5 Ways to Increase Your Credit Score This Summer

As the saying goes, “nothing is certain but death and taxes”, but the same can hold true for your credit score.

Whether you need a car loan, home loan, or more buying power, you need to have a decent credit score to be approved for a loan and get lower interest rates.

I know that it’s often a subject that you don’t want to deal with, but if you take baby steps and don’t avoid your credit score it may be easier to increase it than you think.

Here are 5 ways to get you on your way to a better credit score:

1.  Don’t Avoid Your Credit Report – You are entitled to one free credit report per year issued by three national credit bureaus – Experian, Equifax, and TransUnion. Make sure you order your report and check what’s showing up. Oftentimes there may be errors on your report dragging your credit score down. Check to make sure there are no erroneously reported late payments, debts owed, or credit limits. Your credit score is determined by information reported on your credit report and plays an important role in what loans you qualify for and the interest you will pay.  

If you’re thinking about making a big purchase, like a home or car, request a copy of your credit report a few months in advance. Also, if you have any small unpaid bills like medical bill copays that often pop up on credit reports, call the medical service provider or collection agency to pay those off first and ask them to remove them from your credit. You would be amazed at how much a few outstanding $10 co-pays can lower your score.

Building a strong credit score is essential for improving your financial health, as it is one of many factors that could help you qualify for better loan terms, credit card offers, and other financial products. 

Credit Karma Money^TM Spend members can apply for Credit Builder,¹ a tool that could help improve your credit score. Putting aside just $20 per month into the Credit Builder plan could set you on a course towards better credit² – You could even add 21 points to your score on average in 3 days of starting the plan!³

A connected paycheck⁴ or Qualifying Direct Deposit⁵ is required. You’re eligible to apply for Credit Builder if your TransUnion credit score is 619 or below at the time of application.

Credit Karma also offers other financial services such as credit monitoring, credit score tracking, and personalized recommendations for your future credit card or loan needs. 

2.  Pay Down Credit Card Debt – Credit card debt and maxed out credit cards are one of the major factors that can decrease your credit score. The larger percentage of your revolving credit you’re using, the worse it is for your credit score. Try to keep your outstanding balances below 30% of your credit limit and below 10% is even better.

If you have a lot of credit card debt, make a list of your outstanding credit card balances and pay off the lowest one first and work your way to the highest. As you pay off the smallest credit card debt, you can take the money you would have paid on the lower balances just paid off and put it towards the next highest balance. This trick, known as the debt snowball method, really works in helping you pay down your debt and increasing your credit score. Once you’ve paid off your credit card debt make sure you don’t close your credit cards since closing them can also lower your credit score.

3.  Request Removal of Late Payments – If there is an outstanding debt that was erroneously reported or you really did forget to pay a bill, call the company who reported the late payment and request removal of the derogatory information. The creditor will request a letter stating why you were late or why there is an error. They will let you know whether or not they will remove the derogatory information.

If your request is approved, always get the approval in writing and keep it for your records. I can’t tell you how many people I’ve helped with their credit who went to buy a home and found an old derogatory that was once removed had reappeared.

4.  Don’t Clear Up to Charge Up – Make sure you don’t spend all that time cleaning up your credit and increasing your credit score to get that long awaited home loan approval and then make a huge purchase on credit.

Lenders make decisions based on your credit score and report at the time of application, but they will run your credit again after you get loan approval, but just prior to your loan closing. If a new purchase pops up it can impact your loan. One of my old clients went out and purchased a new Corvette after I helped him clean up his credit for his home loan. The lender did run his credit right before the loan closed, which changed his debt-to-equity ratio and impacted his loan.

5. Improve Your Payment History – With everything that’s happened the last couple of years you may be having difficulty paying your bills. Don’t hesitate to give your lender or credit card company a call and let them know about any challenges you are facing. If you experienced some difficulty and had missed or late payments, the best thing you can do is to start paying your bills on time. The longer you pay your bills on time after being late the more your credit score will increase. Recent good payment patterns will eventually overshadow the bad.

Improving your credit score doesn’t happen overnight, but following these tips will have you on your way to a high credit score giving you lower interest rates and more money in your pocket.

¹ Connecting an external bank account, connecting a paycheck or direct depositing a one time total of at least $750 in a single calendar month is required for activation. Your connected external bank account, connected paycheck or direct deposit(s) must be received in the 2 calendar months prior to application or within a calendar month 90 days after application submission to activate your plan. Credit Builder plan requires you to open a line of credit and a savings account, both provided by Cross River Bank, Member FDIC. Credit Builder is serviced by Credit Karma Credit Builder. Members with a TransUnion credit score of 619 or below at the time of application may be prompted to apply for Credit Builder. If your score increases over 619, you may no longer see these prompts.

² You may enroll in the optional AutoSave Program, which allows you to automatically save as little as $10 per paycheck if you contribute biweekly or semimonthly and as little as $20 per paycheck if you contribute monthly. If you do not enroll in AutoSave, any contribution you make to Credit Builder may not be less than $10.

³ From December 2023 to April 2024, members with a TransUnion credit score of 619 or below who opened a Credit Builder plan and had it reported on their TransUnion report saw an average credit score increase of 21 points in 3 days of activating the plan. Late payments and other factors can have a negative impact on your score, including activity with your other credit accounts.

⁴ Credit Karma Money partners with Pinwheel to securely connect you with thousands of payroll providers.

⁵ A Qualifying Direct Deposit (“QDD”) is a single deposit into your Credit Karma Money Spend Account that is initiated from outside of the Credit Karma Money Platform. Transactions that are not QDD include: Promotional deposits into your Spend account made by Credit Karma; transfers from your Save account; or transfers initiated from the Credit Karma Money platform.