There are so many scams out there that claim to be able to fix or repair your credit. Many of them will actually charge you an outrageous fee and pretend to wipe all negative information from your credit report. Finding and fixing problems with your credit is easier than it seems. Learn how to increase your credit score with these simple, yet effective techniques.
How To Increase Your Credit Score:
Get A Copy Of Your Credit Reports
Before you can improve your credit score, you need to know exactly what makes up that score. That is why the first step in this process is to request a copy of your credit reports. We can’t look at how to increase your credit score without first seeing the details!
Although there are many credit bureaus, you really only need to focus on the three major players (Equifax, TransUnion, and Experian). Everyone is entitled to one free copy of their credit report from each of the 3 major bureaus each year. Simply go to AnnualCreditReport.com (this is the official site…don’t fall for those other emails and pop-up ads) to request free reports from each of the three credit bureaus.
One thing to note, is that you are only entitled to see a copy of your report for free, if you want to see your score, then you’ll have to pay a small amount (around $7 or $8 for each report).
Dispute Any Errors
Once you have a copy of each of your credit reports, check them thoroughly for any errors. If you find an error on your credit report, you have the right to dispute it.
This would mean writing a detailed letter to the credit bureau, explaining what the error really is, and requesting an investigation. Annual Credit Reports makes this entire process really easy.
When exploring how to increase your credit score, this is one of the easiest ways to have a huge impact.
Pay Your Bills On Time
Your ability to pay bills on time makes up 35% of your credit score! This is why having just one late payment reported to a credit agency, can be detrimental! Make sure that if you are already late on a payment, you become current as soon as possible. If your late payment was made recently, call your creditor and ask (or beg) them to forgive your tardiness – this will help you to avoid the late payment fees as well as the hit to your credit score.
If you already have a late payment on your report, the best thing that you can do is to be current on all your accounts from now on. The further away in the past your delinquent payment is from today, the smaller the negative impact on your finances.
Pay Down Your Balances
Having balances that are close to your credit limits does damage to your credit score. The amount of debt that you have constitutes 30% of your score!
Look through all of your accounts and immediately pay down any one of them where your debt to credit limit ratio is more than 30% (this would be more than a $300 balance on a $1,000 limit). Once you have done this, then go through the same exercise, but this time aiming for 10%.
If you are looking to have a sudden impact on your credit score, this is probably the best way. It may require a huge sacrifice (like a temporary 2nd job, or selling some of your “stuff”), but it probably be worth it.
Don’t Close Old Accounts
The age of your accounts also has an impact on how creditors view you. The more “old” accounts on your report, the better your credit score will be (holding all else equal).
This means that you must try to keep open old accounts – even if you don’t use it anymore. Actually, you may want to get a little use out of your older credit cards – buy a tank of gas each month and pay it off right away – this way, they won’t be tempted to cancel your account due to inactivity.
Don’t Apply for New Accounts
Another implication of account ages, is that you should avoid opening any new accounts (with possible exceptions…see below). This is because once you get these accounts, they will bring down the average age of your credit!
Also, every time you apply for credit the bank has to pull your credit report, which is noted as an inquiry. These types of inquiries will reduce your credit score, and they account for 5% of the total. So even if you see a bank offering great credit card benefits, don’t apply!
Take Out An Installment Loan
Most of us – especially when we’re young – tend to focus solely on revolving credit (such as credit cards). However, banks and other lenders like to see how you handle installment loans as well. These are typically mortgages, auto loans, student loan repayments, and personal bank loans.
I remember when I tried to borrow money to buy a car when I was younger. I was told that I couldn’t get a loan for a used car because my credit score was too low. To me, this didn’t make sense because I handled my credit cards very responsibly up to that point. However, they then explained to me that since I didn’t have an installment loan, my credit score still wasn’t as high as they wanted.
So, I had to buy a new car in order to qualify for a loan – I actually needed a cosigner in order for everything to go through.
If you are in a similar situation, then try to take out a small personal loan from your local credit union or small bank – they are usually easier to work with – then be faithful to pay it back on time. Your credit score should see a nice improvement after this.
- What things have you done to increase your credit score?
- Have you ever been denied a loan because you haven’t borrowed enough in the past?
- Do you think we should focus on our credit score as much as we do?