"We’ve all heard something along the lines of “you need to have a good credit score” at one point or another. It’s essential for buying a house, financing a car, or opening a new credit card, and no matter how you spin it, an impressive score unlocks more opportunities for you that can help you reach your goals. But the truth is that building and maintaining a good credit score goes beyond budgeting and paying your bills on time. This is why I tapped four of the most financially savvy women I know for their expert tips and tricks on how to improve your credit score this year and beyond.
No matter where you are on your personal finance journey or what your financial goals are, these 10 tips can help you rebuild, improve, and maintain an amazing credit score all year long.
1. Don’t just rely on credit cards
While credit cards are a useful tool in building credit, it’s far too easy to start overspending, which can then lead to high-interest debt if you can’t pay off your balance right away. “Building credit takes time and intentionality,” VP and Financial Advisor for Wealth Enhancement Group, Britta Ferguson, told me. “Unfortunately, it’s a lot easier to lower your credit score than it is to build it. Fortunately, there are manageable ways to build credit without a credit card.” So, if you’re just starting out, trying to master a budget, or worried about overspending and accumulating interest, consider using an alternative method to build credit.
One way to do this is to become an authorized user on a credit card for a family member or trusted friend. “This can help build your credit if they continue having a positive payment history,” Ferguson explained. Likewise, if you’re currently renting, she also recommends looking into rent reporting services, which help you build credit through your housing expenses via a rent payment service either offered by your landlord or through a tenant program like Piñata or Self.
Finally, if you have no credit history, credit builder loans are a great option. With these, you don’t need a good score for approval. Ferguson explained that lenders deposit borrowed money into a savings account, which you are then responsible for paying back through small and manageable payments. Once the loan is paid off, you’ll be able to access the money. This is a great way to simultaneously build credit and an emergency fund for things like unexpected car repairs or pet expenses. To find a lender that’s right for you, talk to your bank.
2. Ensure your budget supports your expenses
Like all things in life, improving your credit score also means going back to basics. “Another important factor in building credit is taking the time to develop healthy habits related to your financial health,” Lisa Frison, Citi’s Head of Financial Inclusion and Racial Equity, told me. She then went on to explain that this means understanding your expenses and having a budget in place. Knowing how to live within your means will prevent you from racking up bills you can’t pay off, which, needless to say, can decrease your score.
Similarly, Head of Consumer and Small Business Products at Bank of America, Mary Hines Droesch, echoes this sentiment. “To better assess what you can and cannot afford, you should build a budget and review your spending habits regularly to see where you can cut back on discretionary spending,” she said. “This will help you stay on top of your bills and get you closer to raising your credit score.”
3. Aim to make full, on-time payments
According to Courtney Alev—consumer financial advocate at Credit Karma—your payment history is the most important factor in your credit score. “A history of consistent, on-time payments can help you raise and maintain your credit score, whereas even one missed payment can cause your score to meaningfully drop,” she explained. This is yet another reason why having a budget in place and knowing what you can and can’t afford is key; if you can’t afford to pay your credit card balance in full, you put too much on it.
To make paying your credit card off in full each month feel less daunting, look for ways you can save a little more throughout the month. One of the simplest ways to do this is by taking more money out of your paycheck as soon as you get paid and setting it aside specifically for your payments. This will not only help ensure you have more money for your payments but can prevent you from overspending if the money was just sitting in your account waiting to be spent on another Lululemon order. Likewise, doing things like limiting takeout to the weekends or using free at-home workouts instead of paying for a gym membership can help you save more money to apply to your balance.
4. If you can’t afford to pay in full, try to pay more than the minimum
There’s no getting around it: Curveballs are unavoidable, things will pop up when you least expect it, and there may be times you find yourself unable to pay off your balances in full. If this happens, Frison recommends trying to pay more than the minimum; this will help prevent interest from accumulating and balances spiraling out of control. And Frison swears by setting up automatic payments each month to ensure this doesn’t happen; that way, at least the minimum is covered no matter what.
5. Keep your utilization rate under 30 percent
If there’s one thing Alev, Droesch, Frison, and Ferguson unanimously agree on, it’s that keeping your credit utilization rate—AKA the size of your balance compared to your credit limit—below 30 percent is vital. “For example, if your credit card has a $3,000 limit, the balance on the card on any statement date should be less than $1,000,” Droesch explained. This helps boost your score because it makes you look more reliable to lenders. Just because you can spend it doesn’t mean you should, you know?
However, depending on your credit limit, this might be easier said than done. If you’re having a hard time keeping your utilization rate low, Alev suggests calling your credit card company to discuss raising your limit. But be warned: This might require a hard credit inquiry, which can temporarily decrease your score by a few points. “If you aren’t comfortable increasing your credit limit and risking increased temptation to spend, you can make credit card payments more than once a month,” Alex explained. “This way, your balance never gets too high.”
6. Only spend what you can afford with a secured line of credit
We’ve all heard how important it is to only spend what you can afford, and a secured line of credit can help you do just that. “A secured card typically requires a cash deposit that serves as the credit line. The security deposit acts as a safeguard to cover any purchases in the event that you miss a payment,” Droesch explained. Not only can this be helpful for those who don’t have a credit history and want to start building one, but also for those who struggle with overspending because the card acts similar to a debit card while still building your score.
7. Monitor your credit score
Regularly checking in on your credit score is something most of us don’t do, but according to Alev, it’s time to change that. “Always keep an eye on your credit reports so you know where you stand,” she told me. “Checking regularly will help you track progress and spot any errors worth disputing.” She then went on to explain that using an app like Credit Karma is a simple and effective way to do this since it helps you see your payment history, open accounts, and see how your score is tracking.
Additionally, Frison also suggests monitoring your score through one of the three major credit bureaus, whether it’s Experian, Equifax, and TransUnion. “One of my favorite tips is to stagger when you pull them (e.g., one every four months) so you can keep tabs during the year to track progress or catch inaccuracies,” she said.
8. Avoid opening too many lines of credit
Although having multiple lines of credit open can help you increase your score, Ferguson cautions against opening too many at once. She explained that opening a new line of credit often requires a hard credit inquiry, and having one after the other around the same time can make lenders question how financially stable you are. Instead, she suggests spacing out when you open a new line.
Similarly, Ferguson also said that it’s equally important to keep your lines of credit open for as long as possible. “The length of your credit history matters a lot,” she told me. “Try to avoid closing old accounts and let the time benefit you.” So, instead of getting rid of a credit card you barely use, consider using it for a specific purpose, like groceries or utilities.
9. Explore your options for paying off high-interest debt
While not all debt is bad debt (think: a mortgage or student loans), high-interest debt can wreak havoc on your finances. To improve your credit score and get back on track, Ferguson recommends laying all your debt out and paying off balances with the highest interest first and foremost. That way, you can prevent more interest from accumulating and piling onto the amount you already owe.
That said, if you’re struggling, Ferguson suggests utilizing balance transfers or working with credit card companies regarding payment options. Balance transfers transfer your outstanding balance to a new credit card with low or 0 percent interest for a promotional period—this means you’ll have lower interest on your balances for a set amount of months (usually 12, 18, or even 24 months)! This is a great way to get a handle on your debt and get your finances back on track because you’ll be able to focus on paying the debt itself—not the debt plus the crazy interest. Be aware that balance transfers often have fees associated with them; however, it’s usually worth the money, considering how much you’ll save in interest throughout the promotional period.
Additionally, debt consolidation can be helpful if you have a lot of high-interest debt. This rolls all of your payments into one monthly payment and typically lowers the interest, making paying off what you owe easier. Likewise, if your outstanding debt equates to 50 percent of your gross income, consider seeking out a debt relief plan, like debt management from a nonprofit agency you can find through The National Foundation for Credit Counseling. With this plan, a credit card counselor will work with you and your creditors and essentially take over and manage your debt.
10. Be patient and consistent
At the end of the day, Alev, Droesch, Ferguson, and Frison all agree that patience and consistency are key. Building an impeccable credit score may not happen overnight, but it will in time with consistently strong, healthy, and strategic financial habits. Likewise, Alev cautions against getting caught up in slight day-to-day fluctuations in your score since these are totally normal and to be expected. Instead, these financial experts implore you to let go of the stress, focus on making smart money moves, and pay off your balances on time and in full. If you can do that, you’ll be seriously impressed with your score—and so will lenders.