We’re going to tell you something that you likely already know, and if you do, it’s worth saying again: Nearly all of America’s financial infrastructure is based on credit. Credit allows people to purchase or finance items that they can’t pay for in cash upfront. Credit is what allows you get a home loan, car loan, or business loan. So, in a credit-based economy, if your credit score isn’t strong, you’ll find it hard to qualify for financial products or will have to pay more.
If that sounds grim, there’s good news, too: Fortunately, you have a lot of control over your credit score. Each credit bureau uses their own algorithm that determines your credit score , and even if you aren’t privy to exactly what goes into the equation, you still have a window into the component parts. Which means there are proven ways to increase your score and keep your score high.
Sure, we all know to pay our bills on time, not to max out our cards, and to prevent unnecessary hard credit pulls. But there are other techniques for maintaining and improving credit that you probably don’t know about. Learn some of the lesser known ways to boost your credit score—and in turn, your ability to qualify for the best financial products.
First: How Credit Scores Are Calculated
The three main consumer credit bureaus are TransUnion, Equifax, and Experian. Each bureau ranks personal credit scores on a scale from 300 to 850. Most lenders consider a score above 670 as good and a score above 740 as very good.
You might find that your TransUnion, Equifax, and Experian credit scores are slightly different. Each credit bureau relies on slightly different credit models. And creditors and lenders have a choice of which bureaus to report payments to. This means that your Equifax score might be different than your Experian score.
But your scores should be approximately the same across bureaus, and there’s a gold standard of what goes into your credit score:
- 35% Payment history on loans, credit cards, and other debt
- 30% Utilization (how much of your available credit you’re using)
- 15% Length of credit history
- 10% Credit activity (e.g. applications for new loans)
- 10% Diversity of credit
As you can see, payment history is the main determinant of your credit score, so the obvious way to build credit and keep your credit high is by paying all your bills on time. But there are also less obvious factors at work.
Just remember to be patient. Credit doesn’t usually decline overnight, which means you can’t build credit back up overnight either. With all of these strategies, raising your credit can take a month or two, even more.
Surprising Ways to Increase Your Credit Score
1. Keep Your Old, Unused Credit Cards Open
The average American has three credit cards, and many have four or five or even more. Chances are, you’re probably not using all the cards in your wallet. But resist the temptation to call the credit card company and close an account, even if you’re not using the card.
Your level of credit utilization accounts for almost a third of your credit score. If you lower your total credit limit by closing a credit card account, you are effectively lowering your total available credit. For example, if you have a $5,000 credit limit and charge $1,000 of merchandise, that’s a 20% credit utilization. But if you have a $10,000 credit limit and charge that same $1,000, that’s only a 10% credit utilization. Lenders prefer that you have low credit utilization because this shows you’re not overly reliant on debt.
In order to keep cards open, you don’t have to use them religiously or even have them on you at all times. Using them even occasionally, like once a month, is more than enough. If you don’t use a card for several months, the issuer might close the account. In short, keep your cards open to keep your overall utilization lower.
One exception to this rule is if your old, unused cards have high annual fees. In this case, it could make sense to take the temporary hit to your credit score as suggested by Wealth Meta.
2. Be a Good Tenant
Most people’s largest monthly expense is housing. In some instances, you can actually attribute your rent payments to your credit history.
If you have a private, small-time landlord, they might not have the ability or time to report your payments to the credit bureaus. However, if you’re in an apartment building owned by a management company, you might be in luck. Some apartments regularly report rent payments to the credit bureaus. A good reason to be nice to your landlord, even if you feel like you’re overpaying!
Obviously, you only want to ask your landlord to report your rent payments if you’re good about paying your rent on time, just like any other bill. If you tend to fall behind on rent payments, that can actually hurt your credit score.
3. Become an Authorized User on Someone Else’s Credit Card
Another unconventional way to build credit is by becoming an authorized user on someone else’s credit card. Friends or family members might allow you to become an authorized user on their card, but proceed with caution: By becoming an authorized user on someone else’s card, your credit scores become intertwined with theirs. Good and bad payment activity will reflect on both of your credit scores.
Think of being an authorized user as a lifeline for your credit. You can take advantage of someone else’s history of on-time payments to build up your own score and qualify for better products and services.
4. Return Your Library Books (Seriously)
Believe it or not, overdue library books might be bogging down your credit score. If you frequent the library and have forgotten to return a couple books over the years, this usually is no big deal. However, if your fine balance with the library runs too high, or if your book was in high demand, the library can report you to the credit bureaus for overdue items. If you’re a recent grad, you should also make sure that you’ve returned any overdue textbooks to your college library and paid any fines.
5. Don’t Forget About Store Credit Cards
Ever been to a store that offers you 20% off for signing up for a store credit card? Department stores are notorious for this. If you accept the offer, you should know that the store card is like any other credit card.
If you have even the smallest balance on one of these cards, you need to pay that off the same way you would with your bank credit card that you use for everything under the sun. Late payments can accrue interest and become delinquencies over time. As we mentioned earlier, your payment history is the most important metric in your credit score, so being on top of payment deadlines and balances is imperative.
6. Ask for a Credit Limit Increase…
We talked earlier about utilization and the role it plays in your credit score. The lower your utilization, the higher your score will be. If you increase your credit limit, then you have more wiggle room to keep your utilization on the lower side.
Asking for a credit line increase is easy. Many credit cards companies will allow you to request a credit line increase online. All you have to provide is your annual household income. Some issuers even provide an instant decision with a soft credit pull, so there’s no impact to your credit score.
7. …and for (Occasional) Late Payment Forgiveness
Nobody is perfect. We try our best, but sometimes, you might miss a payment deadline on your loan or credit card statement.
Remember that your credit card company or lender wants to retain a positive customer relationship with you. If you have a history of on-time payments, most issuers will agree to waive late penalties. Others might still charge the penalty, but they’ll agree not to report your lateness to the credit bureaus.
Late payment history can negatively impact your credit for years. So, try to resolve a late payment right away.
8. Check Your Credit Report for Errors
One in five American consumers has an error on their credit report. That’s more than twenty percent of Americans. Sometimes, spelling errors, name changes, or mistakes in your address can cause credit report errors.
Fortunately, every consumer can request a full credit report from the credit bureaus at least once a year, at no cost to them. And if you find a mistake on your report, you’re fully within your rights to dispute the error. The bureaus will review your claim and must remove inaccurate information within 30 days. Depending on the type of error, fixing mistakes can raise your credit by hundreds of points.
Cool and True: You Can Do More Than Pay Bills on Time to Improve Credit
Hopefully, some of these tips and tricks prove to be useful for you. First, make sure you take care of the easy and obvious ways to raise credit, like paying your bills and protecting your personal information. Then, if you incorporate some of the tips from the list above, your credit score could turn out to be even better.
To be extra proactive, check out Fundera’s entirely free credit monitoring feature. This will show you both your personal and business credit score, both of which affect your ability to qualify for financial products. Noticing dips and upticks in your score can help you address problems and capitalize on what’s working.