Millennial Money: 5 ways to build your credit score in 2023

Dec 26, 2022, 2:00 PM | Updated: Dec 27, 2022, 4:01 am

You’ve got big financial plans for 2023. Maybe they include buying a home or car, or getting a new travel rewards credit card to help pay for your next trip. There’s a key piece of these plans you may not have considered: building your credit score.

A better credit score can expand your access to credit and make borrowing more affordable. For example, having a score of 700 versus 650 could mean getting approved for a new car loan at 4.9% interest instead of 7.25% interest.

So what can you do to get your score in shape? Here are a few ways experts suggest boosting credit in the new year.

1. PAY OFF HOLIDAY DEBT

When holiday festivities conclude, you might be stuck with leftover debt from food, travel and gift purchases (on top of regular bills, of course).

If missed payments or large balances carry over into the new year, your credit score could suffer. Payment history (whether you pay bills on time) and credit utilization (the amount of credit you’re using compared with your limit) are the two biggest factors that affect your credit score.

So make a plan to pay down your holiday debt. Start by reviewing your account statements to understand exactly how much you owe and how much you can afford to budget for repayment, says Jeff Arevalo, a financial wellness expert at GreenPath, a nonprofit credit counseling agency based in Farmington Hills, Michigan.

“If you’re only paying minimums, unfortunately, it’s going to take you a longer time to pay the debts. Interest rates have increased, and so paying minimums is not a recipe for success,” Arevalo says. Knowing your budget allows you to see if you’re in a position to make more than the minimum payments on your debts, he adds. Perhaps you earned an extra paycheck in December or a holiday bonus that you can put toward debt.

One strategy to consider is paying above the minimums on your most recently opened accounts first, says Todd Christensen, education manager at Money Fit, a nonprofit debt relief service based in Boise, Idaho. Christensen says this strategy, which he refers to as “debt landslide,” can build credit since FICO and VantageScore scoring companies give more weight to activities on new and recently used accounts.

“Paying down balances on new accounts will help build credit faster than paying down the balance on all accounts,” Christensen says.

Protect your credit score in 2023 by setting up automatic payments or payment reminders to help you pay bills on time going forward.

2. DON’T APPLY FOR CREDIT TOO OFTEN

Applying for new credit multiple times in a short period can raise a red flag and negatively impact your score. With each application, you’ll get a hard inquiry on your credit that may cause your score to drop a few points.

“If I’m applying for a credit card once or twice a month, that’s kind of showing the credit scoring model that I’m desperate,” says Kate Mielitz, an accredited financial counselor in Olympia, Washington. “Desperation is not a good look in credit.”

Lenders that view you as a risk may reject your application or offer less desirable terms, such as high interest rates. Think carefully before applying, especially if you plan to make a decision involving credit — like applying for a mortgage — within the next few months.

3. RAISE YOUR CREDIT LIMIT

Ask issuers to increase your credit limits on existing accounts. Higher limits will lower your utilization, as long as your spending doesn’t creep up. To build your score, experts recommend keeping your utilization under 30% of your limit.

4. MAKE RENT AND UTILITY PAYMENTS COUNT

Not all credit scoring models factor rent or utility payments into your score because this information typically isn’t on your reports. But if you lack credit history, there are services you can use to report on-time payments and build credit. Some rent reporting services, like Piñata , are free. Others may charge you or your landlord.

“The thing to watch for is fees, that’s the main thing, and that they actually report to one or more credit reporting agencies,” Christensen says.

Experian Boost, a free feature from Experian, one of the three major credit bureaus, gives you the option to report rent, utility and streaming service payments made from your connected bank accounts.

5. INSPECT YOUR CREDIT REPORTS

Credit reports are records of your credit history. Staying on top of your reports is crucial because scoring companies use the information on them to create your scores. If a mistake on a report is dragging your score down, such as a reported late payment that you actually paid on time, take quick action to dispute the error with the pertinent credit bureau.

“Some people worry that the report is kind of long, there’s a lot of abbreviations and things like that. But like with anything in life, I think it’s not as intimidating once you kind of get used to it,” Arevalo says.

Make checking your credit reports a regular habit. AnnualCreditReport.com offers free weekly reports through the end of 2023.

___________________

This column was provided to The Associated Press by the personal finance website NerdWallet. Lauren Schwahn is a writer at NerdWallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.

RELATED LINKS:

NerdWallet: How to improve credit fast https://bit.ly/nerdwallet-raise-credit-score

AnnualCreditReport.com: Request your free credit reports https://www.annualcreditreport.com/index.action

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

The logo for OpenAI, the maker of ChatGPT, appears on a mobile phone, in New York, Tuesday, Jan. 31...
Associated Press

Cheaters beware: ChatGPT maker releases AI detection tool

ChatGPT is trying to curb its reputation as a freewheeling cheating machine with a new tool that can help detect if artificial intelligence wrote it
1 day ago
A view of a placard as ambulance workers stand on the picket line outside Leeds Ambulance Station i...
Associated Press

Day of disruption in UK as thousands join mass walkout

LONDON (AP) — Thousands of schools in the U.K. are closing some or all of their classrooms, train services will be paralyzed and delays are expected at airports Wednesday in what’s shaping up to be the biggest day of industrial action Britain has seen in more than a decade, as unions step up pressure on […]
1 day ago
Police officers escort Andrew Tate, right, handcuffed to his brother Tristan Tate, to the Court of ...
Associated Press

Andrew Tate to appeal second 30-day detention

BUCHAREST, Romania (AP) — Andrew Tate, the divisive influencer and former professional kickboxer who is detained in Romania on suspicion of organized crime and human trafficking appeared at a court in Bucharest on Wednesday to appeal against a second 30-day extension of his detention. Tate, 36, a British-U.S. citizen who has nearly 5 million followers […]
1 day ago
In this photo provided by the Department of Fire and Emergency Services, its members search for a r...
Associated Press

Radioactive capsule that fell off truck found in Australia

PERTH, Australia (AP) — Authorities in Western Australia on Wednesday recovered a tiny but dangerous radioactive capsule that fell off a truck while being transported along a 1,400-kilometer (870-mile) highway last month in what an official said was like finding the needle in the haystack. Officials said the capsule the size of a pea was […]
1 day ago
FILE - Anti-coup protesters hold up signs as they march in Mandalay, Myanmar Sunday, March 14, 2021...
Associated Press

Myanmar resistance steadfast against army rule 2 years later

BANGKOK (AP) — The prospects for peace in Myanmar, much less a return to democracy, seem dimmer than ever two years after the army seized power from the elected government of Aung San Suu Kyi, experts say. On Wednesday, legions of opponents of military rule heeded a call by protest organizers to stay home in […]
1 day ago
Rescue workers and people gather at the site of Monday's suicide bombing after authorities finished...
Associated Press

Peshawar, the city of flowers, becomes epicenter of violence

PESHAWAR, Pakistan (AP) — Pakistan’s Peshawar was once known as “the city of flowers,” surrounded by orchards of pear, quince and pomegranate trees. It was a trading city, situated at the gates of a key mountain valley connecting South and Central Asia. But for the past four decades, it has borne the brunt of rising […]
1 day ago

Sponsored Articles

safety from crime...

As crime increases, our safety measures must too

It's easy to be accused of fearmongering regarding crime, but Seattle residents might have good reason to be concerned for their safety.
Comcast Ready for Business Fund...
Ilona Lohrey | President and CEO, GSBA

GSBA is closing the disparity gap with Ready for Business Fund

GSBA, Comcast, and other partners are working to address disparities in access to financial resources with the Ready for Business fund.
SHIBA WA...

Medicare open enrollment is here and SHIBA can help!

The SHIBA program – part of the Office of the Insurance Commissioner – is ready to help with your Medicare open enrollment decisions.
Lake Washington Windows...

Choosing Best Windows for Your Home

Lake Washington Windows and Doors is a local window dealer offering the exclusive Leak Armor installation.
Anacortes Christmas Tree...

Come one, come all! Food, Drink, and Coastal Christmas – Anacortes has it all!

Come celebrate Anacortes’ 11th annual Bier on the Pier! Bier on the Pier takes place on October 7th and 8th and features local ciders, food trucks and live music - not to mention the beautiful views of the Guemes Channel and backdrop of downtown Anacortes.
Swedish Cyberknife Treatment...

The revolutionary treatment of Swedish CyberKnife provides better quality of life for majority of patients

There are a wide variety of treatments options available for men with prostate cancer. One of the most technologically advanced treatment options in the Pacific Northwest is Stereotactic Body Radiation Therapy using the CyberKnife platform at Swedish Medical Center.
Millennial Money: 5 ways to build your credit score in 2023