6 things to do to improve your credit in 2021

Jan 6, 2021

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Editor’s note: This post has been updated with the latest credit card information.

Having good credit is like having a baby: You want to feed and take care of it so it can grow healthy and strong. The month of January will be dedicated to helping you either start or rebuild your credit in 2021. TPG has a ton of resources that can help. To that end, we will be sharing posts throughout the month that we feel will get you in the best financial shape so you can get those credit cards with the best perks and benefits. This story is the first of many we’ll post all month.


Happy New Year! Now is a great time to rack up rewards points, plan for future vacations and make the most of your everyday spending habits. It also brings a new chance to focus on improving your credit score, something that can earn you better loan and reward terms. Here’s where to start.

Want more credit card news and advice from TPG? Sign up for our daily newsletter! 

In This Post

Monitor your credit score

(Photo by Getty Images)
(Photo by Getty Images)

Check your credit score regularly. This will show you in real time how your actions impact your score. Issuers that offer free, regularly updated credit scores to cardholders include American Express (by enrolling in its free MyCreditGuide), Bank of America, Barclays, Capital One (via its CreditWise service), Chase (via Credit Journey), Citi, Discover (via Credit Scorecard), U.S. Bank (via CreditView Dashboard) and Wells Fargo (via Wells Fargo Online).

Related: How to check your credit score for absolutely free

How are credit scores calculated?

(Image courtesy of FICO)

FICO scores are based on five factors: payment history, amount owed, length of credit history, new credit and credit mix. The total amount you owe and your payment history hold the most sway over your FICO score, with each accounting for at least 30% of your total score.

Related: How credit scores work

How to improve your score

First, check your credit report to see what might be dragging down your score. Address any errors. Then, pay your bills on time every time. Once you pay a card off, keep the account open. While it may feel like a victory, closing down a paid-off card can actually pull your credit score down.

Related: Should I cancel my credit cards if I don’t use them anymore?

How do inquiries affect credit scores?

The impact of an inquiry on your credit report depends on the type of inquiry. Hard inquiries, which happen once you’ve applied for a lease, loan or credit card, can bring your credit score down slightly. For most people, one hard inquiry shaves five points off a credit score.

Related: How does applying for a new credit card affect my credit score?

Multiple inquiries for things like auto, mortgage or student loans are typically treated as a single inquiry since they tend to signal a customer shopping around for the best rates and terms. Inquiries for several credit cards within a short time period can be perceived as a red flag by lenders.

Soft inquiries are when you check your own credit report or a lender preapproves you for a loan offer. These don’t negatively impact credit scores.

Related: What is the difference between a hard and soft pull on your credit report?

Review your credit report

(Photo by i_frontier / Getty Images)
(Photo by i_frontier / Getty Images)

Your credit score is only part of the picture. You’ll also want to check your credit report, especially if you’re just starting on the path of improving your credit. Correcting mistakes on your credit report is one of the easiest ways to begin improving your credit.

The government grants you free access to a credit report each year from each of the three major credit reporting bureaus — Experian, Equifax and TransUnion. Go to annualcreditreport.com for yours. You’re also entitled to a free credit report whenever a creditor denies your application.

Related: Your next credit card approval is in the hands of these 3 agencies

Grade your own financial performance

Credit agencies offer a well-rounded perspective of how lenders see you, but it’s equally important to look in the mirror and change habits that may be holding you back.

How to use your credit card properly

The smartest way to use your credit card is to pay it off every month and collect your rewards. If you must carry a balance, make every single payment on time. Set your account to autopay your minimum payments. Make additional payments to pay down your debt as quickly as possible, particularly if it comes at a high interest rate.

Related: 10 commandments for travel rewards credit cards

(Image courtesy of Experian)
(Image courtesy of Experian)

You’ll want to keep any balance you do carry to under 30% of the card’s limit, since credit utilization — how much of your card’s available credit you’re using at any given time — factors into your credit score. Shop around for interest rates and don’t be afraid to contact your lender and ask for a decrease if you have a track record of on-time payments, especially during this period of exceptionally low interest rates.

Related: How important is my credit utilization ratio?

How long does it take to improve credit?

Settle in, because it’s going to take a while to fix a damaged credit report. Delinquencies — generally reported to credit bureaus after two consecutive missed payments — remain on your report for seven years. Inquiries can remain on your credit report for up to two years.

Make the most of your checking account

(Photo by Shutterstock)
(Photo by Shutterstock)

Your bank is your best friend when it comes to improving your credit score. You’ll want to use your checking account to set up automatic minimum payments on every account you have. Remember, payment history makes up about 35% of your credit score.

Mistakes linger on credit reports, and the best thing you can do for your credit score is avoid them. Many banks offer budgeting tools to help track spending and saving as well.

Related: How to set up autopay for all your credit cards

Consider requesting a credit limit increase

(Photo by Shutterstock)

If you’ve got a history of on-time payments or just got a big raise, consider asking for a higher credit limit. This might trigger an inquiry that’ll temporarily hit your score by a few points, but in the long term, having more available credit drives down your utilization ratio and ultimately drives up credit scores.

Credit limit increases may also be easier to get than you think. A 2018 survey conducted by CreditCards.com revealed that 85% of cardholders who asked for a credit limit increase were successful.

Related: Here’s why you should never turn down a credit limit increase

Earn credit for paying your bills and maintaining bank balances

If you don’t have a strong credit history, consider Experian Boost, a free service for adding utility and telecom payments to your Experian credit file to build payment history.

If you’re a saver and have a history of healthy bank balances, UltraFICO may be an option for you. UltraFICO takes checking and savings information into account when calculating scores.

Bottom line

During a good or bad economy, you always want to ensure that your credit score remains high. Those with lower scores can be stuck with credit cards that have limited perks, more fees and higher interest rates. It also makes it harder to rent or buy a home, turn on utilities or get personal or auto loans. You can avoid this fate by following the steps outlined above.

If you want to learn even more about credit scores, check out these links:

Related: The complete history of credit cards, from antiquity to today

Featured photo by Maskot/Getty Images

Delta SkyMiles® Platinum American Express Card

Earn 90,000 bonus miles and 10,000 Medallion® Qualification Miles (MQMs) after you spend $3,000 in purchases on your new card in the first three months of card membership. Offer ends 11/10/2021.

With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.

Apply Now
More Things to Know
  • Limited Time Offer: Earn 90,000 Bonus Miles and 10,000 Medallion® Qualification Miles (MQMs) after you spend $3,000 in purchases on your new Card in your first 3 months. Offer expires 11/10/2021.
  • Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
  • Earn 3X Miles on Delta purchases and purchases made directly with hotels.
  • Earn 2X Miles at restaurants worldwide, including takeout and delivery and at U.S. supermarkets.
  • Earn 1X Miles on all other eligible purchases.
  • Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. *Payment of the government imposed taxes and fees of no more than $75 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
  • Enjoy your first checked bag free on Delta flights.
  • Fee Credit for Global Entry or TSA Pre✓®.
  • Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
  • No Foreign Transaction Fees.
  • $250 Annual Fee.
  • Terms Apply.
  • See Rates & Fees
Regular APR
15.74%-24.74% Variable
Annual Fee
$250
Balance Transfer Fee
N/A
Recommended Credit
Excellent/Good
Terms and restrictions apply. See rates & fees.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.