If you feel like few things in life are as confusing and convoluted as credit scores, you're definitely not alone. It can be tough to remember all the things that can impact your credit score. And when it comes to fixing a poor score, it truly can feel like a losing game.
But do not fret — not all is lost. If you check your credit score — and you should check your credit score — and notice that it needs work, there are steps you can take to start correcting any damage that's been done, while also making smart choices to build your credit and swing that score in the other direction.
A great place to start, especially if you've never had a credit card, is opening a secured card. "If you have zero credit at all, it can be hard to start building credit. However, a secured card is like credit card training wheels," Michelle Waymire, a financial advisor and financial coach at Young + Scrappy, tells Bustle. It's basically a card you put your own money on — whatever amount you chose — and use as you would a "real" credit card.
You can also start doing things to build good credit, such as paying a recurring bill that you always (always) pay off on time. Waymire suggests setting up a small predictable payment on a credit credit, such as a monthly payment towards Netflix or Spotify. "Set up an automatic transfer from your bank to pay off each credit card once those statements hit," she says. "The benefit is that everything is on autopilot, you can keep your cards at home, and you’re building a consistent payment history with zero effort!"
Here are a few more things experts say to keep in mind when it comes to improving your credit score.
1. Not Paying Your Bills On Time
As a general rule, try not to spend more than you can afford to pay off on time, because the last thing you want is a history of late payments. "If you miss a payment, it shows the credit bureaus and lenders that you aren't responsible enough to pay off your credit card bills," Alayna Pehrson, a credit repair expert at Best Company, tells Bustle. "Even one missed payment can be a major hit to your credit score. After all, payment history makes up a large portion (precisely 35 percent) of an entire FICO score."
2. Not Having A Credit Card
Having a high credit score in the 700s, with zero credit mistakes — such as late payments — may sound ideal. But it doesn't necessarily mean you're winning the game of credit. "I've seen a lot of people with seemingly high credit scores but had a thin credit history," Jon Sycamore, Certified Financial Planner, tells Bustle. "While they don't have anything negative on their report, they don't have hardly anything there at all." And that's not ideal.
In order to build your credit, you need to use credit cards and take out loans, in a responsible way. "To establish credit, simply use your credit card only to the extent that you would use cash and pay the balance each month," Sycamore says. "Auto loans and mortgages also build credit effectively."
3. Maintaining A High Balance
Using your card is great, but you shouldn't let your balance fill up, since your "credit utilization" plays are large role in your score. "For example, if you have a credit card limit of $2,000 and the balance is $1,000, your utilization is 50 percent," says Sycamore. And the lower that utilization, the better.
You'll want to shoot for around 30 percent, but going lower is even better. "The Americans with the very best credit scores — the people who are getting the lowest interest rates on all types of lending — keep their utilization under 10 percent," Kali Geldis, a personal finance editor, tells Bustle. "That doesn't mean you're hurting your scores by keeping it under that 30 percent mark, but if you want to take your credit score from good to great, it's something you'll want to shoot for."
4. Canceling Old Cards
Once you pay off a credit card, you might be tempted to cancel it, cut it up, and get it out of your life forever. But do try to resist. "Do not cancel your credit cards once you pay them off," Jeff Proctor, owner of the blog DollarSprout.com, tells Bustle. "Having a long credit history actually helps your score, but canceling your cards stops that history from being tracked." So keep those babies open, and maybe use them for that Netflix trick Waymire suggested above, where you have one tiny payment you know you can always make on time.
5. Checking Your Credit Score
Whenever you're interested in checking your credit score, go ahead and do it. "By checking it yourself, you are not hurting your credit score," Steven Millstein, CFA, CPA and founder of the credit repair blog CreditZeal, tells Bustle. "This way you can see exactly what is going on."
That said, it's not a good idea to have lots of inquiries on your credit report. "When you’re doing any kind of activity that requires someone else to pull your credit report, your credit score will take a hit," says Waymire. "That’s because 'credit inquiries' comprise 10 percent of your credit score. This includes obvious things like mortgages and car loans, but also happens when you apply for a credit card, or if you’re searching for a new apartment and your landlord wants to pull your credit." Try to keep things like that to a minimum.
6. Getting A New Credit Card
It's not a bad idea, however, to get a new credit card with the purpose of improving your score. "One very paradoxical way to increase your credit score is to get a new credit card," certified financial planner Joel Ohman, CFP® tells Bustle. "The effect will be seen in the medium to long-term, but everything else being equal, applying for and being approved for a new credit card will almost always positively affect your credit score."
7. Sharing A Credit Card
"If someone else is kind enough to let you have a credit card on their account, you suddenly take on their behavior, too," says Waymire. "If they have a high credit utilization ratio [the percentage of your credit card limit that you are using] this can negatively impact your credit score. On the other hand, if you you’re linked to someone’s account who has great credit (low utilization, long length of credit, etc.), your score will actually go up on account of their good behavior!"
8. Not Catching Errors On You Credit Report
Another reason to pull you credit report is so you can look it over for errors. "As many as one in four people could actually have errors on their credit report: a late payment that’s on there after seven years, a credit card that you’ve been removed from, closed accounts that aren’t removed, etc.," says Waymire. "If you notice such errors on your credit report, you can dispute these with the appropriate credit bureaus and that can sometimes improve your score."
9. Having Different Types Of Credit
Remember, credit is sort of like a game that you need to play, and having different types of credit can definitely help. "By maintaining a diverse range of credit types — credit cards, lines of credit, a car loan, a mortgage — this can be an excellent way to demonstrate your ability to manage your debts," Cody Green, CEO of the fintech company USA Drives, tells Bustle. "If you can handle these loans in an effective manner, this will impact your credit score more positively."
10. Opening Store Cards
Remember what I said above about credit inquiries? "Every time you request a new line of credit, your credit score will get dinged," Andrea Woroch, a consumer and money-saving expert, tells Bustle. So be wary of applying for store credit cards, even though it might be super tempting to save a few bucks.
"It’s better to stick with a single credit card that offers cash rewards or travel miles and utilize the same card wherever you shop to maximize those rewards," Woroch says. "It’s also easier to remember when one credit card payment is due rather than multiple store cards — this could get you in trouble if you forget about a new store card that you hardly use and interest fees mount."
11. Ignoring The Issue
When credit stress gets you down, it can be tempting to ignore it, but that's never a good idea. "Completely ignoring your credit cards bills is much worse than paying late," Mandi Woodruff, Executive Editor of MagnifyMoney.com, tells Bustle. If you can't pay something off on time, consider setting up a payment plan. Paying little chunks at a time is always better than completely ignoring your bill, as it helps show that you can be counted on.
And while you're at it, try not to get overwhelmed. Credit and credit scores can feel impossible at times, but there's always something you can do to get back on track. And the sooner you can do so, the better.