How to Build & Improve Your Credit Score
The Challenge of Building Credit
Good credit opens doors, but building or improving it can feel frustrating. Perhaps you were denied a loan, are stuck with a high interest rate, or are unsure where to begin. Whether you're working to establish credit or repair past mistakes, small, strategic steps can make a big difference.
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Key Takeaways
1
Payment history matters most—on-time payments are the biggest factor in your credit score.
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Keeping balances low on credit cards helps improve your score.
3
Old accounts help your credit history—closing them may hurt your score.
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Too many credit applications in a short time can lower your score.
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Regularly checking your credit report helps catch errors and prevent fraud.
How Your Credit Score Is Calculated
9 Strategies to Improve Your Credit Score
Why Your Credit Score Matters
Your credit score impacts loan approvals, interest rates, housing, and other opportunities. A higher score can mean lower costs and better financial opportunities, while a lower score may lead to higher interest rates or denied applications.
How Lenders Use Your Credit Score
Lenders review your credit score to assess how likely you are to make payments and how you’ve handled debt in the past. A higher score signals lower risk, making qualifying for loans and getting better interest rates easier.
Your score helps determine:
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Loan approval – Whether you qualify for credit cards, auto loans, or mortgages.
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Interest rates – Higher scores often mean lower rates, saving you money.
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Loan terms – Some lenders offer better repayment options to those with strong credit.
A strong credit score can make borrowing more affordable, while a low score may lead to higher rates or loan denials.
Key Benefits of a Strong Credit Score
A higher credit score doesn’t just help with loans—it can improve many aspects of your financial life.
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Lower borrowing costs – Get the best interest rates on credit cards, auto loans, and mortgages.
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Easier approvals – Qualify for more lending options with fewer restrictions.
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Better housing opportunities – Landlords often check credit scores before approving rental applications.
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Savings on insurance – Some insurers offer lower rates for applicants with strong credit.
Maintaining a strong credit score can save you money and provide greater financial freedom.
How Your Credit Score Is Calculated
Your credit score is shaped by a few key factors that reflect how you manage money. Lenders and credit bureaus use this information to gauge your financial reliability, affecting your economic opportunities.
The 5 Key Factors That Influence Your Score
Your credit score is based on five main categories, each carrying a different weight:
- Payment History (35%) – Making on-time payments is the biggest factor in your credit score. Late or missed payments can significantly lower your score.
- Credit Utilization (30%) – This measures how much of your available credit you use. Keeping balances low (below 30% of your credit limit) helps improve your score.
- Length of Credit History (15%) – The longer your accounts are open, the better. A long, well-managed credit history shows reliability. You should not close old cards for this reason.
- Credit Mix (10%) – Various credit types, like credit cards, loans, and mortgages, demonstrate responsible financial management.
- New Credit Inquiries (10%) – Applying for too much new credit in a short time can lower your score, as lenders may see it as a sign of financial risk.
Understanding these factors can help you make smarter financial decisions to build and maintain a strong credit score.
How Often Your Score is Updated
Your credit score isn’t static—it updates regularly based on your financial activity.
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Most lenders report to credit bureaus once a month, but the timing varies.
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Major credit bureaus (Experian, Equifax, TransUnion) update scores frequently, often reflecting changes within 30 days.
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Hard inquiries (like applying for a loan) appear almost immediately, while positive habits like on-time payments take time to show improvement.
Because your score changes often, checking your credit report regularly can help you track your progress, catch errors, and prevent fraud.
9 Strategies to Improve Your Credit Score
Improving your credit score takes time, but consistent financial habits can lead to steady progress. Small changes—like making on-time payments and reducing debt—can make a big difference.
1. Always Pay Your Bills on Time
Payment history is the biggest factor in your credit score. Even one missed payment can negatively impact your score for months.
Setting up automatic payments or reminders can help ensure you never miss a due date.
2. Lower Your Credit Utilization Ratio
Credit utilization—how much of your available credit—makes up 30% of your credit score, making it the second most important factor after payment history.
Keeping your balance below 30% of your total credit limit shows that you’re not overly reliant on credit and can manage debt wisely.
Why Staying Below 30% Matters
If you exceed 30% usage, your score may drop—even with on-time payments. High balances signal risk, reducing approval chances and raising rates.
Paying down debt before your statement closes helps keep utilization low and your score higher.
3. Keep Old Credit Accounts Open
The length of your credit history matters. Closing old accounts can shorten your credit age and impact your score.
If a card has no annual fee, consider keeping it open to maintain a longer credit history.
Protecting Unused Credit Cards from Fraud
However, don’t forget about the card entirely. Unused cards can still be targeted for fraud, and if you’re not checking your statements regularly, you might miss unauthorized charges. Also, avoid carrying unused credit cards to reduce the risk of loss or theft.
4. Diversify Your Credit Mix
Lenders like to see various credit types—such as credit cards, auto loans, and mortgages—because it shows you can responsibly manage different forms of debt.
While you shouldn't open new accounts to diversify, having a mix of revolving credit and installment loans can help your score.
More Credit, Lower Utilization
Additionally, having different credit cards can increase your total available credit, which may lower your credit utilization ratio—another key factor in your score. Just be sure to manage all accounts responsibly to avoid unnecessary debt.
5. Limit Hard Credit Inquiries
Each time you apply for credit, a hard inquiry appears on your report, which can temporarily lower your score. Too many inquiries in a short period can signal financial risk to lenders.
Only apply for new credit when needed, and avoid opening new credit cards if you have a major purchase coming up that requires a credit check.
6. Dispute Errors on Your Credit Report
Mistakes on your credit report—such as incorrect account balances or fraudulent activity—can hurt your score.
Regularly checking your report and disputing errors with the credit bureaus can help keep your credit profile accurate.
7. Become an Authorized User
Being added as an authorized user on a responsible person's credit card can help you build a credit history without applying for new credit.
Just ensure the primary account holder has a strong payment history, as their activity will impact your score.
The primary account holder’s credit won’t be impacted if they make on-time payments and you don’t contribute to their debt.
8. Consider a Secured Credit Card
A secured credit card can be a great option if you're building or rebuilding credit. These cards require a refundable deposit that serves as your credit limit. Responsible use can establish a positive payment history and improve your score.
Looking for the Right Credit Card?
FSB offers credit card options to help you build credit while keeping spending manageable.
9. Get Credit for Rent & Utility Payments
Rent and utility payments typically don't count toward your credit score, but some services allow you to report on-time payments to credit bureaus.
If you consistently pay rent and bills on time, this can help boost your credit history.
How Long Does It Take to Improve Your Credit
Improving your credit score doesn’t happen overnight. While minor improvements can be seen in weeks, more significant increases may take months or even years. The timeline depends on your credit history, current debts, and specific actions.
Short-Term vs. Long-Term Credit Score Gains
Some credit improvements happen quickly, while others require consistent effort over time:
Short-Term Gains (Weeks to Months)
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Paying down credit card balances can lower your credit utilization and improve your score within a billing cycle.
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Disputing and correcting credit report errors may result in a quick score boost.
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Becoming an authorized user on a responsible person’s account can provide a rapid increase if their history is strong.
Long-Term Gains (6+ Months to Years)
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On-time payments build a positive history, but late payments may take up to 7 years to drop off your report.
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Establishing a credit mix—like adding installment loans—requires time to show responsible management.
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Lengthening your credit history takes patience, as older accounts weigh more favorably over time.
Common Delays in Credit Score Improvements
Even with responsible habits, some factors can slow down your progress:
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High Credit Utilization – If your balances remain high, your score may not improve even if you make timely payments.
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Hard Inquiries – Applying for multiple credit accounts in a short time can temporarily lower your score.
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Negative Marks – Late payments, collections, and bankruptcies stay on your report for years, slowing recovery.
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Lender Reporting Delays – Some lenders only report updates to credit bureaus once a month, so changes may not reflect immediately.
Patience is key. Stick to good credit habits; your score will strengthen over time, opening the door to better financial opportunities.
How to Build Credit if You Have No History
If you're new to credit, getting started can feel overwhelming. Without a credit history, lenders have no way to assess how you manage debt, making approvals more challenging.
Fortunately, several options can help you establish credit safely and effectively.
Starter Credit Cards & Secured Credit Cards
A starter or secured credit card is often the easiest way to build credit.
What is a Starter Credit Card
Starter credit cards are designed for those with little to no credit history. They may have lower credit limits and higher interest rates, but responsible use can help establish your credit profile.
What is a Secured Credit Card
Secured credit cards require a refundable deposit, which serves as your credit limit. Since the lender has collateral, approval is more manageable, and on-time payments help build your score.
Credit-Builder Loans & Alternative Credit Reporting
If you don't qualify for a credit card, credit-builder loans and alternative credit reporting can help:
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Credit-builder loans are small installment loans where you make payments first and then receive the funds later. These are designed specifically to build credit history.
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Some lenders and rent-reporting services allow you to add on-time rent, utility, and phone bill payments to your credit file, helping establish a positive track record.
These options provide low-risk ways to build credit without taking on traditional debt.
How to Build Credit Responsibly
Starting with credit is a big financial step, so it's important to form good habits early:
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Always pay on time – Payment history is the most important factor in your score.
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Keep balances low – Using less than 30% of your credit limit helps your score.
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Avoid unnecessary applications – Too many hard inquiries can lower your score.
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Monitor your credit report – Check for errors and track your progress regularly.
Building credit takes time, but with smart financial habits, you can establish a strong foundation and unlock better opportunities in the future.
Take Control of Your Credit Today
Building and improving your credit score takes time, but small, consistent steps can lead to lasting financial benefits. Whether you're working to establish credit, recover from past mistakes, or improve your score for future goals, responsible financial habits are key.
Explore Lending Options with FSB
Your credit score plays a major role in securing loans with favorable rates and terms. If you're considering financing options, FSB offers personal lending solutions to help you reach your financial goals.
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