Your credit score has massive power over your life. The three-digit number can open a lot of doors, including helping you rent an apartment and giving you access to a higher tier of rewards credit cards.
But if your credit score is sub-par — Experian classifies 300-579 as a "poor" score and 580-669 as "fair" — it can also hold you back. Having worse credit will get you higher interest rates>1. Check your credit report for any errors
The first step to increase your credit score is making sure that there aren't any mistakes dragging it down. Do this by requesting your credit report. Currently, individuals are allowed to check their reports from each of the three major credit bureaus — Equifax, Experian and TransUnion — for free every week through April 20, 2022.
"People would be really surprised at how often there are errors>2. Improve your credit utilization rate
One of the biggest factors in your credit score — accounting for as much as 30% of it — is your credit utilization rate. That's the percentage of your line of credit that you are using. For example, if you have $10,000 in available credit and you put $5,000 worth of purchases>3. Start as soon as you can
While one missed payment can quickly tank your score, it takes slightly longer than that to fix it. That's why it's important to pick up positive habits as early as you can and stay consistent with them throughout the year.
"Most credit situations are fixable within a six to 12 month period," says Shannon McLay, founder and CEO of The Financial Gym. "We've seen anywhere from 30- to 100-point credit changes happening over that time period."
If you're starting the year with a higher credit score and want to make it exceptional, it will likely be more difficult to see a large gain over same period of time that someone with a lower score would.
"It's actually easier to go from 620 to 720 than it is for 720 to get to 820," Rubenstein says.
No matter what, the best thing you can do is to start early.
"The more you can show positive and consistent payment history, the better," Rubenstein says. "Those things are going to help you build your credit."
