So you’re wondering how to boost your credit score? First ask yourself, why?
Why is a good credit score important?
Credit affects many of your everyday expenses.
The car you drive? Your credit determines your monthly payment.
Your car insurance rate? Your credit determines your monthly rate.
The neighborhood you live in, most likely affected by your credit.
The credit card you have in your wallet? Yup, credit.
The better your credit, the lower you pay for all of this and more.
In short, it makes life easier and cheaper for you.
If you’re someone looking for fundamental steps you can take to boost your credit score, then this is the guide for you.
We’ll break down how to take action in 7 simple steps.
Grab a pen, a pad, a hot (or cold) drink, and let’s get started with improving your credit score.
Disclaimer: In the name of full transparency, please be aware that this blog post contains affiliate links and any purchases made through such links will result in a small commission for me (at no extra cost for you).
1. What Makes Up My Credit Score?
Just trying to explain how your credit score is calculated can be overwhelming.
Especially when considering how to boost your credit score.
Luckily, we’ve broken it down to a few sections.
35% of your FICO score is in relation to your payment history.
Your payment history helps potential lenders determine how well you do with repaying your creditors. Someone who is 30 days late, 60 days late, or more are huge red flags.
As you can see, payment history takes up the biggest slice of your FICO pie. Do everything possible to maintain a good payment history of 6 months or greater.
Communicate with your creditors if you believe you are going to be late making a payment. Most creditors will work with you and make payment arrangements.
Communication is always the best route when maintaining your relationship with your creditors.
30% of your FICO score is in relation to the amounts you owe.
We’ll talk more about credit utilization a bit later in this guide. But know, that the better you can manage your credit lines, the better your scores will be.
15% of your FICO score is in relation to the length of your credit history.
How long you’ve had credit also has an impact on your credit score. The longer you have credit lines with creditors, the better. As long as they are in good standing.
This is why building credit is important to take on as early as possible.
10% of your FICO score is in relation to the mix of credit you have.
How you manage auto loans, personal loans, installment agreements, credit cards, department cards, mortgage loans and more all have an impact on your credit.
It’s important to have a good mixture of credit. 3 credit cards, 1 installment loan, 1 mortgage are considered ideal.
10% of your FICO score is in relation to the new credit you have.
As you get more and more new credit cards, this can actually have a negative impact on your credit. It may signal to potential lenders that you are in financial distress and need these credit lines to survive.
This is considered high-risk behavior. Only open new credit lines if needed to help build your credit.
2. Get Your Credit Report
A while back, the US government put into place the Fair Credit Reporting Act or FCRA for short.
This law allows you access to your credit report from each bureau absolutely FREE.
Just visit www.annualcreditreport.com to get started.
We recommend checking your credit regularly.
As the world becomes more connected by the internet, more opportunities arise for hackers to breach databases and even steal identities.
Sign up for regular alerts and keep your finger on the pulse of your credit profile.
The first thing you want to do is review your report from each bureau.
Make sure you recognize all of the accounts reported.
Also, make sure your positive accounts are all reflecting the same information.
For example, you would hate to see a good payment history with two bureaus and one bureau shows inaccurate late payments.
In this scenario, you would want to contact your creditor and inform them of the inaccurate reporting to that bureau.
If nothing gets corrected within 30 days, then dispute the information with the credit bureau that is reporting negatively.
Other things to check for are accurate balances, dates, account numbers, account types, credit limits, and more.
This is one more example of how to boost your credit score.
3. How To Boost Your Credit Score By Disputing Inaccuracies
If you’ve found inaccuracies and have done your due diligence to get those inaccuracies corrected, then you may want to consider disputing the inaccuracies with the credit bureaus directly.
The FCRA gives you the legal right to dispute and information you deem to be inaccurate. The bureaus are obligated by law to investigate each dispute and ensure that the data is 100% and 100% verified.
If the data is deemed to be inaccurate or unverified, then those negative items must be deleted from your credit report.
When you form a dispute be sure to be very clear about the information you deemed to be inaccurate and the outcome you want.
After sending your dispute, wait 30-35 days for a response. The bureaus will reply with their findings and then you can determine what your next step is.
We teach others how to use factual disputing for best results.
Another excellent step when learning how to boost your credit score.
4. How To Boost Your Credit Score With Good Payments
Paying your bills on time, every time is the most important factor that determines your credit score.
Missing payments can lower your credit score tremendously.
Build an excellent credit history by making extra payments towards loans or credit cards and/or asking for credit line increases are some factors that help boost your credit score.
Other factors include the amount you owe (your utilization), how long you’ve had certain accounts open for (length of credit), collection accounts (negative marks), inquiries into your file, number of new credit applications (new credit), and, finally, type of accounts (credit mix).
If you’re trying to figure out where to start, focus on what you can control and continue to monitor your credit to look for improvements.
5. Build Credit
If you are someone that needs to build credit then you’ll want to start signing up for a few different programs.
Self Lender is one of the easiest ways to build credit. There’s no credit check and no hard inquiry to get approved. It reports to all 3 bureaus. Get started today.
Secured Credit Card
Chime has a new Credit Builder card that is easy to sign up for. All you need is a Chime account. Move money to your Chime Credit Builder Card and start building credit. Get started today.
This is one of the most crucial steps when discovering how to boost your credit score.
6. Keep Your Credit Card Balances Low
Low balances (not 0 balances) show potential lenders that you are responsible with the credit lines you do have.
And, it shows you can be a low risk to them (if they decide to approve your application).
The golden rule is 30%, but we’ve seen a bigger boost by keeping your credit utilization under 10%.
For example, if your credit card has a limit of $1,000, keep the balance under $100 (10%) -$300 (30%).
Extra payments before your statement date are a good hack to use.
Most importantly, don’t charge up your credit card with impulse buys.
If there’s something you want to buy, sleep on it for a few days before you decide to purchase.
Think about your bigger goal (buying a home, a new car, etc).
Small-term sacrifices are worth long-term success.
Another step that shows you how to boost your credit score.
7. How To Boost Your Credit Score By Monitoring Your Credit Regularly
Credit bureaus track your history, managing different accounts like mortgages and student loans besides retail accounts like credit cards and auto loans.
Monitoring your credit helps you stay on top of any negative activity on your credit report.
The best credit monitoring services offer monitoring for all 3 bureaus and give you monthly access to your credit report from all 3 bureaus.
There are free credit monitoring apps out there, but remember the best offer all 3 bureaus.
Most apps only give you 1-2 bureaus.
We highly recommend MyFICO as they give you FICO scores and reports for all 3 bureaus monthly.
Regular monitoring is an important way how to boost your credit score.
This may seem like a lot of work to take on.
The important thing is to not overwhelm yourself and try to do too much at once.
Take one or two tips and work towards them weekly.
Regularly check in with your progress and see if you need to make adjustments or if you’re ready to take on the next 1 or 2 things.
We hope you enjoyed this guide that discussed how to boost your credit score.