How to Improve Your Credit Score in 2017 (Despite Rising Rates)

how to improve your credit score

You probably know by now that your credit score has far-reaching effects on both your financial and life goals.

Looking to switch jobs? Some employers check job candidates’ credit histories. So if you want to get a better job, you might want to get better credit first.

Making a major purchase like a home or car? You’ll need good credit to qualify for a loan to help pay for it.

Want to be happier and minimize your stress? Improving your money management skills can also help you get your finances under control and reduce your money-related panic.

By focusing on cleaning up your credit and improving your score, you’ll clear obstacles that could keep you from reaching other important achievements, too.

Here’s why 2017 is the year to get started— and how to make it happen.

Borrowing will be more expensive in 2017

Loans and credit interest rates are rising and are expected to keep inching upward in 2017.

The Federal Reserve sets rates that are tied directly to many consumer rates, from auto loans to credit card. In Dec. 2016 the Fed raised its rate, and is set to raise rates three more times in 2017.

An upcoming Donald Trump presidency has also pushed up some rates. Mortgage rates, in particular, saw a large leap following his November election. Overall, it looks like borrowing money will become more expensive in 2017 and beyond.

And in the face of higher interest rates, building good credit is more important than ever. A high credit score can help you get lower interest rates and control your costs, despite rising rates.

Good credit is like an insurance policy

Your first financial line of defense against emergencies should be an emergency fund. Having cash on hand to cover urgent expenses can help you avoid debt.

But a good credit score can also act as a lifeline in a time of hardship or financial crisis. If you’ve exhausted your cash and need funds to stay afloat, a good credit score will grant you access to credit at reasonable interest rates when you need it most.

Avoiding and limiting debt is important, especially in times of financial distress. But knowing that you have good credit can be an extra layer of financial security. That’s why you should always improve your credit as much as possible.

A good credit score is a kind of insurance policy against awful rates. It will lower the cost of borrowing and protect you against high costs should you find yourself in a position where you need to take on debt.

7 ways to start building credit in 2017

Ready to learn how to improve your credit score? Whether you have no credit, bad credit or a good score that could be better, here are some ways you can give it a boost in 2017 and beyond.

1. Get a secured credit card

If you’re starting from square one with building credit, it can be tricky to find loans or credit options that are accessible and affordable.

Yet, you need to repay credit to demonstrate responsible behaviors. Kind of a Catch-22, am I right?

That’s where the secured credit card comes into play. You put up a cash deposit as collateral against the cash you’re borrowing. Usually, this deposit will be equal to your credit limit.

It’s easier to qualify for and get a secured credit card, especially if you keep your balance low and make payments on time. And when you use it responsibly, it’ll only be a matter of time before you start seeing your credit score rising.

2. Become an authorized user

Another way to qualify for credit in your name, even with poor credit, is to get a shared account. The easiest way to do this is to get added as an authorized credit card user.

You can ask someone you trust to add you to their credit card account, and it will be included as an account on your credit reports. As long as it’s in good standing, it should reflect well on your creditworthiness and help your score increase.

Just make sure the original cardholder is someone you trust who is responsible with their debts. Any over-borrowing or missed payments will hurt both of your credit scores.

3. Review your credit report

About 20 percent of consumers have a reporting error on at least one credit report, according to a 2013 Federal Trade Commission study. About a quarter of these errors were negative marks that hurt the consumer’s score.

It’s worthwhile to get copies of your annual credit reports and review the information on them. You can catch and dispute credit report errors. And these reports will often include insights into other factors that are affecting your credit.

4. Monitor your credit with free tools

Your free credit reports are helpful. But unfortunately, they do not include an actual credit score.

Luckily, there are several free credit monitoring tools that can be used to watch your credit score from month to month. It’s also possible this service is already offered by your bank or credit union as a benefit of your credit card or bank account.

Or, you can use a service like Credit Karma or Credit Sesame to check up on your score, track your progress, and receive strategies on how to build credit.

5. Pay down debt balances

Paying your debts ahead of schedule is another borrowing behavior that can positively affect your credit score.

Paying down credit card balances, in particular, can help you lower your credit utilization ratio — a key factor in how credit bureaus calculate scores. Working to prepay loans or other forms of debt can also help when you’re learning how to improve your credit score.

6. Request a credit limit increase

On top of paying down credit card balances, you can ask your credit card issuer to raise your credit limit.

Your credit limit is the total amount up to which you can borrow through the card. The higher it is, the lower any balance you carry will be in comparison.

This makes it easier to keep your credit utilization ratio lower. And maintaining a low credit utilization (around 20 percent or less) over time will keep your credit score trending upward.

7. Always pay bills on time

You can have decent credit without doing everything 100 percent right, all the time. But it’s nearly impossible to achieve and maintain good credit with derogatory remarks on your credit report thanks to late payments or delinquent accounts.

That’s why it’s important to make sure you’re always paying your bills on time, each month. Setting up automatic payments can help avoid forgetting or mixing up bill payments and due dates.

At the end of the day, find a system that works for you and use it to build good credit. It takes time to learn how to improve your credit, but by the end of 2017, you might be amazed by how far you’ve come.

Interested in a personal loan?

Here are the top personal loan lenders of 2017!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

2 Important Disclosures for Citizens Bank.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.19% APR to 11.32% APR (with AutoPay). SoFi rate ranges are current as of July 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 4.99% APR assumes current 1-month LIBOR rate of 1.22% plus 3.95% margin minus 0.25% autopay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2017, the one-month LIBOR rate is 1.23%. Variable interest rates range from 6.02% – 15.97% (6.02% – 15.97% APR) and will fluctuate over the term of your loan with changes in the LIBOR rate, and will vary based on applicable terms and presence of a co-applicant. Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with Citizens Bank at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, Citizens Bank checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.19% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$5,000 - $50,000Visit LendingClub
5.25% - 12.99%$2,000 - $50,000Visit Earnest
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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.