12 Ways to Increase Your Credit Score

It is important to remember that our credit rating can have a significant impact on our finances. It has been found that having a low credit score can result in you paying up to $5,000 more for an auto loan than you would if you had a high credit score. In addition to this, having a low credit score can make it harder for you to get a loan in the future.

Nevertheless, a recent study by US News & World Report of nearly 1,500 consumers found that many Americans are misinformed about their credit scores, and especially how to improve them, according to a recent survey. There were fewer than half of those surveyed who knew that making consistent, timely payments has a large positive impact on their credit score, for example. It was found that 49% of respondents were unsure if carrying a credit card balance is necessary to improve their credit score (it isn’t).

Nearly a quarter of those polled were of the opinion that people who earn more money automatically have a higher credit score than those who do not earn as much money. A credit score is not determined by taking into account the income of a person in order to determine their credit score. In other words, it is all about how you manage the money that you have.

The FICO Score is a credit score used in more than 90% of all consumer credit decisions. It typically ranges from a low of 350 points to a high of 850 points, depending on the creditor. It is recommended that you aim for a score between 650 and 700 for a good score.

It is worth learning how to improve your score if yours is lower than you would like it to be. It is important to keep in mind that depending on the reason for the low rating, it could take anywhere from 12 to 24 months for the rating to improve, according to Bruce W. McClary, vice president of communications for the National Foundation for Credit Counseling, which represents credit counseling agencies throughout the United States. It is a non-profit organization.

It is possible to speed up the process by enrolling in a debt management program and maintaining on-time payments consistently, but he cautions that there is no immediate solution to the problem.

How to improve your credit rating

1. Make sure that you pay your credit card and other bills on time. A 35% FICO score is based on your payment history, which is how often you pay on time and how often you are late. In order to avoid falling behind on your payments, it is better to pay the minimum amount every month.
2. Make sure you check your credit reports on a regular basis. With AnnualCreditReport.com you can request a free credit report once every four months from a different credit reporting agency. A “forced” credit inquiry (from a potential lender or another person with your permission) may lower your credit scores slightly, but if you check your credit report yourself there will be no penalty.
3. Make sure that you do not apply for too many credit cards at the same time. In contrast to applying for a mortgage, car loan, or student loan, applying for multiple credit cards generates multiple “forced inquiries” about your credit history and can negatively affect your credit rating.
4. Don’t open too many new credit accounts at the same time. If you do this, your average “age” of your accounts will be lowered, which in turn can lead to a lower credit score.
5. Don’t cancel unused cards (unless you have to pay an annual fee for the card). Your credit score is determined in part by how much credit you are using in comparison to how much credit you have available. The removal of a credit card can reduce your credit line and can increase your credit ratio, which can hurt your credit score.
6. It is important to keep your credit card balances low. It is a good idea to keep your variable credit balance below 10% of the total amount of credit that you have available. There is a correlation between a high ratio and a high credit risk. When you are using your credit card limit at full capacity or close to it, your ratio will reflect negatively, which, in turn, will negatively affect your credit score,” says Katie Ross, manager of Education and Development at American Consumer Credit Counseling, a Boston-based nonprofit that offers assistance to consumers.
7. It is important to maintain a variety of types of credit. It shows that you are capable of maintaining different types of credit if you manage to pay off, for instance, a car loan, a student loan, and credit card bills all within the same period of time. You will receive 10% of your grade based on this.
8. Pay the debts that have been sent to collections. In most current versions of the FICO Score, collections with a zero balance are ignored.
9. Make sure that you do not keep a high balance on your account. You may want to start using cash or a debit card for a few months before applying for new credit if, for instance, you pay advance for everything with a rewards card in order to earn points. You can’t tell if you pay your debts in full each month by looking at your credit score. Nevertheless, they can tell from your credit score that you are charging too much on your cards in relation to the amount you are allowed to charge on your cards. In a negative sense, that can be interpreted in a negative way.
10. Pay off your credit card debt by taking out a personal loan. To improve your credit score, you can apply for a personal loan to pay off your credit card debt. There is also a good chance that the interest rate on the loan is going to be lower than the interest rate on a credit card.
11. After bankruptcy, you may be able to get a secured credit card. After bankruptcy, you should start completing your credit report with good credit if you have been in bankruptcy previously. A secured credit card (which is linked to a bank savings account) can be a very effective way of rebuilding your credit score. As long as you don’t default on new loans, a bankruptcy will have less of an impact on your credit score over the years. You should know, however, that bankruptcy filings under Chapter 7 and Chapter 13 remain on your credit report for a period of up to ten years.
12. You might want to consider getting a little help from alternative data sources. It is now possible for consumers with less than stellar credit ratings to get lenders to take into account other indicators of their fiscal responsibility, such as regular utility or mortgage payments. As part of Experian Boost, consumers have the option to grant Experian read-only access to their bank account information in order to display their payment history. The service only takes into account positive feedback and can be turned off at the consumer’s discretion if the consumer does not wish to receive feedback. In the same manner, a similar new service, UltraFICO, focuses on how well consumers handle their money, taking into account things including how well they keep a balance in their savings and avoid bounced checks. The advantage may not be great, but it can potentially improve the credit scores of many consumers.