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How to Increase Your Credit Score by 100 Points in 7 Steps

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Your credit score is the gateway to achieving many financial goals — from qualifying for your first auto loan to applying for a mortgage. Making sure your credit score is in the best shape possible helps you get approved for the credit you need, as well as getting the best interest rates on your loans and credit cards.

So, what can you do to get a quick credit score boost? Here are seven tips that may help you increase your credit score quickly.

1. Pay down balances on revolving accounts

One of the fastest ways to boost your credit score is to reduce the amount of debt you’re carrying.

Typically, the second most important factor of your credit score is your utilization rate, which is determined by how much revolving debt you’re carrying compared to your credit limits. It’s worth 30% of your credit score — behind only payment history, which comprises 35% of your score.

Maxing out credit cards and other revolving accounts, such as a home equity line of credit, can signal to lenders that you’re in financial trouble. The quicker you adopt a debt payoff plan and reduce those balances, the more quickly your credit score will rise,

Personal finance experts typically recommend spending no more than 30% of your credit limit.

For example, on a credit card with a $1,000 credit limit, spend no more than $300 at a time. It’s important to note that utilization is calculated both for each individual account and across all your revolving accounts as a whole. Unlike revolving accounts, installment accounts such as personal, student and auto loans and mortgages, don’t impact your credit utilization rate.

2. Increase your credit limit

If you’re carrying large balances on credit accounts, a fast fix to reduce your utilization is to increase your credit limits.

This can be done either by requesting a credit limit increase on a credit card you have or applying for a new card. Either way, your overall utilization will decrease.

For example, if you’re carrying a $500 balance on a credit card with a $1,000 credit limit, that’s 50% utilization. But if you apply for a new credit card and get approved for one with a $1,000 credit limit, your overall utilization plummets to a much healthier 25%. The same principle applies if you request a credit limit increase with your existing issuer and are approved for a higher limit.

To ensure your chances of success when requesting a credit limit increase, it helps if you’ve been paying your bills on time and have been a customer for a while. Some issuers have minimum requirements for how long your account must be open before you can submit such a request — for example, with an American Express credit card, the account must be more than 60 days old.

The process for requesting a credit limit increase also depends on your specific issuer. Some will allow you to make the request online — for instance, Citi makes it easy to submit the request from the “credit card services” area of your online account. If you don’t have an option to request a higher credit limit online, you might have to call your issuer.

Another way to raise your overall credit limit is to apply for a new credit card. When you apply for a new card, know that the issuer will generate a hard inquiry, which will decrease your score by about five to 10 points. It will also reduce your average age of accounts, which is bad for your credit score because length of credit history makes up 15% of your FICO® Score. However, the benefit of increasing your overall credit limit and decreasing your utilization will likely improve your score far more than it will be harmed by those factors.

Applying for a new card almost always generates a hard inquiry (the rare exception being American Express, which may only do a soft pull if you’re an existing Amex customer). However, requesting a credit limit increase on a card you already have may or may not generate a hard inquiry depending on your issuer. Capital One is an example of an issuer that does not perform a hard pull when you request a credit limit increase. On the other hand, Chase cardholders have reported that Chase does do a hard pull when you request an increase (but not if the issuer automatically extends you a higher credit limit).

3. Dispute errors on your credit reports

Correcting inaccurate information on your credit reports could help improve your credit score — especially if that information is related to fraudulent accounts opened in your name or your credit file has been accidentally mixed up with someone else’s.

By federal law, you’re entitled to free credit reports from each of the big three consumer credit bureaus: Equifax, Experian and TransUnion. These reports can be accessed on annualcreditreport.com, which throughout the coronavirus pandemic has made your credit reports available weekly.

Review your credit reports for any errors, such as accounts that don’t belong to you or incorrect late payments.

You can dispute errors on your credit report by opening inquiries with each of the three major credit bureaus online or by writing a letter. Be prepared to provide any documents to support your claim, and don’t forget to follow up if you don’t get a response within 30 days.

4. Consolidate debt with a personal loan

Another great way to knock your credit utilization down to zero is to pay off those revolving debt accounts with proceeds from a personal loan.

To find the best rate, it’s a good idea to comparison shop before you apply. You can do this by signing up for a free LendingTree account, after which you may be matched with up to five lenders that are interested in making you offers. If approved for a loan, your new lender may disburse the funds to your existing creditors or send the funds to you directly.

After consolidating your debt, don’t fall prey to the temptation to overspend and build up new debt. For example, if you use the loan to pay off credit card debt, only use the cards for new charges that you can afford to pay off on a monthly or even weekly basis. If the temptation is too strong, consider managing your spending instead with cash, a debit card or a prepaid card.

5. Catch up on late and missed payments

With payment history accounting for 35% of your credit score, it’s the single most important factor to building a great credit score.

Typically, a lender will report a late payment to the credit bureaus after 30 days. If you pay up before 30 days, your score may not be damaged at all (though you can still be charged a late fee and assessed a penalty APR).

Once a late payment is on your credit reports, it can stay there for seven years.

However, you may be able to submit a goodwill letter to your creditor explaining the situation that caused you to miss a payment, and request that they remove the late payment from your credit reports in exchange for payment.

Just know the lender has no obligation to honor your request, but may be more likely to comply if this is your first offense or there are extenuating circumstances that led to the late payment.

6. Pay off any accounts in collections

Unpaid debts that have been sent to collections will still stay on your credit reports for seven years, but some lenders may look upon you more favorably after seeing that the accounts have been paid off. Plus, newer credit scoring models, like the following, will ignore paid collections when calculating your score:

  • FICO Score 10
  • FICO Score 9
  • VantageScore 4.0
  • VantageScore 3.0

For that reason, your score based on the above models is likely to improve after paying off debt in collections. Unfortunately, older scoring models, such as the commonly used FICO Score 8, will still consider collections accounts as a negative factor even after you’ve paid the debt off.

7. Sign up for Experian Boost

Experian Boost is a free online tool, offered by the credit bureau Experian, that may help you increase your credit score by reporting on-time payments from non-traditional accounts.

For example, you can link a bank account and allow Experian to scan your transactions, or include utility and cellphone bills, as well as Netflix payments.

This tool is aimed at helping consumers with thin credit files build credit history. After signing up for Experian Boost, users saw an average credit score increase of 12 points. Note that this is based on your FICO Score 8 generated from Experian data. Experian Boost will not impact your credit score when generated with data from the other credit bureaus, Equifax and TransUnion.

 

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