Has your history with credit cards left you wondering how to raise your credit score? Though there are tremendous benefits to using credit, there are also action steps you can take to raise your score – no matter where your credit score lands at the moment.
What Is a Credit Report?
It’s essential to know how your credit report is built. Simply put, it’s your history with your credit. Think of it as a relationship that’s either going great, average, or poorly. And in the same way that relationships can turn around for the better, a credit report can improve drastically with a few strategic changes. Who determines your credit score? Equifax, Experian, and Transunion are three credit bureaus that are responsible for tracking your credit history.
Recovery Time
Depending on where your credit score lands, it can take as short as 3 months or as long as 10 years to see dramatic improvement. But take heart – rarely does someone end up in a situation that will require more than 6-7 years for a significant turn-around.
What Makes up a Credit Score?
If you’ve made late payments in the past, this will impact your score significantly as it makes up 30% of your credit score. Next up is your credit utilization. This represents how much of the total credit line you are using. Because this factor also makes up 30% of your credit score, it is important to use anywhere between 10%-30% of your credit line at any point in time. This will ensure that your use of credit is positively impacting your credit score. The length of your credit history is the third contributing factor to your credit score. It makes up 15% of your score and is decided by the average age of your credit accounts. This means that the longer an account is open, the healthier your score will be.
Your credit mix is the fourth contributing factor to your credit score and represents the variety of credit accounts you have. It makes up 10% of your credit score. If you have a personal loan, car loan, or a credit card – your score will be higher than if you only have one credit card. This mix of credit shows that you are able to balance the responsibility of different loans and can be trusted with a mortgage loan in the future, for example. Lastly, new credit makes up 10% of your score, and in general, opening new credit sources or debt can be beneficial as long as the payments can be managed, and they’re opened with spans of time in between.
Consistency Is Key
The good news is that because there are multiple contributing factors to your credit score, there are multiple ways to improve your score as well. Here’s what you need to know. Consistency is key. If you’re looking to boost your score, paying off credit quickly and consistently can be the number one contributing factor to improving your score.
Avoid Credit Report Errors
One easy fix is ensuring there are no errors on your credit report. These errors are not uncommon and are worth checking on. Then, make sure to keep credit accounts open and become an authorized user on an already-existing account such as a company credit card if you’re able. Having your credit connected with an account that already has a great credit score is a huge plus.
Don’t Check It Too Often
Avoiding multiple credit inquiries and applications will help keep your score up as well. Instead of applying to multiple accounts, take time to learn about each credit card’s strengths and weaknesses. Another way to boost your score is to report your rent and utility payments. Anytime you can prove to the credit bureau that you’re making payments on time, it’s a tremendous benefit. And lastly, applying for a secured credit card is an additional way to improve your credit score.
Your Future Will Thank You
When taking all of these factors into play, there are many ways to improve your credit score. And though it can be easy to delay the process, your future will thank you for acting now to see a change in your credit score. Bigger decisions such as purchasing a home or your dream car will be less stressful when you’ve taken the time to strengthen your credit score ahead of time.
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