Concerned about raising your credit score?  READ ON!!

why do credit scores matter?

Every day when I read the day’s events, I ALWAYS find an article on credit scores and for good reason.  Credit scores determine whether you can get a loan and the interest rate you will be charged on that loan.  They are also used by other interested parties.  Perspective employers can use your score when making employment decision.  Insurance companies can use your score when calculating premiums.

How do credit reports work?

When you make loan or credit card payments, the company that you paid, the creditor, keeps a record of these payments.  Creditors and other entities may send information to different reporting agencies about the amounts that you owe, payment amounts, whether you make your payments on time and any missed payments.  Each reporting agency uses this information to make your credit report.  Creditors may report your payment information to different agencies on different days.  This is why your credit report from each credit agency can be different.  Your credit report will also contain records of bad debts, bankruptcies, past and current employers and all known addresses. 

interpreting your score

Banks use your credit history and your credit score to determine your credit worthiness.

Credit scores

300-579   Very Poor – could be denied credit or charged exorbitant rates on loans

580-669  Fair – may be approved for loans but with higher interest rates

670-739  Good – may qualify for loans but not the best interest rates

740-799  Very Good – likely qualify for loans with lower interest rates

800-850  Excellent – will likely qualify for loans with the best rates

how can i increase my score?

Many people with low credit scores believe it is impossible to qualify for a mortgage and they could be correct.  Fortunately, credit scores can be raised with hard work and determination.  They can also be fixed, usually for FREE!!

9 tips to raising your credit score

To work on raising your credit score, I recommend that you take the following steps:

1.  Pull your credit report for free using Annual Credit Report.com.

This is the official site to get your reports from the three credit reporting agencies, Equifax, Experian and Trans Union.  During the pandemic, this site has been providing free weekly credit reports.

2.  Review each credit report for errors or omissions.

Dispute any errors with the creditor directly.  The creditor must make corrections so that the information in your credit report is accurate.  This step can also be done for free.

3.  Create a budget so you can know how much money you are making and spending.

A budget is the best way to get a handle on your cash flow.  You can download a budgeting app which can make the process much easier.

4.  Take advantage of autopay!!

Set up automatic payments through your creditor’s mobile app or website to avoid late or missed payments.

5.  Pay attention to your credit utilization rate.

Banks want prospective borrowers to use less than 30% of their available credit on credit cards.  For instance, if you have a credit card with a $1,000 credit limit, your balance should not exceed $300 at any given time.  Avoid maxing out your credit card!!

6.  Ask an existing creditor to increase your credit limit.

The increased available credit will lower the credit utilization rate and raise your score.

7.  Avoid closing out your credit cards.

Part of your credit score is based on the age of your open credit accounts.  The older your accounts, the better the score.

8.  Try a payment mobile app like Self-Build Credit. (Android)

Payments made through the app get recorded like a loan except your payments are refunded.  These apps are similar to traditional Certificates of Deposit (CD’s) because your payments can not be withdrawn until the term ends.

9.  Have a piggyback ride.

If you know someone with good credit, ask him or her to make you an authorized user on their established credit card account.  As an authorized user, your friend’s good history will transfer to your credit record even if you never make a purchase. This goes a long way to help with raising your credit.