How to Improve Your Credit Score in 2024

Whether you’re in the market for a new home, are applying for a personal loan, or need to get a credit card, your credit score plays a major role in your financial future. Unfortunately, millions of people are dealing with low credit scores, which makes it virtually impossible for them to take the next step on their financial journey.

According to a recent study, 12.6% of Americans are dealing with credit scores that fall between 300 and 579. For perspective, FICO, the leading credit bureau in the United States, considers a “good” credit score to be 670 or higher.

There’s some good news! Hope is not lost if you’re dealing with a poor credit score. Whether you have a bankruptcy on your record or you’ve just made some poor financial decisions in the past, there are some steps you can take toward credit score improvement.

If you’re reading this and wondering, “Can I improve my credit score?”, the answer is a resounding yes. These tips can help you get on your feet and restore your purchasing power.

Review Your Credit Report

There are any number of apps that you can download to see your credit score. However, improving your credit score starts by reviewing your entire credit report.

More than 30% of Americans who requested a detailed copy of their credit report in 2022 found erroneous debts.

In some instances, these errors result from a company not giving you credit for a bill that you paid while other instances stem from fraudulent charges. In some cases, it may simply be a clerical error that’s resulted in a debt showing up that you don’t owe.

Credit reports are relatively straightforward, so you should be able to look at yours and see the name of the company that it says you owe money to and the amount. If you see something that looks out of place, find a phone number and contact them.

The representative that you speak to should be able to guide you through the process of disputing the debt.

You’re not going to bring your credit score up by hundreds of points by disputing erroneous charges, but this is one of the most important steps that you’ll take.

False items on your credit report, especially those that accrue interest, will continually lower your score, making much of what you’re trying to do to bring it up harder than it needs to be.

Make a Budget

Technically, this step is a two-parter, as making the budget is only half of the equation. You’ll also need to be ready to stick to it.

Having a budget is a crucial aspect of improving your credit score, as you’ll get a better handle on where your money is going every month. A written (or typed) budget typically uncovers a lot of financial waste, no matter how frugally you feel like you’re living.

Once you identify where you’re wasting money, you can put that money to work for you. The most effective way to improve your credit score is to pay off debt, and finding money that you’re wasting is a great first step.

On the surface, that $30 you spend each week on your morning coffee doesn’t seem like much. However, when you start paying an extra $120 per month on an outstanding debt, you can bring it down quickly, which pushes your credit score up.

Get Strategic with Credit Card Payments

Making your payments on time is crucial when figuring out how to improve your credit score, but we’ll dive into that in a moment.

When dealing with credit card debt, which affects roughly 47% of American adults, you’ll want to take a strategic approach. The first step in your strategy is to stop using those credit cards.

Running up more debt is going to have a negative effect on your credit score unless it’s something small that you can pay off immediately.

Since you’re looking to change your financial future, not using credit cards unless you’re in a state of financial emergency is the right step to take.

The amount of available credit that you’re using on any given card is known as your credit utilization rate.

For instance, if you have a $10,000 limit on your card and you have a balance of $8,000, you have an 80% credit utilization rate. Experts agree that you should keep your rate at or below 30%. The lower your utilization rate is, the better off you are.

Typically, credit card companies report to the credit bureaus at the end of every billing cycle. With this in mind, you want to get your balances as low as possible before the end of your billing cycle.

Whether this means that you make multiple payments throughout the month or you pay a large lump sum once near the end of the cycle, you need to get your balances as low as possible before credit bureaus get your updated report.

Request Higher Limits

This step should only be taken if you’re ready to be fiscally responsible. Many people have poor credit scores because they’ve spent more than they could afford to spend in the past.

Requesting a higher limit on your credit cards is a recipe for disaster if you’re going to max them out. However, if you commit to not adding to your outstanding balance, a higher limit will lower your credit utilization rate.

It's worth noting that your credit card company does not have to give you a higher limit. Most companies have minimum credit score requirements in place, so if your score is too low, they’ll likely decline your request.

If you’re fortunate enough to be granted an increase, don’t treat it as “found money.” Instead, don’t use the card at all, and work to pay it off while bringing your utilization rate down and your credit score up.

Automate Your Bills

Most of your monthly bills can be automated, which is a great way to improve your credit score. You need to make sure that you have enough money in your checking account to pay the bills when they’re due, though.

Electric companies, water companies, cell phone companies, and other entities that send you monthly bills will often work with you if you’re going to schedule monthly payments on the same day.

If you’re strapped for cash between paychecks, find out if you can space your due dates out a bit. Most companies will be willing to work with you as long as they receive the full amount that you owe them each month.

Don’t Close Anything

One of the most common mistakes that people make when trying to bring their credit score up is to close credit cards after they pay them off. Closing your credit card accounts will actually hurt your credit score, as you’ll have less available credit.

Let’s revisit the hypothetical card with the $10,000 limit. If you pay off the $8,000 and then close the account, you will no longer have $10,000 in available credit.

Ultimately, your credit report focuses on how much credit is available to you, and shutting those accounts down negatively impacts your score.

Parting Thoughts

No matter how low your credit score is, it’s not beyond repair. If you’re dealing with an exceptionally low credit score, the path to credit restoration isn’t going to be a short one.

It takes intentional decision-making that focuses on getting your score where you want it to be.

By making sound financial decisions, you can improve your credit score and set yourself up for a prosperous financial future.