Powerful Steps to a Better Credit Score

Credit cards can be a great way to enjoy perks and points, but they can also be a great way to tank your credit score. If you've found yourself in a pile of credit card debt, don't be too hard on yourself. It's tempting to get swept up by the lure of access to money you don't have, and in the moment, your credit card can feel like access to magical free money. However, if you're ready to take charge of your financial future, it's possible to rebuild your credit score. Below are some tips to help you get back on track.

Review your credit report for errors

Before you take any actionable steps towards improving your score organically, sit down with a copy of your credit report and check it for errors. Some common errors on credit reports include:

• Debts that aren't yours, either due to similar names or identity theft

• One account reported multiple times

• Inaccurate reporting on payment activity

• Paid-off accounts still showing as active accounts

• Any activity that is unfamiliar to you

If you find a mistake, report it directly to the credit bureau. When these errors are removed from your credit report, it can lead to an easy bump to your score.

Reach out to your lenders to organize payment plans (if needed)

While there are several strategies for boosting your credit score, paying down your existing debts is the most impactful step you can take, especially if you have high balances relative to your credit limits.

If your current payments feel overwhelming, you have more options than you might realize. Try reaching out directly to your lenders and ask if they can offer more manageable payment plans or modified terms. Though it might feel intimidating to make that call, most lenders genuinely want to help you. After all, they benefit when you're able to pay consistently. Many people are surprised to discover how willing their lender is to work with borrowers who show they're trying to find a solution.

Taking this step demonstrates financial responsibility and can put you back on track toward building the credit score you want.

Get a credit card — but use it the right way

If you want to build credit, you need... well, credit. One of the first ways that people build a credit history is with a credit card, which most people typically have long before they ever take out a mortgage or an auto loan. However, getting approved for a credit card can be difficult if your score isn't where you'd like it to be.

While paying off any outstanding debts is the first step to improving your credit score, the next one is responsibly using a credit card to demonstrate to lenders that you are a reliable borrower, which will raise your score. If your credit is fair, which is generally in the 580-669 range, you might be approved for several fair credit cards.

If your credit is poor, which is generally anything below 580, you should consider a secured credit card. A secured credit card is a credit card where you give the lender a sum of cash equivalent to your available credit line. The lender holds onto this money, while you use the card like a normal credit card. The cash you give the lender acts as a safety net. In the event you fail to pay your debts, that cash will be used to cover them. Some secured cards eventually convert to traditional cards after an extended period of regular payments, at which point the money you deposited is returned to you.

If you're looking to improve your credit score, don't treat the card like a crutch, but rather as a tool. You want to keep your utilization at or under 30%, with 10% being considered ideal. For example, if you have a secured credit card with an available line of credit of $100, you could use it as the payment on a $10 monthly subscription fee—that's exactly 10% utilization, which is in the ideal range. If you set up your secured credit card to auto-pay, you have a powerful tool running in the background to help you improve your score with minimal ongoing effort on your part, though you'll still want to monitor your spending and check your statements regularly.

Regardless of what kind of credit card you have, the important part is that you don't carry a balance each month. Avoid falling into the trap of "just this once" or "but this is too good of a sale to pass up." Remind yourself of why you got this card in the first place and stay committed to your financial goals.

Ask for a credit limit increase

If you already have a good credit score but want to reach that coveted "excellent" range in the high 700s or 800s, you're in a different situation than someone rebuilding after financial difficulties.

Getting to excellent credit can be tricky because you don't want to open unnecessary new accounts, which can actually lower your current score. One of the smartest moves you can make is requesting a credit limit increase on your existing cards while keeping your spending exactly the same. This strategy lets you continue earning your usual points and perks while automatically lowering your credit utilization ratio—and that's what can push you into excellent credit territory.

Avoid closing lines of credit whenever possible

Closing accounts negatively affects your credit score. Ideally, you want to have your accounts open for as long as possible, as it demonstrates to lenders that you're someone they can trust to stay in the business relationship for the long haul. If you've successfully paid off a card, you might feel like you should close the account to avoid ever falling into that trap again. However, if you continue using the card at a low utilization rate and pay the balance off in full each month, you can use the same card that got you into this mess to rebuild your credit score and improve your financial standing.

Improving your credit score takes time. Don't get frustrated if you're not completely out of the woods after a year of doing everything right — while this might sound cliche, it really is a marathon rather than a sprint.