Advertiser Disclosure

The Good Credit Checklist: 21 Things You Have To Get Right to Build Better Credit

Whether you’re just beginning your credit card journey or you have a few dings on your credit report, you may find that your current credit outlook significantly limits your borrowing power. Fortunately, in either case, there are steps you can begin to take right away to build better credit. Use this checklist as a guide to raising your credit score and improving your overall financial well-being.

1. Understand how credit scores and credit reporting agencies work

It’s important to understand the credit scoring system so you can take steps to build your credit. Credit scores range from 300 to 850. Lower scores are considered poor (300-579) or fair (580-669), and higher scores are considered good (670-739), very good (740-799) or excellent (800-850). Higher scores improve your borrowing power and the terms that lenders will offer you. In fact, some lenders (especially auto lenders and mortgage lenders) may require a specific minimum credit score from their borrowers before they will authorize a loan.

2. Become an Authorized User

If you’re brand new to credit cards, getting a decent credit card offer can be challenging. Because you have no credit history, it can be difficult for lenders to evaluate your reliability as a borrower. But if you can hitch your wagon to somebody in your life who is a reliable borrower, it could help you to establish credit for the first time. According to an article from NerdWallet, “If a relative or friend has a credit card account with a high credit limit and a good history of on-time payments, ask to be added as an authorized user. That adds the account to your credit reports, so its credit limit can help your utilization. Also called “credit piggybacking,” authorized user status allows you to benefit from the primary user’s positive payment history.”

3. Get a Secured Card

Another good option for credit newcomers is the secured credit card. For those without any credit history, a secured card is a way to begin to build a score. As a borrower, you are required to make a cash deposit in a sum equal to your credit limit. This gives you access to an account whose activities are reported to the credit bureaus, so responsible usage of this card and on time payment of your monthly bills can help to establish a credit score, and ultimately qualify you for a more traditional credit card account. As an article from NerdWallet explains, “The goal here is not just having another card, although that can help your score a bit by improving your depth of credit. Rather, your aim is to build a record of keeping balances low and paying on time.”

4. Get a credit monitoring service

Before you can build or repair your credit, you need to know what your credit report looks like. Sign up for a credit monitoring service like Credit Karma or Free Credit Report so you can begin keeping track of your credit outlook.

5. Review your credit reports in full

Now that you have a credit monitoring service, take a deeper look at everything in there. There are many factors that go into having a good credit score, and most of them can be seen in your report. Take note of how many open credit accounts you have, the sum total of credit card balances you are carrying, and your payment history. These factors all help to calculate your credit score range so get to know them.

6. Dispute errors in your credit report

Another reason it’s so important to review the contents of your credit reports is because you may find errors. Whether you see charges that you never made, debts that you know you’ve paid off, or unfamiliar credit accounts that may be evidence of identity theft, you have a right to dispute these charges. When disputes are resolved in your favor, it can help to boost your score.

7. Spread Your Disputes Out Over Time

While your credit monitoring services will give you the ability to dispute any charges that you believe are erroneous or indicative of fraud, there are limits to how aggressive credit reporting agencies will be about investigating claims they view as frivolous. This is why, advises an article from Go Banking Rates, you may want to stagger the pace of your disputes. The article notes that  “According to TransUnion,  by law credit agencies can refuse to investigate a dispute if they seem to be excessive, or irrelevant. This red flag can be avoided by disputing inaccuracies one at a time, instead of all at once.”

8. Deal With Collection Agencies

While there are some things you may be able to dispute on your credit report, there are other negative items that may be accurate. In this case, it’s up to you to begin mitigating the damage. This is especially true if you have accounts that are currently owned by collections companies. According to an article from NerdWallet, “Paying off a collections account removes the threat that you will be sued over the debt, and you may be able to persuade the collection agency to stop reporting the debt once you pay it. You can also remove collections accounts from your credit reports if they aren’t accurate or are too old to be listed.”

9. Improve Your Credit Utilization Ratio

Another factor that contributes directly to your score is your credit utilization ratio. This is the amount of credit card debt that you are carrying relative to your overall credit limit. Ideal credit utilization ratio is 30%. You can take steps to improve this ratio by paying off your debts more aggressively. Nothing produces faster credit score improvements than eliminating existing balances.

10. Ask Your Credit Card Issuers to Raise Your Limits

Of course, getting rid of those balances may be far easier said than done. Fortunately, there is one way to instantly improve your credit utilization ratio without spending an extra dime. You have the right to reach out to your credit card issuers to ask for higher credit limits. If you have a good payment history and a strong track record with your issuer, there’s a good chance this credit limit raise will be granted, which can result almost immediately in higher credit scores.

11. Open a New Credit Card Account

You can also improve your credit utilization ratio by opening a new credit card account. Find a credit card offer with favorable terms that can function as your emergency account. Ask for a robust credit limit on this account. The result will, once again, be an improvement in the balance between your credit card debts and your available credit.

12. Always Make On Time Payments

Your payment history is a major factor in determining your credit score ranges. And the simplest way to create a strong payment history is to start now. Always pay your bills on time. You will eventually see this good track record reflected in a higher credit score.

13. Report Your Rent Payments

As long as you are successfully making these on time payments, you should be getting credit for them. This goes for your rent as well. Rent payments aren’t usually reported to the credit reporting agencies, but they can be. According to the article from NerdWallet, “Rent reporting services can add your on-time rent payments to your credit reports. Rent payments are not considered by every scoring model — VantageScores include them but FICO 8 does not, for example. Even so, if a would-be creditor looks at your reports, rent records will be there, and a long record of consistent payments can only help.”

14. Report Utilities and Other Services

Rent isn’t the only non-credit item that you can report. In fact, with services like Experian Boost, you may be able to raise your credit scores just by making regular on time payments for your energy, phone services, cable, and more. According to the article from NerdWallet, “you link bank accounts to the free Boost service, which then scans for payments to streaming services, phone and utility bills as well as eligible rent payments. You choose which payments you want added to your Experian credit report. If a creditor pulls your FICO 8 using Experian data, you get the benefit of that additional payment history.” Use this application and maximize your chances of raising your credit scores just by paying your regular monthly living expenses.

15. Carry a Zero Balance

Carrying a balance forward from month to month will not only cost you tons of money in interest charges, but it can also be reflected in your credit scores. One of the best things you can do to raise your credit scores quickly is to make purchases and payments immediately. In other words, if you can use your credit card to purchase items that you can afford to pay off immediately, this can help to improve your score in relatively quick order.

16. Pay Off Balances Early

While you may not always be able to pay off your balance in full every month, it certainly helps if you can at least pay it off early. In other words, instead of making minimum payments every month, pay your balances aggressively. Settling these balances quickly will be reflected in your improved score.

17. Avoid Using Cards With a Balance

If you’re working to build better credit, it’s important that you no longer accumulate debt, especially by using accounts that are already carrying a balance. According to the article from Go Banking Rates, you should “Stop using credit cards that carry an existing balance if you want to boost your credit score. Charging credit cards that already have balances will only further increase your credit utilization ratio, which is something you don’t want to do.” Indeed, you can quickly find yourself in deeper debt, subjected to growing interest charges, and further away from raising your credit scores.

18. Explore Balance Transfers

Not only should you avoid using cards with a balance, but you may want to take steps to eliminate those balances more aggressively. If a high interest rate is making this harder to achieve, you may be able to transfer your balance to a credit card offer with a 0% promotional APR. While this rate will usually only last for 6 to 12 months, it may help you to eliminate your balances faster by eliminating those heavy interest charges for a limited time.

19. Avoid Credit Card Rejection

When you apply for a credit card, this triggers a hard inquiry, which can temporarily hurt your credit score. Once you are approved for this credit card, the raised credit limit will usually be more than enough to reverse those negative effects. But that is not the case if your credit card application is rejected. That’s why, according to an article from Wollit, it’s important to know that you will be approved for a new card before submitting to that hard inquiry. Wollit notes that “Before you apply, many lenders now give the option of a soft search so that you can see the likelihood of you being accepted before a full credit check is carried out.” If you are in the process of building credit, this step could help you avoid unnecessary setbacks.

20. Check Your Credit Scores Regularly

Numerous factors will cause fluctuations in your credit scores. Occurrences like hard inquiries, mounting debt or delinquent accounts can lower your score. Conversely, aggressive debt repayment, successful disputes and other credit repair efforts can improve your score. Stay on top of these scores by checking in regularly. This will put you in the position to act quickly to correct occurrences that might set your score back a few points.

21. Be Patient

You may be on the road to building better credit, but this process can take time, especially if you have negative items on your report. An article from Go Banking Rates notes that “Some negative items, including late payments, collections and foreclosures, can remain on your credit report for up to seven years, according to MyFICO. A Chapter 13 bankruptcy remains on your credit history for seven years as well, but a Chapter 7 stays on your report for 10 years. Unpaid tax liens can stay on your credit report indefinitely, so it’s important to fix your credit score as soon as possible.”

In other words, seeing real improvements in your credit scores can take time. Follow the steps on this checklist, keep a close eye on both your debt and your spending, and you will see a better credit score over time.


Speaking of keeping a close eye on your spending, did you know there are all kinds of completely free apps that can help you keep track of your budget and your spending? Check out our favorite spending apps here!