Nine ways to increase your credit score

Improving your credit score is a perfect way to measure personal financial growth. Here are nine ways to make it happen.

1. Pay bills on time
The key factor in credit scoring is your track record for paying your bills on time. Late payments have a negative effect on your credit score, but it won’t be penalized forever. The best thing you can do is to start paying all your bills on or before the due dates. You won’t raise your credit score overnight but paying on time is the most important thing you can do to improve your credit score.

2. Check your credit report
Your credit scores are based on the information in your credit report, so make sure it’s correct. The first step is to get a free credit report and credit score and scrutinize all the entries. Subscribing to a credit monitoring service will alert you to changes in your score and report.

3. Dispute errors on your credit report
If you spot incorrect information in your credit report, check the dispute procedure on the credit bureau’s website to find out how to fix your credit score. Repairing incorrect information can be a lengthy process. Be cautious of suspicious companies that promise to show you how to fix bad credit or how to raise your credit score quickly for a price. 

4. Clean up old collections
If you want to know how to boost your credit score, or even how to improve your credit score in 30 days, contact collection agencies to arrange to pay off your collection accounts. Negotiate with the collection agencies to get the derogatory information removed from your credit report once the debt is repaid.

5. Ask your credit card company to raise your credit limit
One factor that determines your credit score is your utilization. Utilization measures how much of your available credit you’re using. The lower this percentage, the higher the score. You can get a higher credit limit by simply calling your  credit card  company and asking for a limit raise. Just do not to let a higher limit lead to higher spending.

6. Pay down your credit bills
Aim to keep your balance of each of your revolving credit accounts below 30 percent of their respective credit limits. Paying down a high-balance credit card can lower your utilization by further opening that gap between your available credit and the amount you owe. Along with contributing to a higher score, paying down card debt also reduces the amount of interest you’re paying.

7. Don’t apply for new credit cards
Many applications for new credit generate an inquiry on your credit report. Inquiries are how potential lenders know you’ve been applying for loans or credit, and that attempt to get a credit card can stay on your report for up to two years. Only 10 percent of your FICO score is based on recent inquiries, and the score only considers inquiries from the past 12 months. But multiple inquiries for credit cards can indicate a high-risk borrower. Car and mortgage loans are less problematic because credit scoring models treat multiple inquiries made within a short period of time as a single inquiry.

8. Keep existing accounts open
The length of your credit history makes up 15 percent of your credit score. Several factors impact history length, including the age of your oldest account. Older accounts can improve your credit score by increasing the average age of your accounts. If you have old, unused credit cards with no balance, it’s best to leave them open as it can positively contribute to both the length of your credit history and your credit utilization rate. Closing an account increases your credit utilization by narrowing the gap between your total available credit and the amount you owe. Whereas lower utilization helps boost your credit score, high utilization hurts it.

9. Understand your credit scores
It’s a myth that you have only one credit score. There are several scoring models, the most common of which is FICO, and each model can have many different versions. FICO, for example, has separate versions developed specifically for auto lenders, credit card issuers and mortgage lenders. Each of the credit bureaus — Experian, Equifax and TransUnion — has its own versions of FICO. You can get the educational scores for free or purchase the scores lenders use for a fee.

Chi Ishobak  exists to help you manage your financial resources in today’s world. From business consulting and small business loans to consumer loans and financial wellness coaching and workshops, we stand by ready to assist. Call Chi Ishobak today!