Raising Your Credit Score

March 13, 2012

Credit Report on TableIn the eyes of lenders, consumers amount to little more than a series of numbers. How high or low those number are affect the outcome of loans we apply for, deposit requirements from utility companies and landlords, limits on our credit cards, and even how much we're required to pay down (or pay in interest) to qualify for a mortgage. A low credit score can be crippling to your long-term financial health-if you don't take the appropriate steps to fix it.


Step 1: View Your Credit Report and Dispute Any Errors

Your credit score is based on information found in your credit report, so if you want to take steps to raise it, that's where you need to start. Begin by ordering your reports from all three credit bureaus and reviewing each one for accuracy. By federal law, U.S. consumers are entitled to one free credit report form each of the bureaus every year. You can order your reports from all three credit bureaus through the Annual Credit Report Request Service by calling (877) 322-8228 or view and print them online though its web site, You can also get additional reports from a service such as , or you can order from each bureau separately online or by phone:Equifaxwww.equifax.com1-800-685-1111Experianwww.experian.com888-397-3742TransUnionwww.transunion.com800-888-4213Once you receive your credit report, carefully review each section for errors and discrepancies.

Section #1: Identifying information. Look closely at the following:

Section #2: Credit accounts. After you check over identifying information move on to the section that lists the accounts you have opened and closed. Scan this section closely for the following:

If you find a number of incorrect entries, especially if they're delinquent or unpaid accounts, you could be a victim of identity theft. On the other hand, you could also be suffering from a credit bureau mix-up that accidentally merged someone else's information with yours (e.g. a family member with a similar name).

Section #3: Credit inquiries. Inquiries reveal who has asked to review your credit report. There are two types of inquiries: soft and hard. Soft inquiries are made by lenders looking to make preapproved credit offers or your own requests to see your credit history. These do not affect your credit score. Hard inquiries are the ones from lenders that resulted from you applying for credit (unsolicited credit cards, car loans, mortagages, etc.). Look for the following:

If you find any errors, add these to your list of items to dispute with the credit bureaus.

Section #4: Collections and public records. The last section of your credit report lists any collection actions and judgments that are a matter of public record-things like bankruptcies, foreclosures, garnishments, lawsuit judgments and tax liens. Here is what to look for:


Disputing Errors Credit bureaus are required by law to investigate any mistakes your bring to their attention and report back to your within 30 days. If you received your report in the mail it should have come with a form for disputing errors, otherwise you can call or visit the credit bureaus website for further instructions. Typically they ask the creditor that reported the information to check their records for errors.


If the creditor can't vouch for the accuracy of what they reported or doesn't respond, the offending item will be removed from your account. Be warned however, it may show up again in the future if the creditors fail to update their records.

Step 2: Pay Your Bills on Time-Always

If you are having problems remembering to pay your bills on time, set up automatic payment plans for your recurring bills. If you're having problems keeping up on certain payments, call your creditor and ask if you can work out a new repayment plan.

Step 3: Reduce Your Debt

Start aggressively paying down your debt with the goal of eliminating ALL of it. This may mean reprioritizing what you pay off first or even consolidating some your debts. When paying off credit cards, start with the card that carries a balance closest to the limit of the card. Resist the urge to transfer balances from one credit card to another to save on interest.

Because your credit score is affected by the gap between the available credit and the limit on the card, transferring a balance from a high-limit card to a lower-limit card may ultimately "ding" your credit score-even if it saves you a few bucks in interest.Also, avoid transferring everything to one card. For the purpose of raising your credit score, it's better to have several cards with small balances rather than one card carrying a large balance. That's because the score looks at the gap between the balance and the limit on each card, as well as on all your cards put together.Pay attention to how much you charge each month: Stay well below your credit limits. Your credit card balances (the amount you carry plus the amount you charge) should never exceed 30% of your total credit limit at any given time. If your score is already in the high 700s in 800s, that percentage drops even further. You might need to use as little as 10 % or less of your limit to increase your score.

Step 4: Don't Start Closing Accounts

Closing credit cards and other revolving accounts can actually hurt your credit score, because it reduces your total available credit and that makes your balances appear larger. That narrowing of the gap between the credit you're using and the total credit available to you is one of the things that can hurt your score.The average age of your accounts also affects your credit score (older is better) so closing accounts can make a long credit history appear shorter than it actually is.

Step 5: Apply for Credit Sparingly-If At All

Don't apply for credit you don't need. The first few credit accounts you open can help build and improve your credit history, but there comes a point when each subsequent credit application just reduces your score. Where that point is, no one really knows. Most people don't need more than 2 credit cards from major banks. To raise your credit score, get your financial house in order first, and then go apply for that car loan or mortgage refinancing.

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September 22, 2006

Keep in mind that your credit report may be tied to your spouse's. If your spouse has bad credit habits, it could affect your credit as well.

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July 9, 2005

Pay your credit card bill on time to eliminate unwanted interest payments and nasty late fees. This can really add to your bill and possibly give them an excuse to raise your interest rate.

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8 Questions

Ask a QuestionHere are the questions asked by community members. Read on to see the answers provided by the ThriftyFun community or ask a new question.

May 12, 2009

I was told that I shouldn't bother paying off my debts (other than student loans), because paying it out won't change my credit score at all. It will still be lousy, so I might as well keep my money. True?

By Jenlyn from Tonawanda, NY


May 12, 20090 found this helpful

Paying off creditors definitely raises your credit score. It lowers your debt to income ratio which is something lenders look at. It take a month or so for payoffs to show up on your credit report. Hope that helps!

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May 20, 20090 found this helpful

That will work if you don't plan on buying a car or house in the next 10+ years. It might also hinder you from getting a job, as credit scores are checked when you apply at many jobs. It could keep you from renting an apartment, buying a condo (they also check your scores), renting a car, etc.

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May 20, 20090 found this helpful

You were given bad advice. You should certainly pay off your debt, because not doing so will hurt you in the long run. However, if you've defaulted on a credit card debt and want to settle the account, be prepared to pay the agreed-upon amount immediately because otherwise you'll get a "ding" on your credit score for initiating action on a past-due account and not closing it.

Begin by concentrating on your credit card debt, which typically has the highest interest rates, and save larger amounts with lower interest rates (such as your student loans or mortgage) for long-term payoff. Search for "snowball method" of paying off debt to learn more about an easy method to begin. My husband had a poor credit report but has improved it drastically through paying off his credit cards and taking the money he spent on credit card payments each month to pay off his car. It does take a while for your credit report to update, but it's worth it.

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May 20, 20090 found this helpful

Over one third of your credit score is based upon whether you pay bills in a timely manner.It's better to make small payments you can afford than to make no payment at all. You owe the debt. Pay your bills. You'll feel better in the long run knowing you are doing the right thing.

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May 15, 2007

My husband and I would like to be able to make a budget using credit cards. We have little credit and would like to be able to someday get a loan to buy a home. How can we successfully budget our finances to be able to pay off the credit card every month?

P.S. We usually try to do the envelope budgeting.



May 16, 20070 found this helpful

To establish good credit, pay your bills on time. To keep out of debt while using credit cards, pay off the entire amount when the bill comes. It is easy to get into the habit of paying the "minimum" due, but you will soon find that you are accruing finance charges and the "minimum" due starts to grow as your balance increases. The credit card companies are out to make money--their intent is not for you to pay off the balance each month! When we were first married, we bought a washer/dryer combo on a Sears credit card. Money was tight, but we knew we could make the minimum payment each month. We paid month after month--which became year after year. By the time we had paid off the washer/dryer (we bought nothing else with that card), we had paid the original price THREE times! We certainly learned a valuable lesson!!

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By Jpcasino17 (Guest Post)
May 17, 20070 found this helpful

you can't build credit by charging something and then paying it off the next month, you need to show that you can charge and make payments, always more then the minium payment. And always on time, do not get over the limit fees or late payment fees, because that will bring up your finance charges. If you want to buy a house in the future, you can't buy it and get a loan and pay it off, you need to make payment for a very long time and the bank needs to see that you can handle a balance for a period of time, say 6 months and then pay it off and then charge something else and make payments for a period of time then pay it off. This will show good on your credit report and your credit points will go up. You also can get a small loan from a bank to make time payments to show a credit history..I'm not saying to get into credit debt, but you do need to establish credit history. I hope this information helped.

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May 17, 20070 found this helpful

Hi Jessica,
May I suggest a different approach? I am a big fan of Dave Ramsey. You might try checking out his website at and also finding out which radio station in your area carries his program. He is hugely motivational and anti-debt to create "credit scores". He has a lot of great suggestions and specific ideas on how to get home loans, how much you should borrow vs. your income, how much to put down for the best return (and interest rate) on your money. I have been listening to his program for about two years now and feel both our financial situation and our marriage are stronger for it!

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May 23, 20070 found this helpful

Hello. I had a situation recently where I was offered a credit card and didn't want to take it (this debt thing isn't one of my issues, and I don't want it to be!) but it's good to have some credit cards I was told by a loan broker, so for what it's worth, this is what she said. You open the credit cards far in advance of wanting to buy, and not too many at a time. Meaning, one or two probably. If you accept a credit card, be careful, even if you never use it or cancel it before the first due date, there may be an open and closed account on your credit anyway. Always ask once you've accepted a card, nto activated...accepted. Before you decide to dump a card, make sure you've had it at least six months, and if it's right in the beginning you might want to reconsider if it's already an account, it could impact if it's on the report, depending on how long. American Express (I loved this card because I never was tempted to carry a ballance) they told me, the broker, that American Express is the example of credit that won't help you get a house down the road.And it's the same problem if you charge and pay off each month on another card. They can't see you make payments. With AMX it's even worse, because there's no spending limit, normally. So, the way around it, I was told, is to carry a small balance, even if you pay it off every so often. Maybe just a few months then pay it off. NEVER pay only the minimum, ever. Make certain if you decide to make a payment off the time it's due, that it gets applied in the month you think it will, so you don't have no payment in May for example, becuse you paid May on the first, and someone's computer thought you meant April. Make sure that when you do carry a balance, it's less than HALF of the limit. That seems to be a reapeat theme with a lot of brokers, accountants and so forth, no more than half the limit used on any one card at any one time. Hope that helps, it's been consistant advice from my end.

I hope to buy when I'm a nurse, even something small, but not having enough credit though mine is really good what there is of it, can hurt. It's different with a house, I qualified for a new car, no down payment no income information at all at a preferred rate though my bank, yet, I can't get more than $500 limit on a credit card. I told them, it's weird, you were going to give me thirty plus thousand for a car, no questions asked...but it's different. I don't have much credit card experience, except AMX.

Talk to Fannie Mae (if that's spelled correctly you can find them on the web! :) ) but find an authority to guide you so there are no unhappy shocks later. I do know, that if there isn't something in your credit that you need, it takes months sometimes to fix that. So, starting early (as I am) is a good plan.
Good luck to you! Enjoy the house, paint it any color you want! ;)

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May 27, 20070 found this helpful

Hi Jessica!
I'd strongly encourage you and your husband to checkout Also, go to your local public library and checkout any of his books, "Total Money Makeover" or "Financial Peace". The guy makes a lot of sense and wants folks to be able to live debt free. He's not out to sell you stuff and you can work his program by reading his books.

As a REALTOR I can tell you that you don't need to rack up credit debt to qualify for a mortgage. Don't live your life bowing to the alter of the FICO Score. Lenders can perform a manual underwritng process for folks who don't have much or any kind of a credit score.

One other tid bit for you, you and your husband need to sit down and create a budget for the month, whereby you assign a spending category to each dollar you two bring into the household. Begin with your basics; food, shelter, clothing, transportation and then continue down the list. If you have some money left over set it aside for an emergency fund. Again, refer to Dave Ramsey's books or web site for help.

Please don't do credit cards! You'll become a slave to the lender. I speak from years of being enslaved. It's not worth it.

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July 8, 20070 found this helpful

About ten years ago, I swore off borrowing from credit cards. But I still wanted to use them for convenience and points. I created an Excel spreadsheet "checkbook register" that includes a second set of columns for my credit card expenditures, payments, and balance owed. In the very last column, my credit card balance owed is subtracted from my bank account balance, and that is my "available balance." I simply don't spend more than my available balance, and that way, the money to pay my credit cards in full is always there. (My credit card payment is entered as a minus under the checking account section and a plus under the credit card section, for a net effect on my available balance of zero.) If you don't use Excel, you can do the same thing using an old-fashioned columnar pad.

One other point: I disagree with Jpcasino17. You most certainly *can* build credit while paying off your cards every month. In fact, that's the only way you should ever use credit cards. The credit scoring system isn't smart enough to keep track of whether you're carrying a balance. In fact, if you use your cards at all, your credit report will read as if you're carrying balances. A credit score is simply a snapshot of your situation on a given day, and the credit card companies report your balance as of your most recent statement. When preparing to obtain a mortgage last year, I was able to bump up my credit score several points by paying off my credit card balances a couple of days before the statement dates, so that the credit card companies reported all zero balances.

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Answer this Question

September 19, 2019

Ok, so I got a letter offering to settle an account with an original balance of over 5K for $1,300. Can I do this on all my negative marks? I don't want it to show up on my credit as settled, I want it removed.

Do I need a credit repair company or is it a DIY fix? How do I do this?

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December 18, 2013

This page is about using free credit reports. There are ways to keep track of your credit score and reporting without having to pay for this service.

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October 9, 2013

This page is about understanding your credit score. When you know what your credit score means, it can help you determine how best to conduct your borrowing.

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