Experian, TransUnion and Equifax now offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com.
The cost to borrow went up in 2023, which means paying a higher interest rate on credit cards, personal loans and mortgages. Fortunately, taking steps to improve your credit can help you lower the cost of borrowing.
Good credit means having a FICO® Score☉ of 670 or higher. The higher your score, the more access you'll have to the most favorable, least expensive loan and credit card options. And good credit can help you in other ways—like by making it easier to rent an apartment, for example. If you're ready to commit to optimizing your credit in 2024, here are 24 ways to do it.
1. Put Holiday Windfalls Toward Debt
If you're carrying balances that you've been having a difficult time paying off, you could use any windfalls that you receive this season to take a chunk out of your debt. Holiday bonuses and cash gifts from loved ones can be the gifts that keeps on giving—if you use that cash to pay off high-interest debts.
2. Set Up Automatic Bill Payments
The best way to avoid missing a monthly loan or credit card payment is to put your bills on autopay. Make sure you have enough money in your checking account to cover each bill to avoid an overdraft. When you know you won't have to deal with a sudden score dip after a forgotten bill, you can focus on other ways to improve credit.
3. Pay Down Balances
The second most crucial component in your credit score is your credit utilization, and primarily how much revolving debt you're carrying compared with your total available credit. Make it a goal to reduce any high-interest credit card debt first, since that likely costs you more money in interest than, say, an auto loan or federal student loan does.
Decreasing your credit card balances also shows potential lenders that you're responsible with credit. Experts suggest keeping your credit utilization below 30% of your credit limit at all times; those with the highest credit scores usually have a rate in the single digits.
4. Handle Debt in Collections
If you currently have an unpaid debt that's gone to collections, consider negotiating it down or disputing the debt if you think it's an error. A debt in collections is likely more than three months past due, and either the original creditor or a debt collector may be contacting you very frequently to get its payment.
You have the right to request the debt collector stop contacting you, but it's in your best interest to deal with the debt: You may pay off the debt in full or work out a negotiated settlement with the lender. Ignoring the debt could mean wrecked credit and potentially a lawsuit, eventually leading to garnished wages or a lien against your property.
5. Get a Credit-Builder Loan
If you're focused on building credit from scratch or recovering after a hit to your score, a credit-builder loan from a credit union could help. You'll make fixed payments for six to 24 months, and your money will sit in a savings account you'll be able to access at the end of the loan term. In the meantime, the lender will report your on-time payments to the credit bureaus, which could strengthen your score.
6. Seek Out a Secured Credit Card
Another option for building credit is to get a secured credit card. It requires a cash deposit, typically around $200, which becomes your credit limit (you may be able to provide a larger deposit for a higher credit line). You can then use the credit card as you would any other, and the deposit protects the issuer from the possibility that you won't pay off your balance. If you use a secured card responsibly, your card issuer could upgrade you to a traditional unsecured card in the future.
7. Join an Account as an Authorized User
You can also improve credit by joining a trusted family member's or friend's credit card account as an authorized user. You'll be able to use the card to make purchases, and the card's payment history will show up on your credit report. That makes it crucial to pick someone whose credit you will benefit from. Work with the primary cardholder to pay them for your purchases, as they'll be ultimately responsible for any balance on the card.
8. Dispute Credit Report Inaccuracies
You can get a free credit report from each of the three main credit bureaus at AnnualCreditReport.com. Check them each carefully. You have a right to file a dispute if you find something on your report you believe shouldn't be there, such as an incorrectly reported late payment. You can also report the problem to the appropriate loan or credit card issuer, which may then update the information with the bureaus. Fixing any issues could give your credit scores a lift.
9. Get Credit for Monthly Bill Payments
Experian Boost®ø lets you add eligible on-time phone, utility and streaming payments to your credit report, which may cause your FICO® Score to rise. It's free, but it will only affect your Experian credit report and scores. The average Experian Boost user who sees a credit score increase improves their credit by 13 points.
10. Keep Old Accounts Open
Even if you no longer use an old credit card, it's typically best to keep the account open. That's because your credit scores benefit from a long credit history and a high total credit limit. Closing established accounts will shorten the average age of your accounts and lower your total credit limit.
It will take years before an account closed in good standing drops off your credit report, but the effects on your credit utilization rate are immediate. If a credit card comes with a high annual fee you can't afford, closing the account could be a good option—or ask your issuer to downgrade the card to a no-fee version if possible.
11. Limit New Lines of Credit
When you apply for a new credit card or loan, a hard inquiry will appear on your credit report, possibly leading to a brief dip in your score. Plan to apply only for the credit you truly need, after you've done enough research to understand which accounts you'll likely qualify for—and avoid new loans you may have difficulty paying—so you can help your credit improve.
12. Apply for Loans Within a Short Time Period
Lots of hard inquiries in a short time could be an indication to lenders that you're searching for lines of credit you won't be able to pay. Smart borrowers, though, will apply for a few loans of the same type—such as a mortgage, car or personal loan—to compare rates. For that reason, credit scorers treat multiple hard inquiries of the same loan type made around the same time as one, reducing the negative effects on your credit score. So try to submit applications within a short time frame, ideally two weeks. Keep in mind, though, that the scoring models don't offer this same allowance for credit card applications; all of these will count individually regardless of when you submit them.
13. Pay Off Credit Card Balances Every Month
In addition to lowering existing debt balances, minimize ongoing debt by making it a goal to pay off your credit cards each month. Zeroing out your balance each statement period keeps your credit utilization low, which is one of the best ways to strengthen credit. You'll also avoid incurring interest charges.
14. Track Your Credit Score
When you monitor your credit score, you can intervene quickly if it drops. You can address factors that influence your score, such as high balances, late payments or too many recent hard inquiries. There are many ways to check and monitor your credit score for free, including through your current credit card issuer or bank, or through Experian.
15. Protect Your Personal Information to Avoid Fraud
Your credit can be affected by identity theft if fraudsters access your personal information to open accounts in your name. To help keep your data safe, use a password manager to create and store unique passwords and avoid making financial transactions on public Wi-Fi networks, which could be vulnerable to hackers.
16. Responsibly Add to Your Credit Mix
Lenders look for a mix of accounts in your credit file to show that you can manage multiple types of credit. These include installment loans, for which you pay a fixed amount per month, and revolving credit, which comes with a limit you can charge up to (as is the case with credit cards and home equity lines of credit).
If you only have one type of credit in your file, adding something different could improve your credit mix. But while credit mix accounts for 10% of your FICO® Score, you shouldn't apply for new credit accounts simply to improve your score. That could put you at risk of taking on debt you can't repay.
17. Create a Budget
To help pay off debt and keep your spending in check long term—especially if the chaos of the past few years affected your finances—take time in 2024 to make a budget. This process will offer clarity on the amount you're earning and how much you can safely spend on discretionary items. You'll then be more likely to make smart choices when you're tempted to use a credit card, and you can prioritize limiting your credit utilization.
18. Work With a Nonprofit Credit Counseling Agency
If you feel unsure about how to set up a budget or start attacking debt, a certified credit counselor at a nonprofit agency can provide a free initial consultation to discuss first steps. Credit counselors also offer debt management plans, which can help some borrowers pay down overwhelming debt.
19. Avoid Credit Repair Scams
Some for-profit companies claim to be able to remove negative information from your credit report for a fee. But the truth is that no company can legally erase information from your file if it's accurate. Avoid spending money on credit repair and take tried-and-true steps to improve your score instead, like lowering debt balances and paying your bills on time.
20. Add Rent Payments to Your Credit Report
If you regularly pay rent on time, add those payments to your credit report to boost the amount of positive information reported to the credit bureaus. You can do so by signing up with a service such as Experian Boost, which adds eligible rent payments to your Experian credit report for free.
21. Get a Loan With the Help of a Cosigner
Making on-time payments toward an installment loan, similar to making timely payments on a credit card, helps build credit history. Besides using a credit-builder loan, getting a traditional one such as a car loan can add positive information to your credit report and improve your credit mix.
If you can't qualify for a loan on your own, a cosigner can help—but make sure the cosigner knows what they are getting into. If you can't afford to repay the loan, it becomes their responsibility. Also, as always, only seek out a loan if you really need it, not simply to improve credit. Potentially boosting your score should be an added bonus or motivation, not the central reason.
22. Ask for Credit Line Increases
Increasing the credit limit on your credit card—while maintaining the same amount of spending—lowers your credit utilization rate, which can improve your credit score. Some credit card issuers may automatically increase your line after you've used the card actively and responsibly for a certain period of time. But in other cases, it may be worth it to request a credit limit increase.
Your issuer may pull your credit when deciding whether to grant you an increase, which could temporarily lower your score by a few points, but the long-term benefit of a higher limit could be worth it. Just be sure you don't run up the balance on your card, or your score will likely suffer.
23. Use Your Tax Refund to Help Your Score
Tax season is just around the corner, so this is a New Year's resolution you can set now and put into action once you get your refund. Consider earmarking your tax refund to help you pay off debt and improve your score.
For example, you could put your full refund toward a high-interest balance you're carrying. Or, you could put that money toward the deposit on a secured credit to help you get started establishing a credit history.
24. Have Patience
Improving credit isn't an immediate process. An excellent credit score is most often the result of years of conscientious financial behavior. While some strategies will let you see small improvements quickly, joining the ranks of those with the highest credit scores will take time. If 2023 brought with it financial stress or hits to your credit, just commit to doing your best in 2024—and try to avoid moves that could jeopardize your credit score.
Insights, advice, suggestions, feedback and comments from experts
Experian, TransUnion, and Equifax now offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com. This is a valuable resource for individuals to monitor their credit and identify any potential issues or inaccuracies in their credit reports [[1]].
The cost to borrow increased in 2023, resulting in higher interest rates on credit cards, personal loans, and mortgages. This means that borrowers may have to pay more in interest charges over the life of their loans. However, there are steps that individuals can take to improve their credit and potentially lower the cost of borrowing [[1]].
Having good credit is important when it comes to accessing favorable loan and credit card options. A FICO® Score of 670 or higher is generally considered good credit. The higher the credit score, the more access individuals will have to the most favorable and least expensive loan and credit card options [[1]].
In addition to obtaining better loan and credit card terms, having good credit can also make it easier to rent an apartment or secure other types of financing. Landlords and lenders often consider an individual's credit history and score when making decisions about renting or lending [[1]].
Now let's go through the 24 ways mentioned in the article to improve credit:
1. Put Holiday Windfalls Toward Debt
If you receive windfalls such as holiday bonuses or cash gifts, consider using that money to pay off high-interest debts. This can help reduce your overall debt burden and potentially save money on interest charges [[1]].
2. Set Up Automatic Bill Payments
To avoid missing monthly loan or credit card payments, consider setting up automatic bill payments. This ensures that your bills are paid on time and helps you avoid any negative impact on your credit score due to missed payments [[1]].
3. Pay Down Balances
Reducing your credit card balances can have a positive impact on your credit score. Aim to pay off high-interest credit card debt first, as it often costs more in interest charges compared to other types of debt. Keeping your credit utilization below 30% of your credit limit is generally recommended for maintaining a good credit score [[1]].
4. Handle Debt in Collections
If you have unpaid debts that have gone to collections, it's important to address them. Consider negotiating the debt or disputing it if you believe there is an error. Ignoring the debt could lead to negative consequences such as damaged credit or legal action [[1]].
5. Get a Credit-Builder Loan
For individuals looking to build or rebuild credit, a credit-builder loan from a credit union can be helpful. These loans require fixed payments over a certain period, and timely payments are reported to the credit bureaus, potentially improving your credit score [[1]].
6. Seek Out a Secured Credit Card
Another option for building credit is to get a secured credit card. With a secured card, you provide a cash deposit that becomes your credit limit. Responsible use of a secured card can help establish a positive credit history and may lead to an upgrade to an unsecured card in the future [[1]].
7. Join an Account as an Authorized User
Becoming an authorized user on someone else's credit card account can help improve your credit history. The primary cardholder's payment history will be reflected on your credit report. It's important to choose someone with good credit and work out an arrangement for reimbursing them for any charges made on the card [[1]].
8. Dispute Credit Report Inaccuracies
Review your credit reports from the three main credit bureaus and file a dispute if you find any inaccuracies. You have the right to request corrections to your credit report, which can positively impact your credit scores [[1]].
9. Get Credit for Monthly Bill Payments
Experian Boost® allows you to add eligible on-time phone, utility, and streaming payments to your credit report. This can potentially increase your FICO® Score and improve your credit history. Experian Boost is free and only affects your Experian credit report and scores [[1]].
10. Keep Old Accounts Open
Keeping old credit card accounts open, even if you no longer use them, can benefit your credit scores. This is because a long credit history and a high total credit limit are factors that contribute to a good credit score. However, if a credit card has a high annual fee that you can't afford, closing the account may be a viable option [[1]].
11. Limit New Lines of Credit
Applying for new credit cards or loans can result in hard inquiries on your credit report, which may temporarily lower your credit score. It's important to apply only for the credit you truly need and to research which accounts you are likely to qualify for. Avoid taking on new loans that you may have difficulty repaying, as this can negatively impact your credit [[1]].
12. Apply for Loans Within a Short Time Period
When applying for loans of the same type, such as a mortgage or car loan, multiple hard inquiries made within a short time frame are typically treated as one inquiry. This reduces the negative impact on your credit score. However, this allowance does not apply to credit card applications, as each application is counted individually [[1]].
13. Pay Off Credit Card Balances Every Month
In addition to reducing existing debt balances, it's beneficial to pay off credit card balances in full each month. This helps keep your credit utilization low and avoids incurring interest charges [[1]].
14. Track Your Credit Score
Monitoring your credit score allows you to quickly address any drops and take steps to improve your score. There are various ways to check and monitor your credit score for free, including through your credit card issuer, bank, or through Experian [[1]].
15. Protect Your Personal Information to Avoid Fraud
Protecting your personal information is crucial to avoid identity theft and potential negative impacts on your credit. Use a password manager to create and store unique passwords, and avoid making financial transactions on public Wi-Fi networks, which can be vulnerable to hackers [[1]].
16. Responsibly Add to Your Credit Mix
Having a mix of different types of credit accounts, such as installment loans and revolving credit, can positively impact your credit score. However, it's important to only take on new credit accounts if necessary and to avoid taking on debt that you can't repay [[1]].
17. Create a Budget
Creating a budget can help you pay off debt and manage your spending effectively. By understanding your income and expenses, you can make informed decisions and prioritize limiting your credit utilization. This can contribute to improving your credit over time [[1]].
18. Work With a Nonprofit Credit Counseling Agency
If you need assistance with budgeting or managing overwhelming debt, consider reaching out to a nonprofit credit counseling agency. They can provide free initial consultations and offer debt management plans to help you pay down your debt [[1]].
19. Avoid Credit Repair Scams
Be cautious of for-profit companies that claim to be able to remove negative information from your credit report for a fee. Legally, accurate information cannot be erased from your credit report. Instead, focus on proven strategies to improve your credit, such as reducing debt balances and making timely payments [[1]].
20. Add Rent Payments to Your Credit Report
If you consistently pay rent on time, consider adding those payments to your credit report. Services like Experian Boost can help add eligible rent payments to your credit history, potentially boosting your credit profile [[1]].
21. Get a Loan With the Help of a Cosigner
Making on-time payments toward an installment loan, such as a car loan, can help build credit history. If you can't qualify for a loan on your own, a cosigner can assist you. However, it's important to communicate with the cosigner and ensure that you can afford to repay the loan, as they will be responsible if you default [[1]].
22. Ask for Credit Line Increases
Requesting a credit limit increase on your credit card can lower your credit utilization rate, which can positively impact your credit score. Some credit card issuers may automatically increase your credit limit over time, but it may be worth requesting an increase if it hasn't happened automatically [[1]].
23. Use Your Tax Refund to Help Your Score
Consider using your tax refund to pay off debt or make a deposit on a secured credit card. This can help reduce your overall debt burden and establish a positive credit history [[1]].
24. Have Patience
Improving your credit takes time and consistent effort. While some strategies may yield quick improvements, achieving an excellent credit score typically requires long-term financial responsibility. Avoid actions that could harm your credit score and commit to making smart financial decisions in 2024 [[1]].
Remember, these are general tips and strategies for improving credit. It's important to assess your own financial situation and consult with a financial advisor or credit counselor for personalized advice.
