7 Tips For Raising Your Credit Score
Building credit takes time and discipline, especially if you’re trying to rebuild bad credit. That’s because your credit scores are complex and made up of several interconnected factors (more on that below).
But if you start developing healthy habits now, you can build credit over time all by yourself.
5 factors that affect your credit scores
There are several factors that go into determining your credit scores.
- Payment history makes up the biggest chunk of your credit scores. That’s why it’s so important to make on-time payments each month if at all possible. Late payments can haunt your credit history for up to seven years.
- Credit usage, or credit utilization, is another important factor. This measures how much of your available credit you tap into at any given time. Experts recommend you keep this to less than 30%.
- The length of your credit history has some impact on your credit, though not much. This factors in the ages of your oldest and newest credit card accounts, as well as the average age of all your accounts. The older your credit, the better, because it shows lenders you have more experience managing credit.
- Your credit mix has a small impact on your credit. This looks at the types of credit you borrow. Lenders want to see that you can balance revolving accounts like credit cards with installment accounts like mortgages, student loans, auto loans and personal loans.
- Your recent credit also has a small impact on your credit. This tracks the applications you file for things like new credit cards and personal loans with hard inquiries. The fewer, the better.
Tips that can help raise your credit scores
Because credit is so complex, building credit takes time. Depending on your individual situation, there may be ways to raise your scores quickly — like paying down all your debt in a very short span of time. But if you’re starting out with bad credit, even a drastic measure like that may not have the immediate effect you’re looking for. No matter what, the most impactful thing you can do for your credit is to create some consistent habits. Here are some tips that can help you raise your credit scores over time.
1. Check your credit reports on a regular basis to track your progress
No matter where you turn for your credit check-in — your bank, Credit Karma or one of the major consumer credit bureaus — it’s important to keep an eye on your credit. And if you find any mistakes or inaccuracies, you can file a dispute. If your dispute is approved by the credit bureaus, you may see the error corrected as soon as within 30 days, which can help raise your credit scores.
2. Sign up for free credit monitoring
Whether it’s with Credit Karma or someone else, keeping a close eye on your credit is essential. Signing up for credit monitoring can help alert you to important changes in your credit, so that you can check for suspicious activity. Fraudulent activity can weigh down what could be an otherwise good credit score, so it’s important to dispute any details you identify as inaccurate. If the credit bureau rules in your favor, the fraudulent activity will be removed from your credit report, which can help raise your credit scores.
3. Figure out how much money you owe
Gather all your bills and come up with a plan to pay them off. The snowball method focuses on paying off the lowest balances first, while the avalanche method focuses on paying off the balances with the highest interest rates first. If you have too many credit cards to keep track of, you could also consolidate your credit card debt into one balance transfer card to make it easier to manage your monthly payments. All three strategies could help you pay off your credit card debt more quickly, lower your credit utilization ratio and raise your credit scores. So, choose the plan that works best for you, and stick with it.
4. Set up autopay, so you never forget to make a credit card payment
This could help you develop a consistent payment history over time. It might not help you raise your credit scores fast, but it could protect your scores from declining fast, which will likely happen if you miss a payment.
5. Pay twice a month
Instead of making one big payment at the end of the month, try splitting it up into smaller payments every two weeks. This could help you sneak in a few extra payments each year and save money on interest charges. And the extra payments can help pay down your principal balance faster, lowering your account balances and credit utilization ratio, which can raise your scores.
6. Negotiate a lower interest rate
A lower rate can help you pay off your balance faster, because more of your payment can be applied to your principal balance than interest. Lower balances can mean a lower credit utilization ratio (and a lift in your scores). Learn more about how to negotiate a lower interest rate.
7. Ask for a credit limit increase
A higher credit limit is another way to help reduce your credit utilization ratio, which can help raise your credit scores. Keep in mind though that some credit issuers do a hard credit check when you request a credit limit increase, and that can cause your credit to dip. Read up on how to ask for a credit limit increase.
Again, credit building takes time, but knowing your options is important in your journey to that “excellent” credit score. And although your credit score doesn’t impact everything, it is critical your credit history reflects the quality lender and money manager I know you are!