Whether you want to get a credit card or take out a loan, a high credit score could increase your chances of getting approved and scoring lower interest rates. But maybe your credit score is on the lower end, and you’re not quite sure how to improve it.
Don’t fret. These tips will help you start improving your credit score and seeing results sooner than later.
What Is a Credit Score?
Credit scores are used by creditors and lenders to assess the likelihood of borrowers repaying credit cards or loans on time. It ranges from 300 to 850, with a higher score indicating a lower level of risk.
Things That Affect Your Credit Scores
The following impact your FICO credit scores:
- Payment history – 35% of your FICO score
- Amounts owed – 30% of your FICO score
- Length of credit history – 15% of your FICO score
- Types of credit – 10% of your FICO score
- New credit – 10% of your FICO score
Here’s what holds weight in the VantageScore model:
- Overall credit usage, available credit and outstanding balances – Extremely influential
- Credit experience and mix – Highly influential
- Payment history – Moderately influential
- Age of credit history – Less influential
- New accounts – Less influential
Reasons to Boost Your Credit Score
There are several viable reasons to boost your credit score. A higher credit score can be your ticket to getting approved for the best credit cards, auto loans, personal loans or mortgages.
If you’re planning to rent soon, a higher credit score can also give the landlord confidence that you’re the best tenant if there’s competition for the unit. And if your insurance company uses credit-based insurance scores, you could save a bundle on premium payments.
Ways To Boost Your Credit Score
Here are some simple ways to increase your credit score.
1. Catch Up On Past-Due Accounts
Payment history is the most significant factor in the FICO credit scoring calculation. Each late mark on your credit report could mean a score decrease of up to 100 points. If you have past-due accounts, get current sooner than later, and reach out to the creditors if needed to work out a payment arrangement.
2. Make Payments On Time
Avoid late payments as they can mean bad news for your credit score. They also linger on your credit report for up to 7 years, although the impact dwindles as time progresses. Fortunately, delinquent accounts aren’t reported to the credit bureaus until they are 30 days past due, so you have time to get back on track.
You can avoid late payment fees and adverse credit reporting by enrolling in automatic payments with your creditor or lender. Schedule at least the minimum payment amount to come out of your account well before the due date.
3. Pay Down Revolving Account Balances
Your credit utilization rate is the second most crucial component of your FICO score. It’s the percentage of your credit limits in use. So, if you have two credit cards with $500 limits and balances of $100 and $300, your credit utilization ratio will be 40% ($400/$1,000).
4. Keep Your Credit Utilization Low
Generally, you want to keep your credit utilization rate at or low below 30% to avoid damage to your credit score. However, a 10% or lower credit utilization rate will give you the best chance at a very good or exceptional credit score.
5. Raise Your Credit Limits
Reach out to your credit card companies and ask that they consider you for a credit limit increase. You can also submit a request online through the portal with select creditors. If approved, the trick is to avoid racking up more charges so your credit utilization can decrease, improving your credit score.
6. Limit How Often You Apply for New Credit
You need credit accounts to build your credit profile. This doesn’t mean you should apply for a ton of credit cards or loans, though. Each new credit application generates a hard inquiry that slightly dents your credit score. Multiple inquiries in a short window could mean bad news for your score. Too many new accounts could also hurt your average age of credit, which accounts for 15% of your FICO score.
7. Build Your Credit File
It’s impossible to build a credit file without accounts in your name that report to the major credit bureaus – Experian, TransUnion and Equifax. If you’re a credit newbie, start with secured credit cards and credit-builder loans, as it may be challenging to get approved for traditional credit accounts.
Once you’ve responsibly managed these accounts for at least six months, consider applying for unsecured debt products, like rewards credit cards that have more to offer. Store credit cards are another option since they’re relatively easy to get approved for.
8. Have a Variety of Credit Accounts
Lenders and creditors like to see a healthy mix of revolving and installment accounts. If you’re just getting started with credit, ask the creditors if they report to the major credit bureaus – Experian, Equifax and TransUnion.
9. Check Your Credit Report to Have Errors Fixed
Review your credit report right away and highlight any errors you notice. File disputes right away to have them rectified and avoid any further damage to your credit score.
10. Use Credit Monitoring to Track Your Progress
Consider signing up for free credit monitoring with Experian to receive an alert each time there’s any activity in your credit file. The dashboard also allows you to view changes to your score over time, along with recommendations to improve your credit health.
Sign Up for a Free Service Like Experian Boost
Experian Boost is a free tool that helps raise your credit score fast. It allows you to include on-time utility, cell phone and streaming service payments in your Experian credit report to help boost your payment history.
FAQs About How to Boost Your Credit Score
It depends on what’s in your credit profile. However, you can follow the suggestions above to speed up the process.
This also depends on your credit profile. The faster you file disputes to remove errors and add positive activity to overshadow the negatives in your report, the quicker you can rebuild credit.
There’s no surefire way to pull this off, but the suggested tips could possibly get your score up 100 points in one month.
To raise your credit score in the next 30 days, start by filing disputes to get any inaccurate information removed from your report (if applicable). Next, get caught up on past-due payments and reduce credit card debt to lower your credit utilization rate. You can also become an authorized user on a friend or relative’s credit card (assuming it’s managed responsibly). Experian Boost is another option to increase your credit score fast.