How To Raise Your Credit Score
Has your past with credit cards left you wondering how to raise your credit score? Though there are many significant benefits to using credit, there are also great steps you can take to increase your score – regardless of your current score.
What Is a Credit Report?
First off, it’s important to what your credit report is based on. In short, it’s your credit history. Think of it as a relationship that’s either going great, average, or poorly. In the same way that relationships can turn around for the better, a credit report can improve drastically with a few strategic changes. Equifax, Experian, and Transunion are three credit bureaus that are responsible for tracking your credit history. They track and record everything from loans to charge-offs, so it’s important for you know what information they collect on an ongoing basis or when applying for new services.
What Makes up a Credit Score?
If you’ve made late payments in the past, this will impact your score significantly as it makes up 30% of your credit score. Next up is your credit utilization. This represents how much of the total credit line you are using. Because this factor also makes up 30% of your credit score, it is important to use anywhere between 10%-30% of your credit line at any point in time. This will ensure that your use of credit is positively impacting your credit score. The length of your credit history is the third contributing factor to your credit score. It makes up 15% of your score and is decided by the average age of your credit accounts.
Your credit mix is the fourth contributing factor to your credit score and represents the variety of credit accounts you have. It makes up 10% of your credit score. If you have a personal loan, car loan, or a credit card – your score will be higher than if you only have one credit card. This mix of credit shows that you are able to balance the responsibility of different loans and can be trusted with a mortgage loan in the future, for example. Lastly, new credit makes up 10% of your score, and in general, opening new credit sources or debt can be beneficial as long as the payments can be managed, and they’re opened with spans of time in between.
Consistency Is Key
The good news is that because there are multiple contributing factors to your credit score, there are multiple ways to improve your score as well. Here’s what you need to know. Consistency is key. If you’re looking to boost your score, paying off credit quickly and consistently can be the number one contributing factor to improving your score.
Avoid Credit Report Errors
One easy fix is ensuring there are no errors on your credit report. These errors are not uncommon and are worth checking on. Then, make sure to keep credit accounts open and become an authorized user on an already-existing account such as a company credit card if you’re able. Having your credit connected with an account that already has a great credit score is a huge plus.
Don’t Check It Too Often
Avoiding multiple credit inquiries and applications will help keep your score up as well. Instead of applying to multiple accounts, take time to learn about each credit card’s strengths and weaknesses. Another way to boost your score is to report your rent and utility payments. Anytime you can prove to the credit bureau that you’re making payments on time, it’s a tremendous benefit. And lastly, applying for a secured credit card is an additional way to improve your credit score.
Your Future Will Thank You
The key to improving your credit score is having an awareness of all the ways you can do so. Then, once that’s done it only takes a little effort to see see major changes within a matter of months (rather than years or even decades from now)!
