14 Ways to Improve a Bad Credit Score

Got a bad credit score? There could be several reasons why that all-important number is languishing. Maybe you've missed some payments or maxed out your credit cards. Or perhaps you're just starting out, and your short credit history is dragging you down. Or possibly the drastically altered financial landscape of the pandemic era has started to send your score southward. Whatever the reason, don't give up now: While there's no one-size-fits all solution to boost your credit score, here are some things that might help.

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Most credit repair takes time, but verifying the accuracy of your credit report is a no-brainer way to ensure you're not starting at a disadvantage. The FTC says as many as one in five Americans has an error in their report — and at least 5% of us are suffering from a lower score or higher interest rates because of it. Bottom line: Get your free report from AnnualCreditReport.com and go through it with a fine-tooth comb. See something wrong? Open a dispute with the credit bureau.

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Raising a bad credit score can seem daunting, so it's best to have a battle plan with plenty of small, achievable goals. For instance, target one particularly high credit-card balance for extra payments, or aim for a six-month streak of on-time payments. "Check your credit score quarterly. Set goals to raise your credit score 50 points at a time and to pay off your credit card monthly, and write down your goals every day," recommends Shawn Breyer of Atlanta-based Breyer Home Buyers. "Writing down your goals will keep the priority of building your credit back up at the forefront of your mind."

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You might be surprised how willing your creditors may be to work with you — after all, it's in their best interest to be paid. If you have just one late payment with extenuating circumstances (for instance, you didn't get the bill) — it doesn't hurt to ask for the payment to be forgiven, especially if your payment history is otherwise strong with that creditor. Creditors may also be willing to change your payment due dates to something that better works with your schedule, reduce your minimum payment, or even give you an interest-rate break for a limited time. Above all else, try to get things under control before any accounts are sent to collectors.

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While you're looking at your credit report, take special note of any credit accounts with late payments. Payment history affects a big chunk of your credit score, 35%, and even one delinquent account can send your credit score plummeting by 100 points, according to SmartAsset. If organization is the issue, be sure to set up automatic payments through your creditor so that making a payment is as easy as possible.

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Here's a common scenario: You're carrying a hefty credit-card balance, but you're only forking over the minimum payment every month. While you aren't hurting your credit score with late payments, your score is probably still taking a big hit because of high credit utilization. The credit bureaus don't want to see you carrying a balance of more than 30% of your credit limit on any one card, or in total across all your accounts. "If you really want to lower your score in a hurry, keep it below 10%," says Beverly Harzog, a consumer finance analyst and credit-card expert at U.S. News and World Report. "Your goal is to have a 10% ratio on each credit card, not just overall. The FICO score looks at your total ratio as well as the ratios on each individual card."

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It may seem like a bad idea to keep old, unused accounts open, but myFICO recommends against "tidying up" by closing them. While you may never use a certain credit card because it has a high interest rate, closing the account means you have less credit overall, and that can bump up your credit-utilization ratio, assuming that you have balances on other accounts. Be especially careful of closing your oldest accounts. In general, the longer they've been open, the better it is for your credit score, which also takes into account the length of your credit history.

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Here's another trick that can help lower that all-important credit-utilization ratio: Ask your credit-card company to increase your credit line. Of course, there are some caveats here. Harzog recommends against asking for an increase if you have a history of late payments. "If your payment history can't stand up to close scrutiny, you could end up with a lower credit limit," she warns. "And maybe even an APR increase if you look risky and your score is inching downward." If you do get a bump, be sure you can resist the temptation to run up your balance. Otherwise, your credit-utilization ratio — not to mention your debt load — could end up rising, not falling.

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One lesser-known factor that affects your credit is your credit mix — that's whether you have both revolving debt (credit cards, for example) and installment loans (like auto or student loans, or a mortgage). Generally, people who have and responsibly use both types of accounts are viewed as less risky, which can translate into a higher credit score. "Diversifying your credit mix can be another way to boost your credit score that people don't always consider," says Ashley Dull of CardRates.com. She recommends consolidating credit cards with a personal loan if it can help bring down your utilization rate. "Be sure to get a loan with a lower interest rate to also help pay down your debt faster," she cautions.

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If you have poor credit and it's hard to qualify for a traditional loan or credit card, payday loans may seem like an appealing option. This is one that's best to pass on, though, according to the Consumer Finance Protection Bureau. That's because these lenders — besides charging cringe-worthy interest rates that can trap borrowers in a crushing cycle of debt — don't typically report to the credit bureaus. However, if you don't repay them, the loans could wind up going to a collector, who may then report the debt and lower your score even more.

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Carrying a high balance on a high-interest rate card? A balance transfer, where you transfer some or all of the debt to a lower-rate credit card or loan, may seem like a smart move. It can be, especially if it helps you even out that all-important credit utilization, but it's not a magic bullet when it comes to your credit score. "Transferring a balance to a low-interest or zero-interest card can help a motivated person pay off the debt," says Freddie Huynh, vice president of credit risk analytics with Freedom Financial Network. "The key is to be committed to eliminating the debt, not just getting a new card and racking up more purchases." Huynh also warns against shuffling debt around too often, which can spook your creditors. "Avoid moving balances around from card to card, as this can signal creditors of potential financial problems."

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Another lesser-known way to potentially boost your credit score? See whether a friend or family member with good credit will add you as an authorized user on one of their accounts. "Cards on which you are an authorized user will report to your own credit reports, as well as those of the primary cardholder," Dull explains. "Be sure the cardholder is responsible, however, as high debt levels can hurt you both." Before you bother, double-check that the creditor reports authorized users to the credit bureaus — not all do.

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If a short credit history is negatively affecting your score, a secured credit card may help. With a secured credit card, you have to set aside a certain amount of money equal to your credit limit, say $200 or $500, in a special account. If you don't make your payments, the creditor takes that money to satisfy your debt. The main thing to remember is that secured credit cards are a temporary tool for those who can't qualify for unsecured cards. Experts tell Bankrate that it's best to pay the balance off every month to build your credit, then transfer your good habits to an unsecured card — likely with a lower interest rate and fees — when you can.

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Though not as well-known as secured credit cards, credit-builder loans offer a similar way for people to build good credit. The bank or credit union that issues the loan holds the money in a secured savings account, and the borrower makes payments over a set term. At the end of the term, the borrower gets the money — and their credit score benefits from the track record of on-time payments. "Focus on making credit-builder loan payments on time and you will see a credit boost in no time, but only do so if you're confident in your ability to meet payment deadlines," says Sacha Ferrandi, founder and principal of Source Capital Funding.

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If you're a tenant, you may as well get credit for all those on-time rent payments, but you won't if your landlord doesn't report your sterling record to the credit bureaus. "Consider using a rent reporting service to get credit for these efforts," recommends James Stefurak, founder and editor of the Invoice Factoring Guide. "We suggest using one that reports to Experian, since their FICO scores are used the most by lenders." Those services include LevelCredit, which tenants can sign up for and use, even if their landlord doesn't.

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