Getting the best loan and credit card offers can require excellent credit. However, if you don’t know how to increase your FICO Score, you could be making costly mistakes or taking actions that won’t actually help.
What Is FICO Score and Why Is It Important?
FICO is one of the main credit scoring companies in the U.S., and most major creditors use one of FICO’s credit scores when making a lending decision. If you apply for a mortgage, auto loan, personal loan, or credit card, there’s a good chance that the creditor will check your credit report and credit score.
Creditors may have a credit-score cutoff, meaning you’ll be automatically denied for the new if your credit score isn’t above a certain point. If you do get approved, the rate and terms of your loan offer or credit card can also depend, in part, on your score.
FICO creates different types of credit scores. Its base FICO Scores, created for multiple types of lenders, range from 300 to 850. It also offers industry-specific scores for auto lenders and credit card issuers that range from 250 to 900. In either case, a poor score is often a score below 580, while having a good score means your score is in the high 600s, at least.
You won’t necessarily know which type of FICO Score a lender will use when reviewing your credit. But that’s okay because you can take similar actions to improve all of your FICO Scores. So, don’t get led astray by the myths and misconceptions—here are 10 ways to actually raise your FICO Scores:
1. Pay All Your Bills on Time
One of the most important factors in determining your FICO Scores is your payment history. Making loan and credit card payments on time can help improve your scores, while missing payments by 30 or more days can hurt your scores. Even when accounts don’t usually appear on your credit report, falling far behind and having your bills sent to collections can still hurt your credit.
If you think you might fall behind on a payment, you can try reaching out to the creditor to explain your situation and ask if they can offer any help. Sometimes, creditors may offer to lower your minimum payment or let you temporarily stop making payments without hurting your credit.
2. Use Experian Boost
Your credit scores are based solely on the information in one of your credit reports. However, common household bills like utility, mobile phone, and streaming services payments usually don’t get reported to the credit bureaus or appear in your credit history.
Using the free Experian Boost program, you can connect your bank accounts and (with your permission) add “alternative data,” like Netflix, phone, and utility payments to your Experian credit report. Only positive, on-time payments are added, and these new accounts and payments can help increase the latest versions of the FICO Scores based on your Experian report.
3. Add Alternative Data to Your Other Credit Reports
Experian Boost will only help improve your FICO Scores based on your Experian credit report. However, your FICO Scores based on either your TransUnion or Equifax credit reports won’t be impacted. Similar, alternative data-adding services available with the other bureaus, but they may cost a fee. For example, eCredable Lift ($19.95 a year) lets you add data to your TransUnion report. There are also some rent-specific reporting tools, and some landlords may cover the fees.
4. Keep Your Credit Cards Open
Closing a credit card can be a good idea if it has an annual fee, or you tend to overspend using credit. However, don’t close a card if you don’t have a good reason because you may wind up inadvertently hurting your credit scores.
There’s a myth that closing a credit card will hurt your scores because it decreases the length of your credit history. But the account can stay in your credit reports for up to 10 years and continue to impact your length of credit history the entire time. The real reason why is that closing a credit card will decrease your total available credit.
Your cards’ balances relative to their credit limits is an important scoring factor. If you maintain your balances on other cards and your available credit decreases, your “utilization rate” can increase and your score can drop.
5. Pay Down Credit Card Balances Early
Your credit utilization rate depends on the balances and credit limits that appear in your credit reports, which may not mirror your current balance. Most credit card issuers only report balances and limits once a month, around the end of each statement period. If you pay down your credit card balances before the end of your statement period, the credit card issuer may report the lower balance.
The early payment trick can help you maintain a low utilization rate and improve your credit scores as a result. It can be handy if you want to close credit cards, have low credit limits, or frequently use credit cards to earn rewards.
6. Consolidate Revolving Credit Balances
Using a loan to pay off and consolidate credit card debt can also quickly reduce your utilization rate because the utilization calculation only looks at revolving accounts (e.g., credit cards and lines of credit), not installment loans. If your score is primarily being hurt by your utilization rate, this can be one of the fastest ways to raise your FICO Scores. It can also help you save money if the consolidation loan has a lower interest rate than the credit cards.
7. Open New Credit Accounts
Experian Boost and other alternative-data programs can help add positive information to your credit reports. However, using a credit card or repaying a loan may be the most straightforward way to have your on-time payments get reported to all three bureaus.
You don’t necessarily need to borrow money or pay interest to build credit, though. If you don’t currently have any cards or loans, consider getting a credit card that doesn’t have an annual fee. Use the card for a small monthly bill and pay off the entire balance to avoid paying interest.
8. But Plan How and When to Apply
When a creditor checks your credit report after you submit an application, a record of the credit check (called a hard inquiry or hard pull) gets added to your credit report. Hard inquiries can hurt your credit a little, but you can limit the impact by being strategic.
With recent versions of the FICO Score, multiple mortgage, auto, and student loan inquiries only count as one inquiry when they happen within 45 days. Knowing this, you can shop for a loan from multiple lenders—an important part of finding the best offer—without hurting your credit. FICO doesn’t “deduplicate” inquiries from other types of applications. However, all FICO Scores ignore all hard inquiries from the previous 30 days.
9. Become an Authorized User
Another trick to quickly build your credit history is to become an authorized user on someone else’s credit card. When you do, the account’s credit history could be added to your credit reports—potentially adding months (or years) of on-time payments. However, this tactic can backfire if the primary cardholder misses a payment or has a high utilization rate.
10. Dispute Incorrect Negative Items in Your Credit Reports
Another important part of managing and improving your credit is monitoring your credit reports for errors. If there’s a negative mark that’s being incorrectly reported or an account that you didn’t open appearing on your report, you can file a dispute to get it corrected. Once the incorrectly reported negative item or account is removed, it won’t be included in the FICO Score calculations, and your score may rise as a result.
How Long Does It Take to Improve a Credit Score?
Once you learn how to increase your FICO Scores, you’ll likely want to know how long it will take. Unfortunately, there isn’t a simple answer. Credit scoring models use complex algorithms to analyze credit reports and determine scores, and the impact of an action can depend on the rest of your credit report.
For example, a missed payment isn’t “worth” a certain number of points. If you have an excellent credit score and have never missed a payment, a single late payment might lead to a large score drop. But someone who has poor credit and missed many payments might experience a smaller drop from another missed payment. After all, their lower score already indicated they’re likely to miss a payment.
Whether you’re building or repairing your credit:
- The impact of negative (also called derogatory) marks can diminish over time.
- Adding on-time payments to your credit reports can help your credit.
- Lowering your utilization rate can be one of the fastest ways to raise your FICO Scores because most FICO Scores only look at your most recently reported balances and credit limits.
- Disputing and removing erroneous negative marks can also lead to a quick score increase.
Improving your credit can also take patience as the average age of your accounts is a scoring factor and recent derogatory marks can have a large, negative impact on your score. However, if you focus on the fundamentals, you can steadily raise all of your FICO Scores over time.