Best Ways to Improve Your Credit Score in 2020

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Good credit translates to a major part of a successful future. A positive score can open doors to jobs, apartments, even the ability to turn on your utilities.

This is a key time to learn more about how to establish and maintain good credit.

The good news is that just by reading this, you’re already taking the first steps on your journey toward better credit and learning about what it takes to improve your credit score.

Feeling as though your credit score could use some improvement? You’re not alone. Research shows that many Americans could use a little help in the credit department. The average American credit score as of September 24, 2018, is 704, which falls just shy of what is considered a good rating.

In this article, we’re going to look at different ways you can improve your credit score, hear from some Credit Sesame members on how they improved their credit score, and dive into some of the data behind the strategies.

Age Group & Average 4 Year Credit Score Change

Age GroupAverage Credit Score 2014Average Credit Score 2016Average Credit Score 2018
18 to 24618554576
25 to 34628597587
35 to 44630603589
45 to 54628610595
55 +671650626
Source: Data survey of 2,500 active Credit Sesame members in the United States (2018).

Why is improving your credit score important?

When it comes to improving your credit, there really is no time to waste. A low credit score may not seem like a big deal until it’s time to leverage your credit for a car loan, mortgage, insurance, and many other big life events. Americans with low credit scores may not be eligible to borrow money for these things or might end up with much higher interest rates than someone with a higher credit score. The earlier you begin working to improve your credit score, the easier it will be for you to accomplish these things.

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What makes up your credit score?

As you can see from the chart below, payment history is the single most important factor when it comes to your credit score. After that comes credit utilization, and the two together make up the bulk of your score. That’s not to say you should ignore the other factors at work, but understand that these are the major players here.

FICO Scoring Model Calculation (Weight) Factors

Credit FactorsCredit Score Weight
Payment History35%
Credit Utilization30%
Credit Age15%
Different Types of Credit10%
Number of Inquiries10%
Source: Data found September 26, 2018. Boeing Employees Credit Union website. Understanding Your FICO Score. Retrieved from https://www.becu.org/articles/understanding-your-fico-score https://www.myfico.com/credit-education/whats-in-your-credit-score

Factors that may be affecting your credit score

Now ask yourself the following questions and keep track of the “yes” responses:

Do you make late payments?

The number one factor in your score is your payment history. Late payments quickly drop your credit score. Each payment helps, but just one missed payment can wreck that progress. If you miss a due date, make the payment as soon as possible since lenders typically don’t report a payment late until 30 days after it is due.

Are your credit cards maxed out?

Your credit utilization ratio counts nearly as much as payment history. Credit utilization is the amount of total debt versus total credit limit. Very high credit utilization, or amounts owed, means that your credit cards may be maxed out. For example, if you’re carrying $3,000 in debt with a $4,000 combined credit limit, your credit utilization ratio is 75 percent.

The solution: bring down your balances. The lower your ratio, the better the boost. People with the best credit scores use no more than 7 percent of their available credit.

Credit utilization is calculated for each credit card as well as for an overall tally. Even one tapped-out credit card can hurt your score.

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Does increasing your credit limit raise you credit score?

By its nature, contacting banks to request increases on the credit limits for your cards would decrease your credit utilization ratio, provided you don’t increase your spending habits as well.

This can be a great credit score optimization strategy to employ, since it will benefit you regardless of your current credit score. Even those with excellent credit will see a slight bump in their score by increasing their credit limits.

Do you close your old accounts or have only very new accounts?

The third factor is your credit accounts’ average age. Since you’ll gain points in this category over time, you generally shouldn’t close old accounts or those you have paid off.

Do you only use one type of credit?

The next factor is the credit mix. The credit bureaus want to see evidence that you can successfully manage a variety of credit types. For example, student loans, mortgages and auto loans are all installment loans with a fixed payment, but a credit card or home equity line of credit represents a revolving credit with variable payments.

Do you often apply for new credit products?

Each inquiry into your credit, which is what happens with each credit application, can drop your score by a few points. Soft inquiries–which include employment checks, self-checks, and inquiries to prequalify you for promotional offers–do not hurt your score. Hard inquiries are those made as the result of an application for new credit. Those are the inquiries you need to limit.

Think about your answers to the questions above. Each “yes” is a factor contributing to your low credit score.

How to improve your credit score

There are a number of ways to improve your credit score, both in the short term and the long term. We’ve gathered our favorite quick tips as well as general advice for improving your score below. You can also join Credit Sesame for personalized recommendations on improving your credit score.

Check your free annual credit reports for mistakes

Nothing is flawless. Mistakes happen. Error correction is the simplest way to improve your score now. According to the Federal Trade Commission, one out of five consumers has an error on at least one of their credit reports. Don’t let misreported information be the cause of poor credit when it’s relatively easy to fix.

Regularly checking your credit report is an essential first step toward improving your score. How can you bring up the number if you don’t know what it is? As you can see from the chart below, those who check their score on a regular basis see the benefits.

Number of People Checking Their Credit Score Annually

Americans Who Checked Credit Report at Least AnnuallyNumber Who Check Credit ReportMembersNon-Members
Poor15.3 Million18%12%
Fair24.7 Million27%21%
Good27.1 Million42%36%
Very Good25.3 Million59%48%
Excellent27.6 Million71%66%
Source: Historical Data provided by https://consumerfed.org/wp-content/uploads/2016/06/CFA-VSS-Survey-Results_2016.pdf. Current Data provided by a survey given to 750 members and non-members over the course of two years, starting 2/15/2016 and ending 2/15/2018.

It’s clear from the data that those with higher credit scores are more likely to check their annual credit report at least once a year. Although it’s not the reason of why they have a higher credit score since it’s not a factor it does point to the idea that checking your credit can help you be aware of where you stand and how you can improve it.

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Pay on time, every time

Payment history is your No. 1 friend or enemy, depending on how you approach it. Since this comprises 35 percent of your score, you can’t afford to ignore it. Instead, make bill payment a priority. If you need to make a schedule, do it. If you need a dedicated calendar for the purpose, go for it. Whatever it takes to get yourself on a strict payment schedule, that’s what needs to happen.

Payment history is the most important factor in your credit score. The chart below shows this. You can see that good payment habits are rewarded with higher credit scores. Start today and you’ll soon see the benefits.

Late Payment by Generation

GenerationLate Payments Last 12 Months
Gen Z Members35%
Gen Z Non-Members40%
Millennial Members46%
Millennial Non-Members52%
Gen X Members41%
Gen X Non-Members46%
Baby Boomer Members19%
Baby Boomer Non-Members25%
Source: Credit Sesame polled 400 participants between February 10, 2018, and February 17, 2018. 100 participants were Gen Z, 100 participants were Millennials, 100 participants were Gen X, and 100 participants were Baby Boomers.

We see that millennials are still struggling to keep up with paying on time. It’s important to set calendar alerts and reminders on your phone to ensure you are paying your bills on time as that is one of the major determinations of your credit score.

Credit Score Drop from Late Payments

Credit Sesame MemberMonth 1Month 2Month 3Month 4Month 5
Member #1689712 (Late Payment)672 (-40 Point Drop)688717
Member #2754761770 (Late Payment)712 (-58 Point Drop)749
Member #3592604623 (Late Payment)578 (-45 Point Drop)592
Source: Based on 3 Credit Sesame members and their credit score before the drop and after the drop (including recovery).

Improve your credit utilization

You can’t max out your credit cards and still have a good score. You need to keep your ratios low and use as little credit as possible. One way to think about it is that you should only make purchases on your credit card (emergencies are an exception) when you can pay for them out of pocket.

Improving your credit utilization is the second most important step toward improving your credit profile. Successful credit applicants and those with the best scores have the lowest percentage of credit utilization in relation to the amount of credit they have.

Impact of Credit Utilization on your Credit Score

Credit UtilizationAverage Credit Score
Source: https://www.newyorkfed.org/microeconomics/databank.html

The pattern here is quite clear – don’t overuse your credit or you’ll end up lowering your credit score quite significantly. Just compare those who have an average of 1-10% utilization and a 753 credit score compared to those with 51-70% and a 636 credit score.

Being able to apply for new credit or loans will become a lot more difficult once you find yourself in the average of poor credit score range – if not impossible.

Use different types of credit accounts

Your credit mix is another major component of your score. Lenders want to know that you can handle different types of credit products, and look for favorably on those who have several credit accounts open. However, be careful about opening too many new accounts at once. Lenders view multiple applications for credit cards negatively.

Credit Mix & Resulting Change Timeframe

Types of Credit (open, unsecured, secured, revolving, installment)Typical Impact to ScoreHow Long It Takes to See Changes
Two Types10 - 15 Points1 - 2 Months
Three Types10 - 15 Points1 - 2 Months
Four Types15 - 20 Points1 - 2 Months
Five Types12 - 20 Points1 - 2 Months
Source: Survey was conducted on 02/13/18 with a total of 500 responses.

Although credit mix doesn’t have the greatest amount of weight for improving your credit score – improving the amount different types of credit you have can give you a decent boost to your credit standing.

Average Time to See Credit Score Improvement (Credit Mix Impact)

Credit Score Factors0-3 Months3-6 Months6-12 Months12+ Months
Payment History+20 Points+36 Points+48 Points+60 Points
Credit Utilization+15 Points+29 Points+41 Points+55 Points
Length of Credit History+5 Points+7 Points+12 Points+20 Points
Credit Mix+10 Points+11 Points+12 Points+14 Points
New Credit+10 Points+9 Points+7 Points+6 Points
Source: Survey of 750 members who actively worked on improving their credit score. Survey completed over the course of 24 months from 2/15/2016 – 2/15/2018.

Having a strong credit mix (variety) will help you slowly increase your credit score over time – it would be as much of a jump as payment history or utilization but every bit counts.

Be cautious with unpaid collections

Paying off your outstanding debt will help … right? Not necessarily. Sometimes it simply resets the clock and dings your history even harder. Three things to know here:

  • The newest versions of FICO® and VantageScore® ignore paid collections
  • Pay off the most recent delinquent accounts first because these hurt your score the most
  • Non-medical collection debt hurts your score more than medical collections

Fixing unpaid collections can be yet another major component of improving your score. Proceed with caution here, though, as paying down some accounts in collection will not improve your score but actually reset the clock on how long it will take for that debt to fall off your report. Do your research.

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Benefits of learning how to improve your credit score

When it comes to improving your credit, there really is no time to waste.

The lower your score, the lower your interest rates will be and the easier it will be for you to obtain credit And the lower your credit score, the harder it is to get low insurance rates, qualify for credit cards, and more.

The higher your credit score, the more opportunities you’ll have to reach bigger financial goals. With a little hard work, an excellent credit score rating is within reach for most Americans.

Conclusion and Summary

If you didn’t manage to absorb all of the details in this tutorial then just remember this – improving your credit is as easy as understanding what affects your credit score.

Keeping in mind the major credit score factors of:

  1. Payment History (Credit History)
  2. Credit Utilization
  3. Credit Age
  4. Different Types of Credit (Credit Mix)
  5. Number of Inquiries

Each of these factors is your path to credit score improvement. The first two make up 65% of your total credit score weight so make sure you are paying your bills on time and keeping your credit utilization below 30%, or better yet, 20%, and you should start seeing your credit improve over time.

If you’re ready to get started on the road to improving your credit score, you can get a personalized free credit report card from Credit Sesame and know your baseline numbers today.

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Published October 29, 2019 Updated: May 20, 2020
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Richard Lawson•  February 8, 2020 Edit
Great Information !!
Michael Gulas•  April 2, 2020 Edit
That was quite interesting, your site is a great tool and im glad i am a member, thanks for the easy to follow facts!
Credit Sesame•  April 3, 2020 Edit
Thanks, Michael! We are glad you are a member too!