What moves your credit score and what doesn't
Your credit score is a number between 300 and 850 that lenders use to decide whether to lend you money and at what interest rate. It is built from five categories of information in your credit report: payment history (35 percent of the score), amounts you owe relative to your credit limits (30 percent), length of credit history (15 percent), mix of credit types (10 percent), and recent credit inquiries (10 percent). The three major credit bureaus—Equifax, Experian, and TransUnion—each maintain their own version of your report and calculate their own score.
The score moves when the information in your report changes. Paying a bill on time adds to it. Missing a payment hurts it. Paying down a credit card balance helps. Opening a new account temporarily lowers it. Closing an old account can lower it. The effect of each action depends on your current score and the rest of your report. A single late payment damages a 750 score more than it damages a 600 score, because the higher score depends on a clean payment record.
What does not move your score: your income, your employment history, your savings account balance, or whether you check your own credit report. Checking your own report is a "soft inquiry" and leaves no mark. When a lender checks your report to decide whether to lend to you, that is a "hard inquiry" and does show up, but only for a few months.
Key Takeaways
- Payment history is 35 percent of your score, so the single fastest way to raise it is to stop missing payments and let old late payments age off your report.
- Credit utilization—the percentage of your available credit you are actually using—is 30 percent of your score, and paying down balances raises it faster than increasing your credit limits.
- You can obtain a free copy of your credit report from each bureau once per year at annualcreditreport.com, and you should check it for errors before you start trying to raise your score.
- Closing old credit cards or paying off a loan early can temporarily lower your score because it changes your credit mix and available credit, even though both are financially sound decisions.
- Raising a score from 580 to 650 is faster than raising it from 750 to 800, because the factors that matter most (payment history and utilization) have more room to improve at lower scores.
Stop the damage: why payment history matters most
A single missed payment stays on your credit report for seven years from the date you first missed it. It damages your score when ready and continues to damage it for months, but the damage fades over time. A missed payment from two years ago hurts less than a missed payment from two months ago. A missed payment from six years ago hurts almost nothing.
The fastest way to raise your score is therefore to stop missing payments now. Set up automatic payments for at least the minimum due on every account you have—credit cards, car loans, student loans, medical debt, utility bills. If a bill is not yet in collections and you have missed it, contact the creditor and ask whether they will accept a payment now. Some will remove the late mark from your report if you pay within 30 days of the due date; most will not, but they will stop the damage from getting worse.
If you have missed payments that are already reported, you cannot erase them, but you can write a letter to the credit bureau disputing the accuracy of the entry if it is wrong—if the date is incorrect, if the amount is wrong, or if you have evidence you paid on time. The bureau has 30 days to investigate. If the creditor cannot verify the entry, the bureau must remove it. This works only if there is a genuine error; disputing accurate information will not remove it.
Lower what you owe relative to your limits
Credit utilization is the total amount of revolving credit you are using divided by the total amount available to you. If you have three credit cards with limits of $1,000, $2,000, and $3,000, your total available credit is $6,000. If you are carrying balances of $300, $400, and $500, your utilization is $1,200 divided by $6,000, or 20 percent. Scores generally improve when utilization is below 30 percent and improve more when it is below 10 percent.
You can lower utilization in two ways: pay down the balances you are carrying, or increase your available credit. Paying down balances is almost always the better choice because it reduces the interest you are paying and does not create a hard inquiry on your report. Requesting a credit limit increase creates a hard inquiry, which temporarily lowers your score by a few points, and the benefit only appears if you do not use the extra credit.
If you have one card with a high balance and others with low or zero balances, focus on the high-balance card first. The bureaus look at both your overall utilization and your per-card utilization, so a card at 80 percent of its limit hurts your score even if your overall utilization is low. If you cannot pay down the balance quickly, call the issuer and ask for a limit increase on that card; this lowers the utilization on that specific card without requiring you to pay anything.
Check your report for errors before you start
You are may have access to to one free credit report from each of the three bureaus every 12 months. Go to annualcreditreport.com, which is the official site run by the three bureaus themselves. You will need to verify your identity by answering security questions or providing a Social Security number. Do not use a third-party site that offers "free" reports; many of these sites sign you up for paid monitoring services.
When you receive your reports, look for accounts you do not recognize, balances that do not match what you think you owe, and late payments on accounts you paid on time. If you find an error, file a dispute with the bureau that reported it. You can do this online, by mail, or by phone. The bureau has 30 days to investigate and must contact the creditor to verify the information. If the creditor cannot verify it, the bureau must remove it from your report and send you a corrected copy.
Errors are common. A payment might be reported late because it arrived on a weekend and was not posted until Monday. An account might be listed twice because of a merger or because a debt was sold to a collection agency. A balance might be wrong because a payment has not posted yet. None of these are your fault, and disputing them can raise your score by 10 to 100 points if they are removed.
Understand why some good financial moves lower your score temporarily
Paying off a loan in full lowers your score slightly because it removes an active account from your credit mix. Credit mix—the variety of credit types you have—is 10 percent of your score. Having a car loan, a credit card, and a student loan is better for your score than having only credit cards, even though having fewer debts is better for your finances. Once the paid-off loan ages off your report (usually after seven years), the damage disappears.
Closing a credit card lowers your score because it reduces your available credit, which raises your utilization percentage. If you have $5,000 in balances and $10,000 in available credit, your utilization is 50 percent. If you close a card with a $3,000 limit, your available credit drops to $7,000 and your utilization becomes 71 percent, even though you did not charge anything new. The damage is temporary—it fades as you pay down balances—but it is real.
explore for new credit creates a hard inquiry and temporarily lowers your score by a few points. Multiple hard inquiries in a short time (within 45 days for most scoring models) count as a single inquiry if they are for the same type of credit, like shopping for a car loan or a mortgage. But explore for several credit cards in a month creates multiple inquiries and multiple new accounts, which can lower your score by 20 to 50 points. The damage fades after a few months as the inquiries age.
How long it takes to see movement
The speed at which your score rises depends on where you are starting from and what you change. If you have recent late payments and high utilization, you can see a 50-point improvement in two to three months by stopping the late payments and paying down balances. If your report is clean but your score is low because of old negative information, improvement is slower—old late payments fade gradually, and you cannot speed up the process.
Credit bureaus update their records when creditors report new information, which usually happens once a month per account. Your score is recalculated when the bureaus update your report. So if you pay down a credit card balance today, that change might not appear on your report for 30 days, and your score might not update for another few days after that. Do not expect to see movement when ready.
The lower your starting score, the faster it can rise. A score of 550 can jump 100 points in six months if you stop missing payments and pay down balances. A score of 750 might take a year to reach 800 because the factors that move it most (payment history and utilization) are already in good shape. This is why raising a low score is often faster than raising a high one.
What does not work, and why
Credit repair companies claim they can remove negative information from your report or raise your score faster than you can on your own. They cannot. Anything a credit repair company can do legally—dispute errors, negotiate with creditors, help you understand your report—you can do yourself for free. Anything they claim will remove accurate negative information is illegal. The Federal Trade Commission has shut down dozens of these companies for fraud.
Becoming an authorized user on someone else's credit card account does not reliably raise your score. Some issuers report authorized user accounts to the credit bureaus; others do not. Even when they do, the benefit depends on the account's history and the issuer's policies. This tactic is sometimes used by people trying to artificially inflate their score before explore for a loan, and lenders are aware of it.
Paying off collections accounts does not remove them from your report, though it does change their status from unpaid to paid. A paid collection still damages your score, though less than an unpaid one. If a collection agency offers to remove the account in exchange for payment, get that agreement in writing before you pay. Some agencies will agree; others will not.
Frequently Asked Questions
How often does my credit score update?
Your score updates when the credit bureaus receive new information from creditors, which usually happens once a month per account. So a payment you make today might not show up on your report for 30 days, and your score might not recalculate for a few days after that. You will not see movement when ready, but you should see it within 30 to 45 days of making a change.
Will paying off old debt raise my score?
Paying off old debt that is still on your report will raise your score because it lowers your utilization and changes the account status from active to paid. Paying off very old debt—something from five or six years ago—has less impact because it is already aging off your report. Paying off a collection account changes it from unpaid to paid but does not remove it.
Can I raise my score without a credit card?
Yes, but more slowly. Credit cards are the easiest way to build utilization history because you can use them and pay them down monthly. Without a credit card, you can raise your score by making on-time payments on loans, utility bills, and other accounts that report to the bureaus. Ask your creditors whether they report to the bureaus before you assume a payment will help your score.
What is a good credit score?
Scores above 670 are generally considered good, and scores above 740 are considered very good. Most lenders offer their best interest rates to borrowers with scores above 760. The exact threshold varies by lender and loan type. A score of 620 might may have access to you for a car loan but not a mortgage; a score of 700 might may have access to you for both but at a higher rate than a score of 750 would.
How long do late payments stay on my report?
A late payment stays on your credit report for seven years from the date you first missed the payment. It damages your score most in the first year and gradually damages it less as it ages. After seven years, it must be removed from your report. Collections accounts also stay for seven years from the original delinquency date, not from when the collection agency bought the debt.