Top 5 Ways to Improve Your Credit Score That Work Long Term

Why don’t quick tricks raise your credit score for good?

The internet is full of tips on how to raise your credit score in a month. Some of them really do work fast. We covered them in our article how to raise your credit score fast. But if your habits stay the same, your score slides back in a couple of months.

A credit score (sometimes called a credit rating) is a number from 300 to 850. It shows the bank how you handle debt. The bank uses it to decide whether you will pay the money back on time. The best answer is not one nice-looking month, but a year of steady history with no surprises. Five habits create that kind of history.

Way 1: never pay late, with autopay for the minimum

Payment history is the heaviest part of your score. In FICO, the most popular scoring formula, it counts for about 35%. That is why one late payment can wipe out months of careful payments. And the cleaner your history was, the more it hurts.

The bureaus see a late payment when it is a full month late: 30 days or more. Being a few days late usually costs you a late fee from the bank, but it does not go into your history. Still, don’t count on that as extra time.

The best protection against forgetting is autopay. You give the bank permission once to take money from your account, and it pays on the right day by itself. Set it for at least the minimum payment, the smallest amount the bank asks you to pay for the month. Then your payment goes out on time even if you get sick, travel or simply forget.

1. Open the app for every bank where you have a card or a loan.
2. Find the Autopay option in the settings. Choose the minimum payment or the full statement balance (the statement is your monthly card summary).
3. Make sure the account the payments come from always has a cushion, at least enough to cover all the minimum payments.
4. Turn on a reminder 3–5 days before the due date.
5. When you have extra money, pay more than the minimum manually.

Way 2: keep your utilization low every month

Utilization is how much of your card limits you are using. A card with a $3,000 limit and a $900 balance means 30% utilization. It is part of the “amounts owed” category, which counts for about 30% of your score.

Under 30% of your limit is fine, and under 10% is excellent. Watch each card separately too: one maxed-out card pulls your score down even if the overall number looks decent.

Excalibur Credit Solutions managers often see reports where every payment is on time, but the cards stay more than half used for months. To a bank, that is a sign: this person lives on borrowed money. And the score doesn’t move. That is why you need a monthly budget, not a one-time payoff of your cards.

Set yourself a spending cap: for example, no more than $300 a month on a card with a $3,000 limit. Anything above that goes on your debit card. If your balance is already big, pay it down with a plan: first get your overall utilization below 30%, then below 10%.

Way 3: don’t close old cards, and don’t open what you don’t need

The length of your credit history is about 15% of your score. Both the age of your oldest account and the average age of all your accounts count. As long as an old card stays open, it works for you with no effort at all.

That is why even your first card with a small limit is valuable. So the bank doesn’t close it for not being used, put a small charge on it every couple of months, like a subscription, and pay it off right away.

The second half of the rule is not to open what you don’t need. After every credit application, a hard inquiry shows up on your report. It is a record that the bank checked your history before giving you an answer. One such mark usually takes off a few points. It stays on your report for 2 years, but FICO only counts the last 12 months. On top of that, a new account lowers the average age of your accounts. And a bank reads five applications in six months like this: this person needs money urgently.

Before any application, ask yourself four questions:

• Do I need this credit now, or just “in case”?
• Can I check my chances first without a hard inquiry, through pre-qualification, a preliminary check on the bank’s website?
• Have I applied for anything else in the last six months?
• Do I have a big goal in the next year, like a car loan, refinancing or renting a place?

Way 4: the right credit mix

Types of credit, or credit mix, make up about 10% of your score. The formula likes to see that you can handle two types of debt. The first is credit cards (revolving): you spend, pay it off and spend again within your limit. The second is a loan with the same payment every month (installment): a car loan, a student loan or a personal loan.

If you already have a card and a car loan, your mix is fine. Taking out a loan just for your score is a bad idea: it means a new application, new debt and interest.

The exception is when you only have cards. Then take a look at a credit builder loan. It works the other way around: you pay first and get the money at the end. Some banks and credit unions offer it (a credit union is almost like a bank, but it is owned by its own customers). The loan amount, usually a few hundred dollars, is put into a separate account. You pay every month, and the bank reports it to the bureaus. At the end of the term, the money is yours.

Way 5: check your report once a month and dispute errors

Your credit report is your file at the credit bureaus. It can have bank errors, other people’s accounts and debts that were closed long ago but still show as open. All of this pulls your score down, and you won’t know about it until you look.

The easiest way is to open all three bureau reports at once in SmartCredit, IdentityIQ or MyScoreIQ. These are credit monitoring services. Checking your own report is a soft inquiry, and it does not take off any points. Once a month, give your report 15–20 minutes. Our guide reviewing your report in 20 minutes shows what to look at.

Services that show all three bureaus at once

What to look for in your report:

• New accounts you did not open.
• Hard inquiries from banks you did not apply to.
• Late payments where you paid on time.
• Wrong balances and limits.
• Late payments and collections (debts handed over to collection agencies) older than 7 years. They should already be gone.

Found an error? You have the right to dispute it yourself, and it is free. If you would rather not spend time on letters, Excalibur Credit Solutions managers will handle the dispute for you. Only dispute inaccurate, outdated or unverified entries. A dispute will not fix an accurate late payment.

The good news is that time works for you: almost all negative items stay for up to 7 years, but they count less each year. A late payment from three years ago matters less than one from last year, especially if everything has been clean since.

A 12-month plan: how to raise your credit score step by step

A score of 620 is in the “fair” range (580–669) and below the US average, but it is not a life sentence: there are no collections, and the car loan is being paid. Natalya does not need new credit. She needs order.

No one can predict how many points Natalya’s score will go up. Results vary. But it is clear what her report will look like in a year: 12 months with no late payments, low balances and not a single extra application. That is exactly the picture banks want to see before refinancing.

What does this mean in dollars? Hypothetically: the car loan balance is $20,000 over 4 years. At 13% a year, the payment is about $537 a month. If, with a better score, the bank offers, say, 8%, the payment will be about $488. The difference is about $49 a month, and more than $2,300 over the whole loan. It is similar with renting: many landlords check your credit score, and if it is low, they ask for a bigger deposit or a co-signer.

When should you bring in a specialist?

You can build the five habits above on your own. You need a specialist when your report is confusing and it is not clear where to start:

• Your report has entries you don’t recognize, or the three bureaus show different things.
• There are collections or charge-offs (debts the bank wrote off as uncollectible), and it is not clear which of them are reported accurately.
• You have been paying carefully for six months to a year, but your score barely moves.
• You have a big goal ahead, like refinancing, renting or business funding, and you need a plan for a specific date.

An Excalibur Credit Solutions manager first studies all three reports from start to finish. Then the manager puts the steps in the right order: what to dispute, what to leave to age, which debt to pay off first. We review your report for free. For people who need a detailed plan for a big goal, one of the company’s owners does a personal case review.