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While an excellent credit score can open a lot of doors, a bad credit score can slam them shut. One of the most significant markers of your financial health, a high credit score is imperative for major life milestones such as buying a home, leasing a car or applying for a new loan or credit card.
If your current credit standing isn’t where you’d like it to be, you’re probably wondering how to improve your credit score. Luckily, there are a number of methods you can use to likely achieve the credit boost you’re after.
Your credit score is how lenders determine your creditworthiness, and it’s calculated based on the information in your credit reports. Most credit scores fall within a scale of 300 to 850, and your score is determined by five important factors, each weighted differently:
By understanding the key factors impacting your credit score, you can prioritize the right strategies as you work to improve it. Remember that there are no quick fixes to boost your score—it’s a process that requires time, effort and patience. However, anyone can raise their credit score with some discipline and a commitment to seeing the process through. Use the strategies below to get started on your credit-building journey.
Your payment history has the biggest impact on your credit score, which makes this a critical step if you’re working to improve it. Your payment history shows how likely you are to stay on top of your payments, and even a single late payment can dramatically drop your score. Use these tips if you’re currently struggling to pay your bills:
Making consistent, on-time payments might not cause a drastic jump in your credit from month to month, but it will improve steadily over the years in a lasting way. Consider prioritizing your most seriously delinquent accounts when getting a handle on missed payments.
If you’re learning how to increase your credit score, making a point to avoid any new credit applications can help improve your score. Each new application results in a hard inquiry to your credit report, which can lower your score. Tips for this strategy are fairly straightforward:
Many people assume they should close out old or unused credit accounts when working to improve their credit score. However, this can actually make the job harder—closing out a credit card lowers your credit utilization, which can result in a lower score. Use these tips to work this strategy in your favor:
Becoming an authorized user means adding your name to someone else’s credit card account (with their permission). If you have a friend or family member with a strong credit history, becoming an authorized user means all activity on their account will also reflect on your credit report. This is an easy way to bulk up your credit score without much effort on your part. Keep these tips in mind:
While becoming an authorized user likely won’t have a significant impact on your credit score on its own (lenders prefer to see your ability to manage credit responsibly on your own account), using this strategy in tandem with others can help give it a boost.
A misplaced negative item on your credit report will bring your credit score down unnecessarily, and such mistakes can be disputed and potentially corrected. You should routinely check your credit reports for inaccurate information, such as unauthorized purchases or misreported late payments from your lender.
Whether you opt to review your credit reports yourself or hire a professional to help navigate the process, regularly checking your reports for errors and disputing them is one of the easiest ways to instantly give your credit score a lift.
Credit utilization is a percentage found by dividing your credit balance by your total available credit. (For example, a credit balance of $400 compared to a total available limit of $2,000 is a credit utilization ratio of 20 percent.) It’s the second most significant factor in your credit score, and most lenders prefer to see a utilization of 30 percent or lower. Here’s how you can keep your utilization in check:
Instead of making one large payment when your monthly bill is due, making multiple smaller payments each month can help keep your credit balances low. This can result in a lower credit utilization and, in turn, a lift to your credit score.
As mentioned above, lowering your credit utilization is an important strategy when it comes to raising your credit score, and increasing your credit limit is one way to do it. Increasing your credit limit while keeping your credit balance the same instantly lowers your credit utilization, and in turn improves your credit score.
Keep in mind there’s no guarantee that your credit issuer will approve your request to increase your credit limit. You’re more likely to be approved if you have a healthy credit history and a good relationship with your issuer. If you’ve recently missed payments, your chances may be slim.
Even if you consistently pay your bills on time every month, keeping a high balance on revolving credit accounts can inflate your credit utilization rate and damage your score. Revolving accounts include credit cards and lines of credit, and keeping balances low can boost your credit score.
Your credit mix is the combination of the different types of accounts you have. It accounts for a smaller percentage of your credit score—just 10 percent—but lenders prefer to see a mix of credit accounts or loans in your portfolio rather than a single type alone.
If you’re wondering how to increase your credit score fast, you should know the process isn’t generally a quick one. It can take a year or more of good, consistent credit-building habits before you see your score increase. However, the answer also depends on what your current score is and what caused it to drop in the first place.
Someone with a lower credit score might see quicker improvements than someone with a strong score trying to improve it further. A commitment to paying your bills on time and keeping your credit card balances low can boost your score in as little as 30 days (credit issuers report your account activity to the credit bureaus every 30 days). Ultimately, time is one of the most important factors in seeing improvements to your score.
If you’ve never had a credit card or loan before, you may be looking to start building credit from scratch. In this case, many of the strategies above will still apply: making steady, on-time payments over a long period of time is the best way to establish healthy credit. However, there are other ways beginner borrowers can start establishing credit as well.
While these strategies are a great place to start raising your credit score, they aren’t a guarantee of improvement. Your credit report and score are dynamic. For example, even if you lower your balance to zero, but incurred a late mortgage or rent payment to do that, your score may stay the same or get worse.
The good news is you don’t have to figure it out alone. Instead of panicking, enlist the services of a professional credit repair advisor. They can help you create and execute a foolproof game plan for raising your credit score and keeping it high.
Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.
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