How to raise your credit score

Melissa Aguilar

Melissa Aguilar

How to raise your credit
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Having a good credit score is vital to a lot of the big financial decisions in your life, like securing a mortgage or car loan. With a lot of contradictory information out there, it can be hard to know how to raise your credit score.

The three major credit bureaus – TransUnion, Equifax and Experian – calculate this score based on things like the length of your credit history, the amount of debt you owe and what your payment history looks like.

Of course, it is possible to buy a house with bad credit, but it’s always a good idea to get as good a score as possible before making major financial changes.

Check your credit reports

You’re entitled to get one free report a year from each credit bureau. During the COVID-19 pandemic, the agencies have been offering free weekly checks. Go to AnnualCreditReport.com and look through all of the inquiries to make sure they’re accurate.

If you see anything that doesn’t seem right, you can dispute the errors and get your credit back on track.

Pay those bills on time

Your payment history makes up the biggest chunk of your credit, or around 35 percent of your score. Lenders are looking to make sure you pay everything on time.

Making just one payment that is more than 30 days late can dramatically affect your credit score for the worse. It’s not just a one-time hit to your score, either. That late payment can stay on your record for the next seven years.

Setting up auto payments for all your bills will ensure that you don’t forget to pay something.

Keep your credit utilization down

The next most important factor is what is known as credit utilization. It accounts for 30 percent of your total score.

Essentially, this refers to how much of your credit you are using at a given time. So if you have a credit card with a spending limit of $1,000, you should be using no more than $300 of that, or 30 percent.

Contact your credit card company and see if you qualify for a larger credit limit. That way you’ll be able to charge more without it having as big of an impact on your credit score.

Add rent and utility payments to your credit

Depending on the scoring model a lender is using, they might not include your rent payment as part of your overall credit. For example, the well-known FICO score, does not include rent. But its newer counterpart, VantageScore, does.

You can choose which rent reporting service works best for you. Many of them charge monthly fees or a one-time payment.

Boosting your credit score is process that can take a while. Even things that you think might logically raise your score, like paying off a debt in full or closing a credit card, may actually hurt your score.

Staying on top of your finances includes knowing where your credit score is and regularly checking your reports. As with most financial decisions, the more you know the better.

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