Lift Your Credit Score

Financial Skill

ONE NUMBER, MANY DOORS

In early 2025, more than 2.2 million student loan borrowers saw their credit scores fall by over 100 points. After a pause of more than three years, missed federal student loan payments began appearing on credit reports again. Many people who once qualified for car loans and mortgages now risk higher rates or outright denials. Additionally, some of these young people struggled to find a good job since many employers require a good credit score. Our credit score is essential for our financial success.

Your credit score is a three-digit number that tells lenders how likely you are to repay borrowed money on time. The FICO Score, the most widely used version, ranges from 300 to 850. This number reaches far beyond credit cards. It helps determine whether you get a car loan or a mortgage and what interest rate you pay. Landlords often check it before they rent you an apartment, and some employers review credit reports before they hire.

Yet the national average FICO Score was 714 in October 2025, well below the 760 that many lenders require for their best rates. On a 30-year mortgage, that gap can cost tens of thousands of dollars. The good news is that your score is not a fixed grade. The five steps below can help you lift it and keep it high.

DECODE THE SCORE

Before you can raise your score, you need to understand how it is calculated. Your credit report is a detailed record of your borrowing history. Three national credit bureaus maintain these reports: Equifax, Experian, and TransUnion. Your credit score is a number that a formula calculates from one of those reports. Think of the report as your transcript and the score as your grade point average.

You actually have more than one score, because companies use different scoring models. The main rival to FICO is VantageScore, which also ranges from 300 to 850. Its role is growing. In July 2025, the Federal Housing Finance Agency announced that lenders could use VantageScore for mortgages sold to Fannie Mae and Freddie Mac. These two companies back most home loans in the United States. Because models differ, watch the direction your score moves rather than small gaps between different scores.

FICO weighs five factors. Payment history counts for 35 percent. Amounts owed count for 30 percent. The length of your credit history counts for 15 percent. New credit and your mix of accounts each count for 10 percent. Payment history and amounts owed together make up 65 percent, so focus on them first.

NEVER MISS A PAYMENT

Since payment history carries the most weight, your first goal is to pay every bill on time. Most lenders report a payment as late once it is 30 days past due. That mark can stay on your report for up to seven years. If you miss a due date by a few days, pay immediately. You will likely owe a late fee, but you can usually keep the late payment off your credit report.

You should automate your payments. Set up automatic payments for at least the minimum due on every credit card and loan. Then pay the remaining balance manually. Schedule each automatic payment for a few days after payday, so the money is already in your account.

Watch your smaller bills, too. In 2025, FICO announced scoring models that can include buy now, pay later loans. These loans typically split a purchase into four payments over six weeks. On-time payments may help some borrowers, while missed installments could hurt. Treat every installment like any other bill. If you know you cannot make a payment, call your lender before the due date and ask about a hardship repayment program.

MANAGE YOUR UTILIZATION

Once your payments run automatically, turn to the second largest factor: how much you owe. This factor depends heavily on credit utilization, the share of your available credit card limits that you are using.

To calculate it, divide your total card balances by your total credit limits. With a combined limit of $10,000 and balances of $2,500, your utilization is 25 percent. A common guideline is to stay below 30 percent. People with the highest credit scores, however, often stay below 10 percent.

Timing matters as much as the amount. Most issuers report your balance once a month, usually on the statement closing date. Suppose you charge $2,000 on a card with a $2,500 limit. Your report may show 80 percent utilization even if you pay in full by the due date. To lower the reported balance, make a payment a few days before your statement closes.

Many people believe they must carry a balance to build credit. That belief is false. Paying your full balance every month builds the same record of on-time payments without interest charges. If you already carry debt, pay the minimum on every account. Then send every extra dollar to the card with the highest interest rate. This approach, called the avalanche method, saves the most money and often lifts your score.

PLAY THE LONG GAME

Length of credit history and new credit together make up a quarter of your FICO Score. Both factors reward patience.

If you have no credit history, you need credit to build credit. Two tools can help. The first is a secured credit card. You give the issuer a refundable deposit, which usually becomes your credit limit. Use the card for one small recurring bill and pay it in full each month. If you consistently pay your balance, your issuer will likely return your deposit and switch you to a regular credit card. The second tool is to become an authorized user on the card of a parent or spouse who pays on time. Their account history can then appear on your report.

Your rent may count as well. VantageScore 4.0 can include rent and utility payments when they are reported to a bureau. Ask your landlord whether it reports rent payments.

Once you have credit, protect its age. Keep older accounts open, because closing a card shortens your history and reduces your available credit. Use an old card without an annual fee for a small purchase every few months to keep it active.

Finally, apply only for credit you need. Each application usually triggers a hard inquiry, which may lower your score by a few points. When you shop for a mortgage or car loan, compare rates within two weeks. FICO typically counts several inquiries for the same type of loan within a short window as one.

GUARD YOUR REPORTS

Strong habits work best when your reports are accurate. In a Federal Trade Commission study, one in five consumers found an error on at least one credit report. Visit AnnualCreditReport.com, the only website federal law authorizes for free reports. All three bureaus offer free weekly reports there.

Read each report line by line. Look for accounts you do not recognize, late payments you made on time, and wrong balances. If you find an error, gather proof, such as bank statements. Then file a dispute with each bureau that shows the error. The bureau generally must investigate within 30 days.

Protect your reports from fraud as well. In 2017, a data breach at Equifax exposed the personal information of about 147 million people. A credit freeze offers strong protection against this kind of theft. It is free at all three bureaus, and it blocks most new lenders from viewing your report until you lift it.

Between reports, track your score with free tools from your bank or card issuer. Spend ten minutes each month confirming your payments, checking your balances, and noting your score.

THE TAKEAWAY

Your credit score is not a mystery or a fixed grade. It results from your financial habits, and you can improve it. Learn how the score works. Pay every bill on time, and automate your minimum payments. Keep your balances low, ideally below 30 percent of your limits. Build your history patiently, and apply only for credit you need. Finally, check your reports, dispute errors, and freeze your credit.

Begin this week with two small actions. First, go to AnnualCreditReport.com, download one credit report, and check it for errors. Second, set up automatic minimum payments on every credit card and loan you have. Both tasks take less than an hour. Over time, they can save you thousands of dollars and open doors to the home, car, and career you want.