One of the most common credit score questions I find in my search results are “how to raise my credit score?” and “how to raise credit score?” People desperately want to know how to raise their credit score number. Understandably they want a good score so they can get a good mortgage rate, rent a house, or get better interest rates on the loans they do take on.
A slight increase in your credit score can save you thousands on a home mortgage if you’re able to move the interest rate available to you by just a few percentage points. So that explains how a good credit score can help. But that’s not why you’re here. You want to raise your credit score. To do so requires that you understand what makes up your score.
Factors Making Up My Credit Score
The following 5 factors are what the Fair Issac corporation takes from the 3 credit bureaus to calculate your credit score:
- Payment History
- Amounts Owed
- Length of Credit History
- New Credit
- Types of Credit Used
Here’s how they breakdown from a percentage point of view:
Now that you understand the factors, here’s how to improve each of those factors.
Ways to Improve My Credit Score Factors
Improve Your Payment History – To improve your payment history, just keep making your payments on time. Set yourself a reminder to pay all your bills on a certain day of the month. It’s also possible that your credit report is showing incorrect payment history or the wrong history. Go over your credit reports with a fine tooth comb and ensure the information is accurate. If not, contact the bureaus to fix your credit report.
Decrease Your Amounts Owed – If you have out standing revolving debts (i.e. credit cards), make sure you pay them off each month. If the balances are large, try to pay them down using any extra money you have. Similar to above, be sure to take a look at your credit reports to ensure the proper balances are being reported.
Lengthen Your Credit History – There’s no fast way to do this. Just make sure your credit report shows all your old loans. You want to get credit for your history.
Don’t Apply for New Credit – Limit the number of credit applications you make, or simply stop applying for credit all together.
Increase the Types of Credit Used - There are two major types of credit: revolving (i.e. credit cards) and installment (i.e. auto loans). Fair Issac likes to see both and in multiples from different sources. I’m not going to advise you to go out and take on new debt to raise your score. But I will remind you to check your credit reports to ensure that the correct information is presented.
Learn more about boosting your credit score (video link) from the credit score expert, Liz Pulliam Weston.
No Quick Fix to Raise Credit Score
If you’ve come this far, you probably realize that there are no real quick fixes with your credit score. It will take time to improve. Even fixing credit report errors is going to take a while. But that’s not to discourage you. It’s meant to encourage you to get started now with your improvements.
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