Five Simple Steps to Improve Your Credit

A good credit score and solid credit history are the cornerstone of any lucrative credit card rewards strategy. So if you’re lacking in that department, you might find that it’s difficult to qualify for more than one popular rewards card – or that you can’t qualify at all.

If you find yourself in that boat, you’re not alone. According to a 2014 report from the Urban Institute, approximately 77 million Americans had debt in collections that year. And that figure just includes people who are behind on payments; it doesn’t include the millions of people who have poor credit because they lack a credit history.

All the Right Credit Moves

Whether you have negative marks on your credit history or are lacking one altogether, there are plenty of moves you can take to improve where you stand. It won’t happen overnight, but with the right moves, you can build your credit score over time. And when you do, you’ll finally be able to enjoy the credit card rewards you’ve been hearing others (like me) rave about. Here’s how to get started:

1. Face the Music (and Your Credit Report)

By law, everyone is entitled to a free copy of their credit report from each of the credit reporting agencies every year. You can access your credit report at AnnualCreditReport.com, and rest assured it will be free. Look over your report to see what kind of information might be hurting you and create a plan to address it. If you find any errors, you can dispute them with the three credit reporting agencies: Equifax, Experian, and TransUnion.

2. Focus on Paying Off Debt

According to Experian, paying down debt is one of the smartest moves you can make when it comes to improving your credit score. If your credit utilization is high due to maxed-out accounts, paying down your balances will improve your debt-to-limit ratio and thus improve your score over time. As an added bonus, paying off debt will also help you save money on interest.

3. Pay Your Bills on Time

“Delinquent payments and collections can have a major negative impact on a credit score,” warns Experian. In other words, you need to make sure you are paying all your bills on time so they don’t go to collections and wreck your score.

If you have trouble remembering your due dates, set reminders on your phone or simply put them on auto-pay online. Whatever you do, continue paying all your bills on time while you focus on paying down debt.

4. Consider a Secured Credit Card First

Whether you’re trying to build credit for the first time or simply trying to rebuild poor credit, a secured credit card might be just what the doctor ordered. Secured cards are just like traditional credit cards except that they require you to put down a deposit as collateral. And while they tend to come with lower credit limits and few perks, secured cards can help you prove your creditworthiness over time.

Check out this list of credit cards for people with bad credit for our top picks among secured cards.

5. Don’t Open Any New Accounts

When you’re trying to build your credit, it might be tempting to open a ton of new accounts to prove yourself. However, that plan could backfire.

According to Experian, opening too many new accounts could harm your credit score. Instead of going that route, Experian suggests keeping any old accounts open to increase the average length of your credit history.

You can also ask your creditors to increase your credit limit if you can handle the responsibility; raising your limits could improve your utilization ratio — and your score — in one fell swoop.

Bad credit and still want rewards? If that’s the case, you’ll need to do some work to improve your score enough to qualify for the best offers. Once you improve your credit, you might find that a good score is a reward in itself.