When it comes to finances, our credit scores affect our money more than we would like to admit. Your credit score can affect how much money you can borrow and how much you spend on financing. It also affects whether or not you will qualify for a larger purchase. So, if your credit score has been holding you back financially, now is the time to rectify it. We have put together a list of some of the best ways to increase your credit score. Hopefully, these tips will help get you to where you want to be faster, which can ultimately end up saving you a lot of money in the future.
Check Credit Report
When you embark upon the credit score journey, the first stop should always be to check your credit report. If you don’t regularly pull it to see what is going on, there could easily be some errors in it. And if there are, your credit score could definitely be directly impacted negatively.
The best place to start is with AnnualCreditReport.com since you can pull your credit annually for free with them. This is the only site that is authorized by federal law to give you your credit report for free with no strings attached. If you want your credit score along with the report, there is a fee for that.
But, most credit cards will give you your credit score for free once a month now. Or, you can check out Credit Sesame for your credit score and flags on your account. We have been using them for a few years now and check it once a month to see where we are at. Plus, it’s free, which we love!
No matter which way you choose to do it, checking your credit report is extremely important. You want to make a thorough check of everything listed for accuracy. And if you find discrepancies, make sure to request a change or dispute it.
I have done this in the past when my ex-husband’s information showed up on my report. It had nothing to do with me and occurred well after our divorce was finalized. So, I disputed it and it was subsequently removed from my report, which increased my credit score. You just never know what you are going to find when you dig into your credit report.
Pay Bills On Time
Once you have checked your credit report, the next step is fairly straightforward. You must make sure you pay your bills on time. Any time you are late paying a bill, it dings your credit score. In fact, this is the single largest factor that affects your credit score, coming in at 35% of your total score.
While I realize that this may be easier said than done sometimes, it is crucial in order to keep your credit score up.
So, if you have not been paying your bills on time, this is a good place to begin increasing your credit score. If you are having difficulty figuring out how to juggle your funds to make this work, creating a budget can be extremely helpful.
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Pay Off Debt
When you pull your credit report, you should be able to see all of the current debts associated with your credit score. I like to organize the debt first to get a better look at everything before I figure out my plan of attack. So, what I have done in the past is to create a spreadsheet with the following items:
- Name and contact information of creditor
- Account number(s)
- How much is owed
- Interest rate (if any)
- What the debt was accrued for (education, medical, revolving line of credit, mortgage, car, etc)
Once all of this information is organized, then you have to decide how to pay it down. Whether you choose the debt snowball, debt avalanche or debt snowflake method to pay down your debt is completely up to your personal style.
Once you have figured out your plan of attack, then I would suggest calling the creditors to see if there is any wiggle room on the amount owed or the interest rates. We have done this a few times and it has really helped knock a lot of debt off our credit reports fast. Keep in mind that not all creditors will be willing to work with you, but a lot of them will be. So, it never hurts to ask and see what you can do to expedite the process.
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Credit Card Usage
Your credit cards have a pretty big impact on your overall credit score. In fact, this one category affects 30% of your overall credit score. Whether you use credit cards a lot or not, there are a few ways just having them impact your score.
Your credit limit for all of your cards combined is how much money you have available to spend. How much of the credit lines you have currently being used creates your credit usage percentage. For the best credit score in this department, you want to get your credit card usage to under 10%. But, if you are still under 30%, that can increase your credit score as well.
A good example of this is if you have a combined available credit of $15,000, then you want to keep how much credit you use to under $4,500. If you can keep it under $1,500, then that would be even better since that is 10% of the total amount available to you.
Credit Card Age
Another thing to keep in mind, is the age of your credit cards. The longer you have had credit cards open, the better your score. So, even if you aren’t using a specific card anymore, make sure to keep it open anyway. If you choose to close it, it will directly affect your overall combined credit available as well as the length of time open. When you do this, it could bring down your credit score quite a few points because this category makes up 15% of your overall credit score.
I have a few cards that I don’t use anymore since other cards give me better rewards. So, I just keep the cards in a drawer or safe and keep them open. Some people choose to cut them up and destroy them but keep them open at the same time. No matter which way you choose to do it, just let them stay open on your credit so you can keep increasing your credit score.
Increase Credit Line
There is one more thing to do while you are looking at credit cards. Every 6 months or year call each company and inquire about increasing your line of credit and decreasing your interest rate. Sometimes they will be able to assist and other times they won’t have any options. Either way, you don’t want them to pull a hard credit inquiry to increase the credit line. This is because hard inquiries make up 10% of your overall credit score and this can affect your credit negatively.
I have been doing this for many years now and have been able to get a few of the companies to increase my credit line every time I ask. This doesn’t mean you will be using the extra credit you are being given, but it will automatically increase your credit score by increasing how much credit you have available to use.These great tips can really increase your credit score fast! Click To Tweet
Multiple Account Types
Once you have tackled all of these items, the last thing to look at is the diversification of your open accounts. Credit scores are partially based on how many different types of accounts you have open. Your account mix can affect up to 10% of your overall credit score.
These are the categories they are looking at when they determine the different types of accounts you have open:
- Credit Cards
- Home Loans
- Auto Loans
- Student Loans
- Other Loans
So, if you don’t have enough diversification or accounts open, your score in this department will be lower. Therefore, it may be beneficial to open accounts in other categories to increase your account mix. When you do this, it will automatically increase your credit score.
Increase Your Credit Score Summary
No matter how you choose to tackle this, the end game is to increase your credit score as much as possible. Some of these items may be a bit easier to address for quicker results. But, my suggestion would be to go in the following order to potentially see faster results:
- Check credit report and dispute any discrepancies
- Pay all your bills on time
- Pay down debt
- Increase available credit on credit cards
- Decrease interest rate on credit cards
- Diversify your account mix
Once you address all of those categories, you should easily see your credit score increase. Which will only give you more purchasing power in the future. And by doing this, you are keeping more of your money in your wallet.
What are some of the best ways you have found to increase your credit score quickly?