8 Steps to Improve Your Credit

This article based on information from the Kasasa Blog, August 2019.

Credit scores play an important role in many aspects of life, from the rate on a loan to background checks for a job. Bad credit can keep you from your goals. Luckily, improving your credit is a simple process if you follow it consistently.

Step 1: Check Your Report

To begin, you need to know where you stand. Credit scores are based on your credit history, such as payments, types of credit, and amount. You are entitled to a free copy of your credit report, showing your history, from the three credit bureaus each year. The FTC (Federal Trade Commission) recently announced that weekly access to credit reports is now available. Request your free credit reports at

Step 2: Clear Any Mistakes

Look through your report for any negative items. Look for late payments, an account in collections, or defaulting on a loan. If anything is inaccurate, send a letter to the creditor letting them know of the mistake. You can find a free template for this letter from the FTC.

Step 3: Settle What You Can

Once you have cleared the errors from your report, focus on resolving any legitimate issues. Contact your creditor and see if they are willing to settle your debt and remove the derogatory mark.

Step 4: Repay for Utilization

Credit utilization, the amount of credit used out of your total limit, impacts your credit score. Prioritize making payments on the credit card with the highest utilization percentage to help your credit. Note that this is different from the strategy you would use to get out of debt. In that case, focus on the account with the highest interest rate.

Step 5: Automate Bill Payment

One of the easiest ways to build credit is to consistently pay bills on time and in full. Failing to pay on time will negatively impact your score. Enrolling in automatic payments ensures your payments are never late.

Step 6: Keep Accounts Open

The length of time your credit accounts are open is another factor in credit scores. Credit cards do not need to be closed once they are paid off. By keeping the card open, you keep that line of credit open. If you need to avoid using the credit card, cut it up but leave the account open.

Step 7: Simple Credit Building

Credit is built by paying debts on time. A simple way to do that is to charge small, recurring payments on a card and pay it automatically in full each month. For example, put your utility bill on automatic pay. Have that be the only bill on your credit card and set the card up to be paid in full every month.

Step 8: New Account Caution

Applying for credit, whether a credit card, loan, or line of credit, creates a credit inquiry. When the creditor you apply with inquires about your credit history, it is recorded as a hard pull, which can temporarily lower your credit score. Applying for several new accounts at once may reduce your score by giving the appearance you need a lot of credit because of financial difficulties.

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