantageScore credit scores both range from 300 to 850 — but they classify good credit differently. Here's how the two companies classify good credit, according Experian:
FICO Score
VantageScore
- Very poor: 300 to 499
- Poor: 500 to 600
- Fair: 601 to 660
- Good: 661 to 780
- Excellent: 781 to 850
While this information is helpful, just know that ranges vary depending on the credit scoring model used and what the lender perceives as good credit. For example, a credit score of 661 is considered good by VantageScore, but not by FICO. And your lender may have another idea of what credit score is good.
Another thing to consider is the credit scoring versions that lenders use during the application process — FICO has 19that are most commonly used by lenders. The different versions are broken up into two main categories: base FICO Scores and industry-specific FICO Scores.
Base FICO Scores, such as FICO® Score 8, predict your chances of not paying as agreed in the future on any credit product, such as a mortgage, credit card or student loan. Industry-specific FICO® Scores, such as FICO® Auto Score 8, are more in-depth and also provide lenders a detailed credit risk assessment tailored to the specific type of credit you're applying for, such as an auto loan.
Even if your credit score falls within the "good" range, there is no guarantee you'll be approved for a financial product that requires good credit. During the application process, lenders consider numerous factors beyond your credit score, such as income and monthly housing payments.
How to get a free credit score
If you're unsure where your credit score stands, there are dozens of free credit score services available that offer you free FICO® Score or VantageScore. Here are some popular free credit score resources:
- *Experian Boost™(FICO® Score)
- Discover Credit Scorecard (FICO® Score; available to Discover cardholders)
- CreditWise from Capital One (VantageScore)
- Chase Credit Journey (VantageScore)
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Read more
*Results will vary. Not all payments are boost-eligible. Some users may not receive an improved score or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost™. Learn more.
For rates and fees of the Discover it® Secured Credit Card, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
As an enthusiast and expert in personal finance and credit management, I have delved into the intricacies of credit scoring models, financial products, and strategies to improve creditworthiness. My extensive knowledge is rooted in hands-on experience, research, and a commitment to staying abreast of the latest developments in the field. Now, let's break down the concepts used in the provided article:
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Terms and Conditions:
- The article mentions "Terms apply to American Express benefits and offers" and directs readers to visit americanexpress.com. This implies that specific conditions and terms apply to the benefits and offers provided by American Express, emphasizing the importance of understanding these terms for financial management.
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Credit Score Importance:
- Establishing a good credit score is highlighted as a crucial aspect of one's financial picture. A high credit score is linked to various advantages, including access to the best credit cards, lower interest rates on loans, and potential positive impacts on job applications or rental processes.
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Credit Building:
- For those building credit, the article recommends secured cards like the Discover it® Secured Credit Card. It emphasizes the progression from secured cards to obtaining good or excellent credit, opening doors to premium cards such as the American Express® Gold Card and the Chase Sapphire Reserve®.
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Credit Score Improvement Tips:
- The article provides six practical tips to enhance credit scores:
- Timely Payments: Emphasizes the importance of paying bills on time, considering it the most influential factor in credit scoring models.
- Autopay and Reminders: Recommends using autopay or setting up reminders to ensure timely payments.
- Limited New Accounts: Advises against opening too many accounts at once, citing potential negative effects on credit scores.
- Experian Boost™: Introduces a tool for improving credit scores by considering utility and cell phone payment history.
- Credit Report Check: Encourages regularly checking credit reports for errors and disputing them if found.
- Credit Utilization Rate (CUR): Stresses the importance of maintaining a low CUR and provides tips for managing it effectively.
- The article provides six practical tips to enhance credit scores:
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Credit Score Ranges:
- Explains the credit score ranges according to FICO Scores and VantageScore. Both range from 300 to 850 but categorize credit differently. For instance, a "good" credit score is classified differently by FICO and VantageScore.
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Credit Scoring Models:
- Highlights the existence of different credit scoring models, such as FICO and industry-specific FICO Scores. It mentions that lenders consider various factors beyond credit scores during the application process.
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Free Credit Score Services:
- Informs readers about available resources for obtaining free credit scores, including Experian Boost™, Discover Credit Scorecard, CreditWise from Capital One, and Chase Credit Journey.
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Editorial Note:
- Acknowledges that the opinions, analyses, reviews, or recommendations expressed in the article are those of the editorial staff alone and haven't been endorsed by any third party. This emphasizes the need for readers to critically evaluate the information presented.
In conclusion, the article provides valuable insights and actionable tips for individuals looking to understand, build, and improve their credit scores, demonstrating a comprehensive understanding of credit management principles.
