You probably know by now that your credit score has far-reaching effects on both your financial goals and your life goals.
Looking to switch jobs? Some employers will check your credit history. So if you want a better job, you might need better credit first.
Making a major purchase or hoping to refinance your student loans? You’ll need good credit to qualify for an affordable loan.
Trying to be happier and minimize your stress? Learning more about money management can help you get your finances under control and reduce your money-related anxiety.
By focusing on cleaning up your credit and increasing your credit score, you’ll clear obstacles that could keep you from reaching other important achievements too. Here’s why 2021 is the year to figure out how to improve your credit score — along with a few suggestions to get you started.
Borrowing will be more expensive this year
Loan and credit interest rates could inch upward in 2021.
The Federal Reserve sets target rates that are tied directly to the interest many consumers pay on auto loans, credit cards, and more. While the global pandemic in 2020 prompted a sharp rate cut, the monetary policy direction could very easily change direction in 2021.
In the face of higher interest, knowing how to improve your credit score is more important than ever. A high credit score can help you get lower interest rates and control your costs, no matter where market rates land.
How to improve your credit score in 2021
Whether you have no credit, bad credit, or decent credit that could be better, here are some ways you can give your credit score a boost in 2021 and beyond.
1. Get a secured credit card
If you’re starting from square one, it can be tricky to find credit options that are accessible and affordable. With little to no credit history, you’ll have a hard time getting new loans or lines of credit. In other words, you need credit to build credit.
That’s where a secured credit card comes into play. When you open a secured card, you put up a cash deposit as collateral. Usually, this deposit will be equal to your credit limit.
It’s easier to qualify for a secured credit card, especially if you keep your balance low and make payments on time. When you use credit responsibly, it’ll be only a matter of time before you see your credit score rise.
2. Become an authorized user
Another way to qualify for credit in your name is to get a shared account. The easiest way to do that is to get added as an authorized credit card user on someone else’s account.
Ask someone you trust to add you to their credit card account, and it will be included on your credit reports. As long as the account is in good standing, it should reflect well on your creditworthiness and help increase your score.
Make sure the original cardholder is responsible with their debts. Any overborrowing or missed payments will hurt both your credit scores.
3. Review your credit reports
Credit reporting errors are more common than you might think. According to the Consumer Financial Protection Bureau, 74% of credit reporting complaints relate to incorrect information on credit reports.
It’s worthwhile to get copies of your annual credit reports and review the information on them to catch and dispute credit report errors. Plus, your credit reports often will include insights into factors that affect your credit.
4. Monitor your credit with free tools
Your free credit reports are helpful, but they don’t include your actual credit score.
Luckily, there are several free credit monitoring tools to help you track your credit score from month to month. Your bank or credit union might offer free credit scores as a benefit of your credit card or bank account.
Or you can use a service such as 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 debt 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 your score. Working to prepay loans or other forms of debt also can 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 you can borrow through the card. The higher it is, the lower any balance you carry will be in comparison.
That makes it easier to keep your credit utilization ratio low. And maintaining a low credit utilization (around 20% or less) will keep your credit score trending upward.
7. Always pay bills on time
You can have decent credit without doing everything right all the time. But it’s nearly impossible to maintain good credit with derogatory marks on your credit report from late payments or delinquent accounts.
That’s why it’s important to pay your bills on time each month. Setting up automatic payments can help you stay on top of all your accounts and due dates.
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 also can act as a lifeline in a time of hardship or financial crisis. If you’ve exhausted your cash and need emergency loans to stay afloat, a positive credit history 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 you have a good credit score can be an extra layer of financial security. That’s why you should always be mindful of your credit score and be working to improve it.
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 2021, you’ll be amazed by how far you’ve come.
Interested in a personal loan?Here are the top personal loan lenders of 2022!
|Lender||APR Range||Loan Amount|
|5.74% – 20.28%1||$5,000 - $100,000|
|4.37% – 35.99%||$1,000 - $50,000|
|5.94% – 35.97%*||$1,000 - $50,000|
|99.00% – 199.00%2||$500 - $4,000|
|5.99% – 24.99%3||$5,000 - $40,000|
|7.99% – 20.88%4||$5,000 - $50,000|
|9.99% – 35.99%5||$2,000 - $36,500|
|10.68% – 35.89%6||$1,000 - $40,000|
|9.95% – 35.99%7||$2,000 - $35,000|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
Fixed rates from 5.74% APR to 20.28% APR APR reflect the 0.25% autopay discount and a 0.25% direct deposit discount. SoFi rate ranges are current as of 1/18/22 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. 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, income, and other factors. See APR examples and terms. 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.
2 Includes AutoPay discount. Important Disclosures for Opploans.
Direct Deposit required for payroll.
Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.
3 Includes AutoPay discount. Important Disclosures for Payoff.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 10.68% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 9.56% and a 5.00% origination fee of $300 for an APR of 13.11%. In this example, you will receive $5,700 and will make 36 monthly payments of $192.37. The total amount repayable will be $6,925.32. Your APR will be determined based on your credit at time of application. The origination fee ranges from 2% to 6% (average is 4.86% as of 7/1/2019 – 9/30/2019). In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,001 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Avant.
*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.
Based on the responses from 7,302 customers in a survey of 140,258 newly funded customers, conducted from August 1, 2018 – August 1, 2019, 95.11% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.