Having a low credit score can limit your opportunities and cost you money. If you’re looking for a home to rent, a landlord can pull your credit report to see how likely you’ll be to pay your rent on time. If you’re trying to buy a home, your credit rating will impact how much you’ll pay in interest on your mortgage and if you’ll have to pay extra deposits for your utilities. Improving your credit score is definitely worth your time and effort, but moving your score upwards is going to take time, patience and planning.

What’s Your Score?

It’s going to seem obvious, but the first step to improving your credit score is to find out what your score currently is. You can do this by obtaining one free copy of your credit report from each of the three major credit reporting bureaus: TransUnion, Experian and Equifax. The Fair Credit Reporting Act entitles you to these copies, and you can access them at You can choose to pull all three of your reports at once, or you can spread them out over the year to monitor your credit rating.

Most credit tiers, including FICO, run as follows:

Excellent: 750+
Good: 700-749
Fair: 650-699
Poor: 600-649
Bad: 599 and below

Are There Errors?

Once you have your report in hand, check it carefully for errors. Start with the easiest items first, like your full name, Social Security Number, address, and birth date. Then begin checking that your accounts are being accurately reported, especially your payments. If you see any late or missed payments that you can prove you made on time, take note of these for further action. Also note any accounts or applications you don’t recognize.

If you find any errors, you’ll need to file a written dispute for each error with each of the three credit bureaus listed above. This means that if you find three errors, your file a total of nine disputes, three disputes for each bureau. Once you’ve files your dispute(s), the credit bureaus have 30 days to respond. For additional information on correcting errors on your credit report, please visit the Federal Trade Commission’s website.

What Are the Most Important Credit Score Factors?

Vice President of Communications for the National Foundation for Credit Counseling, Bruce McClary, states that 35% of a consumer’s credit score is determined by his or her payment history and 30% is determined by his or her credit utilization ratio. Lenders perceive these factors as indicating most reliably a consumer’s ability to pay back a debt. It follows then that improving these two factors will have the most impact on improving your credit score.

Payment History

A reliable predictor of future behavior is past behavior, so when a creditor wants to know if you’re going to pay your bills in the future, it makes sense they want to know your payment history. This includes your full range of bills, from your mortgage to your gym membership. It also includes whether you’ve paid your bills in full. Settling an account for less than you originally agreed or paying it off after it’s been sent to collections will negatively impact your credit score.

If you’re late with a payment or miss it entirely, contact your creditor as soon as possible to ask for leniency. The creditor may still report the payment as late or missed to the credit bureaus, but it doesn’t hurt to ask. Then be sure to bring your account current as quickly as you can, because a 30-day delinquency won’t impact your credit score as much as a 60-day delinquency will.

When you realize that late and missed payments will stay on your credit report for seven years, you may feel more motivated to call your creditor if you think you’re going to be late with a payment. The impact of late/missed payments will decline over time and can be offset by positive marks from on-time payments. You can ensure your future payments will be on time by setting up automatic payments and using calendar reminders.

Credit Utilization Ratios

McClary defines credit utilization ratios as “the combined balance of how much you owe on your credit cards compared to the total amount of credit you still have available. Your credit score takes into consideration both the individual credit utilization of each card and your overall utilization ratio.”

Although many financial experts suggest keeping your credit utilization ratio at or below 30%, McClary believes your credit score could suffer if your ratio gets above 25%. Consumers with the highest credit scores tend to keep their ratio at or below 10%.

Improve Your Credit Ratio by Paying Down Debt

The most significant way to improve your credit utilization ratio is to pay down your credit card debt. John Ulzheimer, formerly of FICO and Equifax, says it’s possible to increase your credit score by as much as 100 points if you pay off a number of maxed-out credit cards. Start with your credit card that has the highest utilization rate and work your way from there. It won’t be an easy task to complete, but the improvement to your credit score will be worth the effort.

Improve Your Credit Ratio by Raising Your Credit Limit

A simple call to your credit card provider may be enough to improve your credit utilization ratio. Be sure to ask for a credit limit increase without a “hard” credit inquiry. A hard inquiry will have a small negative impact on your score and will remain on your credit report for two years. If your provider agrees to increase your credit limit and your balance remains unchanged, your ratio will automatically improve.

Improve Your Credit Ratio by Making Multiple Payments

Even if you pay your credit card balance off at the end of the month, your credit score can suffer if your credit utilization ratio surpasses the 30% mark during the billing cycle. To keep your credit ratio, and your credit score, as healthy as possible, make multiple payments during the month. Utilizing automatic payments and calendar reminders are a great way to stay on top of your credit card payments and keep your credit utilization ratio as low as possible.

What Determines the Remaining 35%?

If your payment history and credit utilization ratio make up 65% of your credit score, what determines the remaining 35%? According to McClary, the remainder of your credit score is determined by the length of your credit history (15%), new credit inquiries (10%), and your credit mix (10%).

Length of Credit History

Although you may be tempted to do so, don’t cancel credit cards you no longer use. In addition to helping your credit utilization ratio, they also help establish your credit history. Follow the same philosophy when it comes to having paid accounts removed from your credit reports after the seven-year mark, especially if they show you paid your account on time and in full. It’s “like making straight A’s in high school and trying to expunge the record 20 years later,” Ulzheimer says. “You never want that stuff to come off your history.”

If you have a trusted friend or relative with a long and positive credit history, you could ask to become an authorized user on his or her credit card. This involves risks on both sides, so don’t be surprised if the answer is “no.” He or she would be putting their own credit rating at stake, as would you, because your credit ratings would be tied to each other’s payment practices, both positive and negative.

New Credit Inquiries

Avoid the temptation to apply for unnecessary lines of credit, even if it includes a discount when shopping at your favorite retailor. The hard credit inquiry will cause a small negative impact that will stay on your credit report for two years, regardless of whether you’re approved for the card.

When buying a big-ticket item like a home or vehicle that will require financing, restrict your rate shopping to a limited time. Scoring formulas take into account that you’ll probably be submitting several applications but only taking out a single loan. The FICO score ignores such inquires made 30 days before scoring. Any found older than 30 days will be counted as one inquiry if they were made within a typical shopping period. A shopping period can be considered between 14 and 45 days, depending on the form of scoring software used.

Credit Mix

Your credit mix is determined by the combination of revolving credit and installments loans you have. A credit card is an example of revolving credit, and a mortgage is an example of an installment loan. Although lenders like to see a variety of accounts, it’s not advisable to take out a loan just to improve your credit mix.

Improving Your Credit Score Is a Marathon

Improving your credit score is going to take time and plenty of patience, especially if you’re starting out closer to the bottom of the scale. But the good news is that it’s very possible to improve your credit score, especially if you take advantage of handy tools like automatic payments and calendar reminders. Focus your efforts on the two most significant factors, your payment history and credit utilization ratio, and your number will start moving in the right direction.