How To Improve Your Credit Score: A 6 Step Plan

by Silicon Valley Blogger on 2009-06-0522

I haven’t been paying much attention to my credit score lately since I haven’t been using my credit card much, and haven’t had to apply for credit for sometime now. Well I really should be taking a closer look now! Because despite my generally good credit management habits, I’ve made some mistakes than have nicked my score — and I know I can certainly do much better. A few missed/late payments on our bill payment schedule have had a few bills land in collections, so there’s definitely room for me to clean up my record here. In reality, I *should* be looking at my credit score and reports more often!

I’m actually planning to do a few things to improve my credit score. There are a lot of tips out there to achieve this, but I thought to organize my thoughts on the subject here.

How To Improve Your Credit Score: A 6 Step Plan

1. Know where your credit stands.
According to the Federal Citizen Information Center, we can check out our credit score and report at sites like, as well as credit reporting agencies like Equifax, TransUnion, or Experian (the latter two offer proprietary/non-FICO codes).

 With some research, you’ll find that there are many sources that can provide you with your credit information (read our articles on where to get free credit scores and how to pick up an Experian credit score).

Also, read any fine print before you sign up for free credit score and report offers — most services that are advertised this way are only free for a limited time. Free trial periods expire fairly quickly, so unless you cancel your subscription to these services before the end of the promotional period, you’ll ultimately end up committing to a premium (paid) monthly subscription that gives you access to your credit information on a regular basis.

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2. Be aware of those factors affecting your score.
How many of us really know (off the tops of our heads) what dings our credit scores? I’m not as on top of this as I’d like to be, so this list serves as a good reminder for those of us who need to be better organized about our day to day money management. Here are some factors that could weigh down your score:

  • Being late on credit card bills and other consumer debt payments.
  • Being close to the limit for your credit lines.
  • Having a short credit history.
  • Applying for a bunch of credit lines during a short period of time.
  • Not having a mix or variety of installment loans (e.g. debt with fixed payments like a car payment) and revolving loans (like an unsecured credit card).
  • Declaring bankruptcy.

3. Get a good credit score.
So what’s the best credit score you should be aiming for, especially if you’re thinking of getting a mortgage anytime soon?  In the past, 700 may have been the ideal minimum score to shoot for, but experts are now saying that 740 is better.  The better your score, the less of a risk you are in the eyes of lenders, and the easier it will be for you to secure credit at lower interest rates.

4. Build credit.
If you’re looking to improve your score because you have a limited credit history, then you can do a few things to build your credit:

  • Open checking and savings accounts. With more assets, you are deemed as more financially stable by lenders. If you’re looking to park your money somewhere safe, see our list of high interest savings accounts for suggestions.
  • Keep good credit management habits: pay bills on time (missed payments stay on your report for 7 years!), avoid maxing your cards.
  • Start with a department store card (who knew that Nordstrom has a bank?) or a specialty gas credit card such as Shell. This kind of credit is easier to get.
  • Ask your bank or credit union if you qualify for a credit card with a small balance. This is how I personally built my credit history.
  • Secure loans of various types such as revolving accounts (e.g. lines of credit, credit cards) and installment loans (e.g. home loans, auto loans, etc).

5. Manage and fix your credit.
Be aware of those things that can hurt your score. Again, credit report monitoring will help you keep track of how you’re doing. If you see something inaccurate on your report, contact the credit bureaus to dispute or correct the information. As for anything else you see on your report that you don’t like? You’ll have to actively work hard to make improvements: if you haven’t already, make a budget, automate your bill payment process (to avoid having bills fall through the cracks) and gain solid financial habits.

6. Avoid credit repair scams.
Finally, it’s important to note that your credit score isn’t something you need to pay others to fix.  You may be tempted to turn to someone else to help you resolve your problem, but many of these credit repair companies simply charge you a large fee for questionable advice (promises of “magically” fixing your credit, changing your social security number to have you start afresh, or “piggybacking” on someone else’s credit are typical). Despite all the promises that credit repair companies make about cleaning up your credit, the Federal Trade Commission notes that it’s best if you oversee and manage your own credit.  Credit repair is something we can do ourselves (for free), but in those cases where you feel the need for help, you can contact the National Foundation For Credit Counseling. They may be able to provide you counseling for no or little cost.

Copyright © 2009 The Digerati Life. All Rights Reserved.

{ 22 comments… read them below or add one }

Manshu June 6, 2009 at 8:08 am

Apply for a credit card takes away a few points and I find that this point is not known to a lot of people. Everytime you go to a big retailer they will ask you to get their credit card and insist upon it. They rarely say that this is going to put a small ding on your credit score.

Silicon Valley Blogger June 6, 2009 at 8:41 am

There is indeed a short term effect on your credit score when you apply for credit. Your score usually drops a few points when an inquiry is made on your report. But from what I’ve read, the effect is short term (I’d like to know exactly how long it stays around, actually). So typical advice here is that you should avoid applying for a credit card prior to shopping for a big loan like a mortgage or car loan, in order for your credit score to be in its best light (and you can receive the most favorable rates).

DSS June 6, 2009 at 1:42 pm

Coincidentally, I just found that my credit had been adversely affected because one of my creditors lost a payment I had made and told the reporting agencies that I was over 30 days late for 2 months. My credit rating went to 640! I got it cleared up and it brought my credit back up to 760. Whew – was a chore!

Goran Web Design June 7, 2009 at 8:54 am

Getting updated on your current credit status is definitely a worthwhile idea, as it is better to fix blemishes before applying for credit, ratyher than find out you got some old unpaid bill that has come back to haunt you, and that scuppering or delaying your purchase of a new car, home, etc.

Paul June 7, 2009 at 1:41 pm

You didn’t mention it, but there are free credit score sites like

Silicon Valley Blogger June 7, 2009 at 2:10 pm

I actually devote a whole article on how to get free credit scores, which I’ve linked to in my post above. In case you missed it, here it is. Thanks for pointing it out!

escapesomewhere June 8, 2009 at 4:08 am

I can’t totally vouch for this. But I have heard if you have cards that you use frequently you can get dinged because even if you pay them off each month if they take a snapshot when you have a 2k balance or whatever credit agencies can think you have too much credit card debt. Therefore its best to overpay them so that whenever they take a snapshot your balance is between 0 and maybe -500.

Craig June 8, 2009 at 9:29 am

Another tip is to ask your credit card to raise your monthly limit. This will help you improve your FICO score a little bit, since the ratio of your limit to how much you borrow is one thing they consider.

Kristy @ Master Your Card June 8, 2009 at 9:08 pm

Here’s a couple of tips I’ve picked up in my years of lending….

1.) Inquiries will ding your score about 3-5 points, of which you will gain back in about 6 months. However, lenders look at the overall number of inquires within a 24-month period, so even if you’ve gained your points back, we still look to see where you’re applying.

2.) When you apply for credit, if you’re applying for the same thing at multiple locations (i.e. trying to get the best deal on a new or used car) then the multiple hits only count against your credit once as long as they’re within a 14-day period of time.

3.) When opening department store cards, read the fine print. If it’s not being financed from an actual bank, it’s being bankrolled by a finance company which is the equivalent of a loan shark and too many of those are worrisome to lenders.

4.) Negative information on a credit report only affects your score for four years; however it remains on your credit report for seven (unless multiple disputes result in its being removed). While lenders will look at your score, the history of your credit report is more important.

5.) Most lenders have the bar set to about 730 as the best rate. That means whether your rate is 730 or 801, you’re going to get the same best rate that the lender has to offer. Don’t beat yourself up if you’re not about 800…the only thing you get is bragging rights.

To escapesomewhere’s point, I’m not sure where you heard that, but that’s not correct. First of all, credit bureaus don’t take a snap shot of your balances. Lenders report your activity every 30 days to the credit bureaus and that’s the information that is used to determine your score. If you have a $2k balance showing on the credit report it’s because it wasn’t paid off before the lender reported it to the credit bureau at the end of the reporting period. Secondly, most credit cards won’t let you pay over, in fact, I don’t know of any that let you. Most of them will send you a check back or block you from paying more with your online accounts. The best thing to do is find out when the lender reports to the credit bureau and pay it off before then.

However, on that note, it’s not necessarily a ding on your credit to care balances. It depends on the ratio of balances to limits that you have. The credit bureaus recommend having anywhere between 25-40% of a balance to your available limit used at any one time. Any more then that and it’s starts adversely affecting your score. But, carrying a small balance does show lenders that you’re responsible and can make payments…but, it’s a double-edged sword in that carrying balances isn’t a good idea overall because you’re paying money back to the credit card companies.

Silicon Valley Blogger June 9, 2009 at 1:30 am

Awesome tips Kristy! Definitely some comprehensive information you’ve shared with us. It’s great to hear from someone who’s actually worked in the credit/lending industry for the real scoop. I’d call this, “Top 5 Tips You May Not Know About Your Credit Score”.

Amy June 10, 2009 at 8:25 pm

Great, simple post! This is definitely one of the best posts I have seen for improving your credit score. Keep it up!

Meaghan June 18, 2009 at 3:17 pm

This is a great post! Credit scores are so important when trying to get a mortgage. This is great advice.

Daji Kinabu June 18, 2009 at 5:39 pm

Thanks for the information you provided. I wish I knew about it earlier. Anyway “it is better late than never,” as they say. Thanks, once again!

Annie July 6, 2009 at 11:37 am

If you want to take advantage of major loans and purchases and you want to be attractive to lenders and get good terms, you might want to check your credit score. Your score will most likely tell your chances of getting lower interest rates and good loan terms.

Ann July 14, 2009 at 5:15 pm

In improving a credit score the very first thing that comes in my mind is you have to always pay your bills on time. This is I think the first step in developing a good reputation with your creditors. Make sure they view you as trustworthy. If you have any problems paying back your bills on time, call your creditor to arrange a payment plan. Chances are, they will appreciate the effort on your part.

check my credit July 25, 2009 at 5:59 am

Nearly all of this information applies equally to folks in the UK who need a credit check. Very useful information.

Brandon August 13, 2009 at 7:05 pm

Yes, a credit score is very important with bigger purchases, especially when you’re buying a car, or maybe signing up with a cellular contract. Paying your bills on time is a no brainer.

old car buff August 14, 2009 at 7:05 am

And don’t leave your cards idle for too long. I lost my oldest open line of credit (a Sears card that opened in 1977 when I was in college) because I hadn’t used it in four years (it was a very high interest card, but I would have a small purchase on it if I’d have known that was coming). No warning, no letter and no recourse. So that’s negatively impacted my length of credit history.

Frank Fitton August 24, 2009 at 10:58 am

There certainly are no quick fixes in attempting to raise your credit score. The most important thing is to stay on top of things and know whats in there. There very well could be errors in your credit report due to things misrepresented, even fixing these is going to take time. In order to raise it though you have to know what’s in it for sure, as well as exactly what effects it.

One area I think that is very important to address in these times. Is to make sure that you don’t lose any of your cards. Companies are canceling cards that are not being used. This could be really damaging if its one of your oldest cards. Remember this, and just use the card every once in awhile to keep it in rotation. You need that available credit in theory at least.

Andy Bedford August 25, 2009 at 11:21 am

Hi in relation to the comments about how long a credit search for a new card, loan or mortgage application etc will affect your score, here in the UK lenders will look at how many applications you make in a three month period. So if you dont apply for anything for three months you go back to clear. And another really important part of checking your report is to make sure fraudulent applications aren’t being made in your name.

Credit Dispute Advisor March 2, 2011 at 8:32 am

I found your article quite accurate except for the credit repair section. I agree with you that you do not need to hire a credit repair company to write credit dispute letters for you. You do need the right information and credit counseling firms are not the place to go. If you did not know, credit counseling firms are backed, sponsored by their lobbyists (that make laws that work against the consumers), by creditors & lenders. It is in their best interest to support counseling firms to keep the consumer paying back their creditors and make them believe credit restoration or credit repair does not work. Just so you know, it really does work and you just need to know how to be successful in doing it. Just as a credit repair agency does.

Jim S. December 20, 2011 at 5:43 pm

I was surprised to find out that I can hurt my score by following advice found on the internet. Information on the web on how to increase your score can actually reduce your score, based on some things I’ve learned. This article is a good read if you want to improve your credit rating.

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