How can I improve my credit score?
To improve your score, “pay your bills on time, stay out of debt, and apply for credit only when you need it,” Ulzheimer says.
Think twice about closing a credit card you don’t use. Although a closed account will stay on your credit report for years and count toward your length of history, it could lower your utilization rate. You could offset this by requesting a higher limit on your other cards, or getting another card to keep your total available credit equal, and make it easier to keep your total utilization rate under the generally recommended maximum of 20 to 30 percent.
If you can’t establish credit on your own, consider getting a co-signer or a secured credit card. You could also become an authorized user on someone else’s credit card, such as a parent or partner, if the credit card agency includes authorized users in its reports. The primary card holder’s use of the card will be reflected on your credit report and—for better or worse—affect your score.
Also, check your credit report regularly for errors. Ideally, stagger your free annual credit reports, so you can check one from each bureau every four months* or so. To dispute an error, write to each credit bureau where the error appears and provide supporting documentation, if possible. The bureau must investigate, which usually means contacting the company that supplied the disputed information. If that company acknowledges the error, the bureau must correct it and, if you request it, notify anyone who received a copy of your report over the past six months. If the reporting agency says the information is correct, you can put a statement disputing it in your file, but there is no guarantee anyone will see it when they access your report, Ulzheimer says. You can also file a complaint with the Consumer Financial Protection Bureau, a U.S. government agency that is meant to protect consumers and ensure banks, lenders, and other financial companies treat consumers fairly.
Mistakes can be caused by sloppiness, name mix-ups, or identity thieves who fraudulently obtain credit in your name. To prevent identity theft, “be careful what you share, especially your Social Security number,” says Lisa Schifferle, a Federal Trade Commission attorney. “Install antivirus software on your computer and keep it up to date. And don’t use public wifi for personal information,” such as online banking.
The most effective way to head off financial ID theft is to put a credit freeze on your file, which prevents anyone other than lenders with whom you have a relationship with from seeing it. Thieves can’t open an account in your name if a prospective lender can’t access your file. Since September 2018, you can place and lift a freeze for free as often as you want by contacting each credit bureau separately.
The downside of a freeze is that you must lift it when you want a potential lender, employer, or landlord to see your credit report. Alternatively, but less effective: You can place a free one-year fraud alert on your file, which tells businesses that pull your credit to check with you before opening a new account. To place a fraud alert, you only need to contact one bureau; it will notify the others.
You can also subscribe to credit monitoring services, which alert you whenever there is a substantial change to your credit report. These are unnecessary if you freeze your credit, Ulzheimer says.
However, Schifferle advises, “if you are part of a data breach and the company is offering free credit monitoring, take advantage of it.”
*Editor's note: In light of the pandemic, Equifax, Experian, and TransUnion are providing free weekly online reports.