10 Tips To Improve Your Credit Score

It's true: your credit score is important. Having a high credit score gives you a ton of perks like better credit cards, lower interest rates, and even better insurance rates. Many people are looking at your financial responsibility (in the form of your credit score) these days. Employers, apartments, and mortgage companies are all looking at your credit score to determine your financial worthiness.

For a long time, I just let my credit score do what it wanted. I mean, it was never 300 bad, but it was hovering in the high 500s-low 600s for a while. In 2019, I decided to start taking my credit seriously. At first, just for my own wellbeing, but then I decided that 2022 would be the year of homeownership for me. Now I have an even larger reason to improve my credit score.

Today I wanted to share ten tips to help you improve your credit score, no matter where your credit score is right now.

1. Understand Where Your Credit Stands Today

First and foremost, to improve your credit, you need to understand where it stands today. I use Experian to get daily credit reports. You can also get your free credit report or see if one of your credit cards gives you monthly credit reports (many of them do.)

Ensure that you are looking at a FICO credit score, not any ones like CreditWise or VantageScore. These scores can give you a lot of boosts to your confidence, but creditors don't use these numbers. Creditors won't see your higher VantageScore, so you need to know your FICO score so you can prepare for actual conversations with creditors.

Take a look at where your credit stands today and note any:

• Student loans and their balances.
• Collections accounts and their balances.
• Revolving debt and the balances you owe on them.

We will walk through many of these accounts today, and it's great when you know where you stand on those accounts from the beginning.

2. Pay Off Collections Accounts

One of the first things I encourage you to do is pay off your collections accounts. Some people will tell you to let them age off your account. That's something you can do if you aren't cleaning up your credit for any reason in particular. Waiting seven years for the accounts to fall off wasn't really an option for me. I want a house in 2022. Waiting for tradelines to fall off would have meant neglecting my dream until 2023-2024. One to two years isn't a huge time difference, but it will feel pretty nice if I can have a house before I turn 30.

Make Sure Paying Them Off Removes The Credit Tradeline

Before you put a ton of energy into paying off collections accounts, do some digging. Will paying the account off remove the tradeline? Most debt collection agencies will remove the tradeline because they do it to get money. If you are dealing with the original creditor, they might not be as likely to remove the tradeline.

For example, I still have a couple of late payment tradelines from Synchrony Bank and Barclays Bank. Those tradelines likely won't fall off until 2023 and 2024, seven years after they closed. I called, and those companies don't remove tradelines, even though both of those debts have been settled with the company or their debt buyers.

Try To Get Them Settled For Less Than If Possible

If the debt collections agency is willing to hear your settlement, try your best to get these accounts settled for less than you owed. Most of these debt collection agencies are buying the debt for far less than what the original creditor was owed. For example, a $1,000 debt might sell for a fraction of the price. If the debt collector can collect what they paid plus a little extra, there's no reason why they shouldn't take the deal. Ask if there are any settlement options before you agree to the full price.

Be Sure To Get A Letter Stating That You Are Finished Paying Off The Account

After you've paid off your debt, be sure to get it in writing. You'll want to have this letter on hand in case the debt collector tries to pull any tricks later on after you've already paid them.

Check In A Month Or So To Ensure The Tradeline Was Removed

If you are actively getting items removed from your credit report, you'll want to check in on your credit often. About a month or so after you've paid your last debt collection payment, take a look at your credit report. It will likely take a bit of a hike after you've paid off your debt (unless the debt you paid off was your longest opened account.)

3. Pay Down Revolving Credit

After you've paid off collections accounts, I would go to paying down any large revolving debt on your account. Do you have a credit card with a lot of money on it? Pay it down so that your credit utilization rate goes down. You want to keep credit utilization around 30% whenever possible. So, go through your credit cards and pay down as much as you can.

4. Ask For Credit Increases On Current Lines

If you have credit cards open right now, ask for credit increases on those lines. Don't ask for credit increases to spend more money. Ask for the credit increases and then leave that money alone (or pay off things as soon as you spend them.) This will drive your credit utilization rate down and help you improve your credit score in the process if you are approved.

5. Pay Down Student Loans And Other Debts

If you're like me, a large part of your debt is student loan debt. Many of us have stopped paying student loans this year because of the pandemic and flexibility with that (while others paid down large chunks of their debt because everything went to the principal.) It doesn't matter where you fell on that spectrum.

The truth of the matter is simple: student debt plays a role in your credit score. Paying that debt down, particularly the principal, will give you a lot of wiggle room to improve your credit score.

Now, you don't need to pay it all off in a year or anything crazy like that. In fact, you'll probably want to consult with someone to make sure paying off your student loan debt doesn't reduce your credit score. Just keep making regular payments (and don't be afraid to go above the minimum amount when you can.)

6. Stop Paying Only The Minimum Payments

Minimum payments are great when you don't have a ton of spare cash, but they are designed to keep you in debt and milk money from you. If you have excess cash, always pay more than the minimum payment. You were born to do more than pay bills and die, after all. Going above and beyond, even if you can only afford $25 more, can make all the difference.

Let's say you had a debt of $1,000 at 25% interest. The minimum payment is $25. Look at this table to understand how paying more than the minimum can help your debt significantly.

Note: It's hard to create a nuanced experience with general numbers based on where I calculated this. It looks as though you'll pay the same amount for $75 and $100, but that's not the case. This doesn't take into account the last monthly payment you'll make on your credit card. This payment assumes you'll keep paying $75 or $100 during that time, but you'll only pay what's left. So, these numbers do differ, and you'll pay less when paying more.

As you can see from the table above, paying more than the minimum payment of $25 cuts down on your interest and payment timeline drastically. Putting that extra $25 in made all the difference.

If you want to do this with your own debt, I encourage you to use CreditKarma's Debt Repayment Calculator. It's a fantastic resource (even though it's not as nuanced at calculating the final payments). You can enter your own balances, interest rates, and monthly payments to play around with getting rid of any interest debt.

If you want a debt calculator that shows a bit more nuance in the final payments but isn't as pretty to look at, I really liked the Debt Payoff Calculator from Calculator.net. It's not the prettiest sight, but it will give you that nuance you might be looking for when calculating how much to put toward debt.

7. Get A Side Hustle

One of the easiest ways to improve your credit score is to pay off debt, but it isn't easy to do that when you have other bills. If you are struggling to make ends meet and pay down your debt, consider getting a side hustle.

There are many types of side hustles, and some of them are more scalable than others. Right now, I freelance and own a blog in addition to my full-time job in marketing. It's tough some days, but I have huge goals to raise my credit score to 700+ and buy a house in 2022. I need the extra income coming in regularly to ensure that I can reach that goal.

You don't have to side hustle every day of your life to make an impact. Before you get into a side hustle, you'll want to define your why. You may even want to determine a limit for how long you'll work the extra shifts.

I will probably always have some side hustle because I like working on my own projects and building this community online. I don't think I'll do client work forever. For now, client work serves me as I am building up my savings to purchase a home.

Depending on your goals, you might decide to go after a more consistent side hustle like Instacart or Uber. When you work with these companies, you don't have to market your business and drum up a customer base. Inconsistent side hustles like building a blog or running your own freelance writing business can be extremely lucrative, but they can take a while to get off the ground.

If you'd like to start your own side hustle, enter your information below to grab my Side Hustle Planning Kit and start creating a profitable side hustle today.

8. Improve Your Credit Mix

Your credit mix can have a decent impact on your score. In fact, according to Experian's mobile application: “10% of your FICO Score is based on the different types of credit you have.”

Here are some examples:

• Revolving Accounts: Credit cards, store cards, etc.
• Installment Loans: Student loans, auto loans, etc.
• Real Estate: Real estate is technically an installment loan, but when you can add real estate to your portfolio, it helps.

If you've gotten student loans and credit cards, you've already started to mix things up a bit. Before you add something like a mortgage or an auto loan to your account, you should make sure that adding it will be truly beneficial. There are other things on this list that will help you way more than adding another type of loan/debt to your account.

9. Pay Your Bills On Time

Payment history has the biggest impact on your credit history. In fact, it makes up 35% of your score, according to Experian. Ensure that you pay your bills on time, every time. If you can't make a payment as arranged, don't ignore it. Companies are usually willing and able to work with you. They'd rather see a late payment than no payment at all. If you don't contact them, they won't know your situation. You need to be willing to put your adult hat on, make a call, and get the arrangements you need to pay your bills on time.

10. Let Your Accounts Age (AKA, Wait.)

I know, I know, waiting sucks. Here's the thing: length of credit makes up 15% of your FICO Score, according to Experian. If you wait and let all of your accounts age, you will begin to see small increases in your credit. If you've done everything else you can do, all you can do is wait and keep your cards active and paid down.

Bonus: Be Careful About New Credit

A store clerk has probably told you about a shiny new store card, and you've likely been mailed a million credit card solicitations. We all want to see what we can get with our credit score, but this can negatively impact your score. If you have too many hard inquiries on your account, you can start to look financially desperate to potential creditors. No one wants to lend to people who are just looking for any money they can get. As much as that sucks, for banks, this doesn't look like a safe bet. Be careful to consider the other inquiries on your account before you add something new to the pile.

Conclusion: You Can Build A Great Credit Score Over Time

You are well on your way to creating the credit score of your dreams! With some time, energy, and patience, you can build a score that will lower costs over time. Take this list one step at a time. Don't get overwhelmed by all the advice. Chances are you are already doing many of the things on this list. Keep going and raise your score in the process!