How to Improve Credit Score

Your credit score is a number that helps lenders determine how likely you are to repay debt. A credit score can be anywhere between 300 and 850 – the higher, the better.
 
When you raise your credit score, you’ll find that you have more opportunities in life. It can help you:

• get a credit card. A solid credit score helps you qualify for a credit card. If you have a high credit score, you may get a lower interest rate or a larger credit line. You may also get access to a credit card with perks like an introductory bonus or reward benefits.
• rent an apartment. Many landlords require a credit score of, for example, 600 or 700. Some offer flexibility but expect tenants with lower scores to pay a higher security deposit.
• buy a home. A good credit score can help you get a mortgage loan. If you have a high credit score, you may get a lower interest rate, potentially saving you tens of thousands of dollars over the course of your loan.
• qualify for a loan. You’re more likely to get approved for a loan, such as an auto loan or a personal loan, if you have a good credit score. You may also get a better interest rate.
• get WiFi and energy service. Some utility companies conduct a credit check. If your credit report shows that you’ve had trouble paying bills in the past, the utility company may ask you to pay a security deposit before they turn on service.
• get better insurance rates. If you improve your credit score, you may get a better price on auto insurance, renters insurance, or homeowners insurance.
• your dream job. Most employers don’t perform a credit check. But some conduct a background check that could turn up certain information about your finances, such as late payments or bankruptcies.

Know your credit score

A healthy credit score can help you reach your financial goals, so it’s important to know your number.
 
You can get your credit report free every week from the three major credit bureaus – Equifax, Experian, and TransUnion. Learn how to check your credit score and get a free report.

FICO and VantageScore

The most popular credit scoring models are FICO, which about 90% of the major lenders use, and VantageScore, which is gaining popularity.
 
The two use similar factors to arrive at your credit score but weigh them a bit differently. Scores from both FICO and VantageScore range from 300 to 850.

Ways to raise your credit score

Want to improve your credit score? There are ways to raise it. Just keep in mind that it can take time, because your payment history accounts for about 35% of your score.
 
Here are some steps you can take to increase your credit score.
 

Correct any errors on your credit report

Some errors, such as an inaccurate late payment, can impact your credit score, so review your credit report regularly.
 
If you find an error, contact the appropriate credit bureau(s) to file a dispute. The credit bureaus generally must investigate consumer disputes within 30 days under federal law. If they confirm an error, they will correct it and, if appropriate, raise your credit score.
 

Pay down any credit card balances

Carrying large credit card balances – especially if you’re using a large portion of your available credit – can lower your credit score. Paying down those balances can help raise your credit score fairly quickly. Get some advice for how to pay off credit card debt.
 

Resist the urge to close old accounts

Once you pay off an older credit card, you may be tempted to close that account. But if you do, you’ll lose the available credit, which affects your overall credit utilization rate.
 
Let’s say you have two credit cards, and each has a $5,000 credit line, giving you a total of $10,000 in credit. You have a balance of $500 on the first credit card, and you have a $5,000 balance on the second card, which is now maxed out. So you’ve used $5,500 of your $10,000 available credit, or 55%.
 
You pay off the $500 balance on the first card and decide to cancel that account. But when you cancel that credit card, you lose the $5,000 credit line that came with it. So you now have a $5,000 balance on the remaining credit card and only $5,000 in total credit (instead of the $10,000 you had with both cards). You’ve gone from using 55% of your available credit to now using 100% of your credit, which will lower your credit score.
 

Avoid applying for new credit cards

Applying for new credit may result in a temporary decrease in your credit score. However, applying for several credit cards within a short time signals to lenders that you may be a high-risk borrower.
 

Set up automated bill pay

When life gets hectic, you may forget to pay a bill, and that can impact your credit score. Setting up automatic payments helps ensure that your bills get paid on time, every time.

How to improve your credit score fast

Hoping to raise your credit score quickly? Here are some steps you can take.

• Ask for an increase to your credit limits. Contact your creditors to request a larger line of credit. A credit limit increase lowers your credit utilization, which is the portion of your total available credit that you’re currently using. Lowering your utilization rate can increase your credit score.
• Get credit for paying your household bills on time. Use a service like Experian Boost to get credit for making timely payments of your rent, WiFi, phone, utilities, certain insurance policies, and streaming services. This can raise your credit score pretty quickly.
• Negotiate your credit card interest rates. Contact your card issuers to ask for a rate reduction. Paying less interest will help you pay down your debt faster and improve your credit score.
• Get a debt consolidation loan. If your credit card issuer won’t reduce your interest rate, you may be able to get a consolidation loan with a lower rate. You’ll likely need a credit score of at least 580 to qualify.