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Published: Jan 04, 2022 7 min read
A person is crossing from an orange stripe to a green stripe on the credit score.
Rangely García / Money

This article is part of Money's January 2022 digital cover, which features 22 ways to make 2022 the best money year of your life. Browse all 22 articles here.

It might seem like a daunting task, but your hard work will pay off, since a higher credit score means better interest rates on mortgages, auto loans and more.

Most personal finance experts say a score of 600 or higher is a good number to shoot for. (You can check your score through your online banking site, or request a free credit report at AnnualCreditReport.com.)

Don’t worry if you’re not there yet: Even if you’re at the bottom end, you can raise your credit score with some careful planning and discipline.

Here’s how to do it.

Set up auto-pay on your credit cards and student loans

Quick reminder: A credit score is a metric typically ranging from 300 to 850 that determines your likeliness to pay bills on time. Most lenders use the scoring model FICO, which dives deep into your credit report and weighs different factors to pop out your score.

Since payment history counts for 35% of that score, making payments on time—all the time—is one sure-fire way to boost it.

“If you're making late payments, that's the most damaging thing,” says Betterment Certified Financial Planner (CFP) Andrew Westlin.

If your credit card or student loan lender gives you the option to set up auto-payments online, do it. And if you can afford to make more than the minimum monthly payment, do that too — it’ll help you pay less interest in the long run.

FYI: COVID-19 forbearance for federal student loans ends on May 1st, 2022. If you were using auto-pay to pay for those loans, you’ll need to re-enroll before your next payment is due.

If you have a few years of student loan payments ahead of you, don't fret. Having a few different types of credit (like student loans and a mortgage) actually helps your credit score, since credit mix accounts for 10% of your total score.

Use less of your available credit

Credit utilization, or the amount of available credit you have relative to the amount of money you owe, accounts for 30% of your credit score.

A credit utilization of no more than 10% will keep you out of red-flag territory over the credit bureaus. So if you have a credit card with a $1,500 limit, for example, try to keep your balance to a maximum of $150.

The best move, of course, is to pay off your entire balance before every month. That way, you'll avoid interest payments. (Banks profit off the fact that few people do this.)

If you have high-interest debt, you may qualify for a low-interest personal loan or balance transfer card to pay it off — and raise your credit score in the process. The average credit card APR is 14.58%, according to the latest Federal Reserve data. Meanwhile, the average personal loan APR is 9.41%, according to Experian. A good credit score can help you snag one as low as 3%.

Another option is a balance transfer card, which has an intro APR of 0% for anywhere from 12 to 18 months. So if you pay your debt off within that intro period, you essentially remove the interest from your existing credit card debt and pay it off faster.

If you don’t have a long credit history, consider credit-builder loans — low-interest short-term loans that help establish credit.

Make sure you manage all of these options responsibly. Falling behind on loan payments hurts your credit score, and jumping from balance transfer card to balance transfer card will make a dent too.

Likewise, new credit inquiries account for 10% of your credit score, so don’t go overboard.

Sign up for free credit-building programs

Experian offers a free service called Experian Boost, which lets you link your bank account to your credit score, so payments on cell phone bills, utilities and streaming services can get factored into it. This is a good option for people with a short credit history (which, by the way, accounts for 15% of your credit score).

Other companies, like Credit Karma, offer free credit monitoring services that alert you when there is evidence of fraudulent activity or when there are changes to your credit report. This can help you detect discrepancies quickly and dispute them with the credit bureaus.

It might be worth tapping a credit counseling agency, too. These organizations hire certified professionals who can help you improve your credit. But make sure they're accredited by a major credit counseling organization like the National Foundation for Credit Counseling (NFCC).

According to Experian, a late credit card payment that's at least 29 days past its due date can stay on your credit report for up to seven years. You can ask your bank or lender to remove the late payment for you, but they’re not required to. And anyone who says they can make it go away faster is probably a scammer.

"In almost every one of those cases, the tactics that they're using are questionable and could actually get you in trouble,” says Bruce McClary, Senior Vice President, Membership & Communications at NFCC.

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