credit score

The Top 10 Ways to Improve Your Credit Score

Do you have a less-than-ideal credit score? In case you do, don’t fret—there are a few tips and tricks on how to improve credit score, like the ones we’ll discuss today.

 

First, what is a good credit score?

According to FICO, a good credit score is at least 670, while for VantageScore, 661 is the good credit baseline. If your score didn’t make the cut, there are ways to improve credit score

Based on a survey from Experian, 67% of Americans have a good FICO score or higher, while 61% have a good VantageScore or better. A good credit score opens up a host of money-saving opportunities. From lower interest rates to better loan terms, a better credit score is something worthwhile to strive for. 

 

Why is a good credit score necessary?

A good credit score is your key to unlocking doors of opportunity. When you have a good credit score, it will be easier for you to secure loans with lower interest rates and lower down payments. You’ll be able to get 0% credit card installment  rates and and better deals overall.

Whether you’re planning to get a loan or purchase a new house, car, or appliances, a good credit score will be handy.

 

There are Ways to Improve Credit Score

While there are several ways to bump your credit score higher, experts agree on one thing that can make a significant impact on your credit. Paying your bills on time—no matter how basic this may seem—is still the best strategy for improving your credit score. To date, all other strategies pale in comparison, although your credit score may still benefit from them.

If your credit score lags behind the Fico’s 670 or VantageScore’s 661 marks, here’s a summary of the things you can do to improve your credit score:

 

  1. Review your credit report and check for errors. 
  2. Pay your bills on time.
  3. Reduce the amount of debt that you owe. 
  4. Apply for new credit only as needed.
  5. Don’t close old, unused credit cards.
  6. Use credit monitoring services.
  7. Consider quick loans.
  8. Use a debt consolidation plan.
  9. Take advantage of score-boosting apps.

 

10 Tips To Improve Credit Score

 

1. Review your credit report and check for errors.

Each year, you’re entitled to one credit report each from the 3 reporting agencies. Make sure to request a credit report from each. Review the report/s closely and check for discrepancies or outdated information and dispute inaccuracies in your credit report as soon as you spot them. Your credit score improves almost immediately as soon as the false information is updated.

 

2. Pay your bills on time.

If there’s one fix that will help tremendously improve your credit score, it’s paying your bills on time. While this may sound too basic, it’s easier said than done. According to FICO, delinquent payments, even if only a few days late, will negatively impact your credit score. 

To prevent this, FICO recommends setting up automatic payments or payment reminders for your credit card, car and other loans. In addition, you can set multiple payments within a payment cycle (instead of a single payment).

If you’ve already missed payments, get back on track as soon as you can. FICO states that you can expect your credit score to improve the longer you pay your bills on time after being late. Poor credit won’t haunt you forever, as long as you continue making on-time payments. 

If you’re having financial difficulty, contact your creditor immediately to work out a payment plan. Or, you can get assistance from a legitimate credit counselor.  

 

3. Pay off debt.

The balance of your debt available to credit (or credit utilization) makes up 30 percent of your FICO score, while it makes up 23 percent of your VantageScore. Since this makes up a third of your credit score, prioritize cleaning up your debt, especially credit card debt, since these have the highest interest rates.

When dealing with a number of credit cards, pay off the maxed-out credit cards first, as they’re the ones that are likely to bring down your credit score.

However, beware of old, ‘charged off’ debts. If a debt is charged off, the lender does not expect further payments. Reactivating these old debts may lower your credit score. Talk to your lender first before dealing with these debts. 

 

4. Apply for new credit only as needed.

Refrain from opening new credit just to ‘diversify’ your account. Open new accounts only whenever necessary. Unnecessary credit can create multiple problems, like additional inquiries to your report and the temptation to overspend.

 

5. Don’t close old, unused credit cards.

If you have old, unused credit cards, don’t close them yet—as long as they’re not burdening you with annual fees. Closing them may result in increasing your credit utilization ratio. According to Experian.com, having the same debt but with fewer accounts open may lower your credit score.

 

6. Use a credit monitoring service.

Credit monitoring services help you track your credit score changes over time. These services also help prevent identity theft and fraud, as their notifications include alerts on new credit accounts appended to your file.

 

7. Use a debt-consolidation program.

Unpaid debt will have a negative impact on your credit score, unless you find ways to deal with it immediately. If you are having trouble keeping up with your debt payments, you can consider getting into a debt-consolidation program for debt relief to improve your credit score.

Here are a few debt-relief options you can try:

 

  • Family or friends. You can try asking your family or friends for help when paying for your outstanding debt. Loans from family or friends have no record and will not affect your credit score. Use this loan to pay off existing debt and boost your credit score. However, be responsible in repaying your debts, as finances can complicate your relationships.
  • Begin looking for debt relief at your bank. If you have an existing account in a local bank, consider getting a loan there.
  • Bank debt-consolidation loans. Credit unions or banks can give individuals a one-time loan for the purpose of debt consolidation. This allows you to have only one monthly payment for all your existing debts. You may find it easier to get updated with your payments using debt-consolidation.
  • Credit unions. Joining these organizations allow you to enjoy loan benefits and relaxed interest rates and fees.
  • Get a home equity loan. If you have a house that you’ve been paying for years, you can ‘borrow’ against that equity and use the money to pay off your debts. Home equity loans are usually low-interest since you have the house as a collateral.
  • Enroll in a debt-management program. If you’re struggling to pay off outstanding debt, you may find help through enrolling in a debt management program. They won’t give you a loan, but these programs help borrowers reduce their monthly repayments and get lower interest rates. In addition, these organizations also provide debt and credit counseling to help improve credit score.

8. Consider quick loans.

If you have poor credit and are left with not so many options to improve credit score, try taking ‘quick loans’ to slightly boost your credit score. Quick loans are small, personal loans (usually $250 to $1000) repaid in a short time frame.

As long as you’re able to keep up with your repayments and as long as your repayments are reported to your credit history, chances are, you’ll get a slight credit score improvement. However, experts recommend taking quick loans as a last option.

9. Get a guaranteed credit card

Getting a guaranteed credit card is one of the fastest ways to either build your credit or increase your credit.

10. Take advantage of score-boosting apps.

Experts swear by using free credit monitoring apps to improve credit score health. These credit monitoring apps helps you learn more about your credit score, like what exactly prompts it to go up or down.

 

Credit Score-Boosting and Monitoring Apps You Should Download

Here are a few credit score monitoring apps experts recommend for those interested in keeping track of their credit scores:

 

Experian

Availability: Android,  iOS

Cost: App is free, but premium features require an active Experian account

Pros:

  1. Tracks Experian and FICO credit scores
  2. Automatic credit report updates every 30 days
  3. Comes with Experian Boost, an exclusive feature that allows you to boost/improve your credit score
  4. Credit score change reports
  5. FICO score-based credit card suggestions

 

myFICO

Availability: Android, iOS

Price: App is free, but subscription costs at least $20

The Android and iOS/Apple app versions of myFICO are free to download. To use the app, however, you’ll need an active myFICO registration (cost is $20+ per month).

Pros:

  1. FICO Score simulator, which enables you to check which actions can increase or decrease your credit score
  2. +9.88% and FICO score monitoring
  3. credit report monitoring

 

Self

Availability: Android, iOS

Cost: App is free to download, but it requires at least a $25 monthly loan repayment fee

According to experts, Self is great for individuals who are beginning to establish their credit profile. It’s also excellent for individuals with poor or bad credit.

Pros:

  1. Offers quick loans (1 to 2-year terms) to individuals trying to build (or rebuild) their credit scores
  2. Only $25 (at least) monthly loan repayment
  3. Payments are reported to all 3 credit bureaus, so your credit score is up-to-date
  4. No hard inquiry to your account
  5. Free credit monitoring access

 

Credit.com

Availability: Android, iOS

Cost: Free

Credit.com is a free credit monitoring mobile app, one of the few apps that won’t require a hefty subscription fee.

Pros:

  1. Access to your entire credit profile
  2. Credit score insight and comparison with your peers
  3. Insight on credit score changes (why it went up or down)
  4. Recommendations for better credit score and money saving

 

Lock & Alert from Equifax

Availability: Android, iOS

Cost: Free

A free credit monitoring app from Equifax EFX that has a protective ‘lock’ or ‘unlock’ credit report feature to prevent fraud. It applies only to your Equifax credit report.

Pros:

  1. Credit lock and unlock (not a credit freeze, but still, some protection for your account)

 

Lexington Law

Availability: Android, iOS

Cost: App is free, but features require an active Lexingon Law account

Best for users who have already signed up with Lexington Law credit repair services.

Pros:

  1. Complementary app for those availing Lexington Law credit repair services
  2. Access to your credit reports from all three credit reporting institutions
  3. Regular updates regarding disputes and changes on your credit score
  4. Money management features for tracking cash flow, budgeting, and debt management
TransUnion

Availability: AndroidiOS

Cost: App is free to download, but features require an existing TransUnion account

Pros:

  1. Credit Lock Plus, a security feature that protects your account against fraud or identity theft
  2. Instant alerts on credit history changes
  3. Daily credit score reporting
  4. Debt Analysis tool for calculating your debt-to-income ratio
  5. Access to public financial records under your name
ScoreSense Scores To Go

Availability: Android, iOS

Cost: App is free to download, but features require an active ScoreSense subscription

Pros:

  1. Credit reporting for all three credit score monitoring bureaus
  2. Daily credit alerts and reports
  3. Creditor contact information in case you need to contest errors in your reports
  4. Credit score tracking and comparison with

 

Credit Score Improvement Takes Time

There is no instant way on how to improve credit score. Although the steps are basic, improving your credit score will take time, commitment and discipline. Ironically, the biggest secret to this is also the most obvious; if you want a better credit score, get a good handle on your bill payments. However bad, your credit score will start improving as long as you’re consistent on your debt and bills payments. 

For advanced credit score issues, don’t be afraid to seek help. Join a debt consolidation program or consult a licensed financial consultant to assist you. In addition, try quick loans only as a last resort. Remember, developing good financial habits is a better strategy than resolving your credit issues with additional debt.

 

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