Top 9 Tips to Improve Your Credit Score

Unfortunately, in life, it is critical to have a good credit score to qualify for a mortgage, apply for a loan, or get credit cards. If your score is less than perfect or your credit has taken a few hits in recent years, fear not, there are ways to raise your credit score pretty quickly.

What is a Credit Score?

There are three major credit reporting agencies (Equifax, TransUnion, and Experian). Each one is independently owned and operated. They are not connected in any way. These credit bureaus keep track of all Americans’ debt, payment history, and things like foreclosures and bankruptcies. They use all this information to calculate a score (a 3-digit number), which informs lenders of your creditworthiness. 

When you apply for a credit card, loan or mortgage, lenders turn to the big three credit agencies to get a sense of how well you pay your bills and how much of a risk it is for them to lend you money. If you have a low credit score, they may deny you credit. You may even be denied a lease to rent the property if you have a low credit score. It is essential to know what your score is, how it was calculated, and how to improve it. The first step is to get a copy of your credit report.

Credit scores range from 300 to 850, and this article from Experian explains how they are calculated. Additionally, here is the table for what good vs. bad credit looks like: 

What is a Credit Report?

A credit report is an extensive document that details all of your debts, any foreclosures, and bankruptcies along with your payment history. It also contains details like your name, previous addresses, social security number, date of birth, and other details. Each of the three credit reporting agencies keeps a file on you. Because they are not affiliated with each other, each report may contain different information, and some even have errors. 

The FTC is the government entity that oversees credit reporting agencies through the Fair Credit Reporting Act. Through this law, every American is eligible for a free report each year from all three credit bureaus. The credit reporting agencies gathered together and set up a website where you can order yours: Annual Credit Report.com. This is the only website that is approved by the FTC.

Steps to Improve Your Credit Score

First, you need to get a copy of your credit report and review it. Look closely for any errors or fraudulent accounts. To fix those, contact the credit bureaus directly and the vendors who reported the misinformation. You can contact each agency below:

• Equifax: 866-349-5191.
• TransUnion: 800-916-8800.
• Experian: 888-397-3742.

Once you have your credit report cleaned up, now it’s time to get to work improving your score. The top tips for doing this are:

• Always pay your bills on time. Late payments factor heavily into a credit score.
• Keep your credit card balances low (30% or less than the credit limit).
• Pay off your debts but don’t close credit card accounts. Too much debt will also negatively affect your credit score.
• Don’t open new accounts for a few months and don’t open too many new ones at the same time. This can trigger a lower score for a while.
• Be patient. The longer you go on paying all your bills on time and the credit “ages,” the better it looks to lenders, and your score will increase as time passes.
• If your credit score is really low, you can sign up for a prepaid or secured credit card to start building anew.
• Have a trusted family member or friend put you on their credit account and start building that way.
• If you were the victim of identity theft or data breach, put a fraud alert on your credit report or consider a credit freeze to prevent anyone from opening new accounts and affecting your credit score. 
• Sign up for credit monitoring with a company like IDStrong.com to watch things for you and alert you to any fraud or changes in your score. 

Rebuilding your credit score won’t happen overnight, but it can change quickly if you take the steps above and stay on track. The months will pass, and suddenly you will realize your credit score has bounced back up, and you are on the path to financial freedom again.