How to Raise Your Personal Credit Score

Your credit score measures your overall financial health. Your credit score will impact things like your ability to take out a loan, rent an apartment, and even get a job. The higher your score, the easier it is for you to get approved, demonstrating you are responsible with money and lending habits. Improving your credit score should be your top priority so you can get better interest rates and prove your ability to pay your bills. Here’s how you can raise your credit score. 

Review Your Credit Reports

Lenders, landlords, and even employers will run a credit check, so you must have the same information they do. The first step for improving your credit is knowing what’s working in your favor and what’s working against you. 

You can get a copy of your credit report from one of the major credit bureaus, which consist of:

  1. Equifax
  2. Experian
  3. TransUnion

Factors that contribute to a higher score include:

  • History of on-time payments
  • Low credit card balances
  • A mix of credit cards and loans
  • Old credit accounts
  • Minimal hard credit inquiries

The opposite of these factors, such as missed payments, high credit card balances, and multiple hard inquiries have adverse effects and reduce your credit score. 

With your credit report in hand, you can look for errors that might be hurting your score. If there are any errors in your report, such as accounts you did not open, you can dispute them so they can be corrected, which will help increase your score. 

Pay Your Bills On Time

Mortgage lenders will use your credit score to determine whether or not you’re someone who will pay their mortgage every month. Payment history is your track record for paying bills on time, and it is one of the most important factors for determining your score. If you don’t pay your bills and debts off on time or don’t pay them at all, you’ll see a low credit score on your report. Paying your debts, including student loans and credit card bills on time will help boost your score. 

A simple way to improve your credit score is to pay all of your bills on time. You can do this by: 

  • Keeping track of monthly bills
  • Setting notifications on your phone for due dates
  • Automating bill payments

You can also choose to charge all of your bills to a credit card as long as you pay the balance in full when due. 

Another option is charging all (or as many as possible) of your monthly bill payments to a credit card. This strategy assumes you’ll pay the balance in full each month to avoid interest charges. Going this route could simplify bill payments and improve your credit score if it results in a history of on-time payments.

Keep Your Credit Utilization in Check 

Credit utilization is the amount of your credit limit you use each month. Your credit limit is determined by your loans and the limits on your credit cards. The easiest way to keep your credit utilization low is to pay off your credit cards by the due date each month. If that’s not possible for any reason, you can aim to keep your outstanding balance at 30% or less of your total limit. 

If you want to improve your credit score quickly, you should ultimately aim to keep your credit utilization at 10% or less.

Your credit card may have a high-balance alert that allows you to stop adding new charges when your credit utilization becomes too high. This will help you keep your utilization low without continuously checking your accounts. You can also keep your ratio low by calling up your credit card providers and asking for a credit limit increase, which will allow you to raise your credit limit without using your cards less. 

Limit Hard Inquiries

The two types of inquiries into your credit are hard inquiries and soft inquiries. A soft inquiry might include:

  • Checking your credit score
  • Allowing an employer to check your credit score
  • Credit card companies determining pre-approval

Soft inquiries such as these don’t affect your credit score, but hard inquiries do. Hard inquiries can lower your score for up to two years and include checks into your credit from:

  • Applications for a new credit card
  • Mortgage application
  • Auto loans
  • Personal loans

Occasional hard inquiries won’t have any long-lasting effects, but they can damage your score for a short period. When you have multiple hard inquiries around the same time, banks may view this as you asking other lenders and financial institutions for money because you’re facing financial issues, causing you to be viewed as a bigger risk. 

If you want to improve your credit score, avoid applying for new credit. If you need more credit, contact your bank to see if you can raise your credit limits. 

Fatten Up a Thin Credit Report

A thin credit report means the credit reporting bureaus don’t have enough credit history on you to give you a credit score. This can be the case if you have never had a credit card or a bill in your name. Luckily, you can give the bureaus enough history on you to give you a score. If you don’t currently have a score, you can use this to your benefit by practicing good financial habits. 

You can also find programs that collect your financial data that wouldn’t normally be in your report, such as utility bills to calculate a FICO credit score. As long as you have a history of paying your bill on time, you may have a credit score available you don’t know about.

Keep Old Accounts Open

Your credit score is also impacted by the age of your credit accounts. This portion looks at how long you’ve had credit accounts open. The older your credit age, the higher your score will be. If you have old open accounts you don’t use, like your first credit card, don’t close it. Closing accounts, while you have balances on others, can lower your score while increasing your credit utilization.

If you have any delinquent accounts or accounts in collection, you can take action to resolve them by getting caught up on payments. Getting caught up won’t eliminate the fact that you had late payments, but it will improve your payment history in the future. 

Consolidate Your Debt

If you have outstanding debts you just can’t seem to pay off, you may want to consider debt consolidation. Debt consolidation is a type of loan from a financial institution that allows you to put all of your debt together so you can easily pay it off. 

Instead of having multiple bills to deal with, you’ll only have to make one payment. Debt consolidation may also allow you to get a lower interest rate, which can help you save money in the long run, ultimately improving your credit utilization ratio and your credit score.

Monitor Your Credit 

To help you get a handle on your credit score and how it changes over time, you can use a credit monitoring service or do it yourself. Many services are free, which can monitor changes in your credit report and send you notifications. 

You can also pay for a service that will provide you with identity theft and fraud protection and will send you a notification when a new account has been opened in your name so you can find errors faster.