5 Tips To Improve Your Credit Score

A poor credit score does not only make you look like a reckless borrower. It affects other spheres of life. This indicator is considered by insurance companies, landlords, and even recruiters. You may fail to get the job of your dreams due to a disappointing credit history. Fortunately, there are many ways to remedy your status. On the downside, this may take months or even years, depending on the starting point.

Visit My FICO to check your current score, or download a finance app like Credit Sesame. The most popular assessment methodology in the US relies on a scale from 300 to 850 and a combination of five factors to evaluate your status. VantageScore uses similar requirements. Generally, you need at least 700 points for ‘good credit’. Here are the best ideas for score improvement.

Tip 1. Repair the Score

An inferior score is not always related to your own missteps. Sometimes, it results from mistakes in financial reporting. The records are compiled by three nationwide agencies — Equifax, Experian and TransUnion. Any of the documents may be erroneous, which results in a score drop. Check creditrepair.com reviews to see how to eliminate the errors quickly.

If you are not in a rush or want to save money, you could try performing credit repair on your own. The law — specifically, the Fair Credit Reporting Act — allows you to do this for free through formal disputes. This is not an overnight process, which is why delegated repair is so popular. Here are the key stages.

1. Collecting the Reports

Until April 20, 2022, every American is entitled to one free copy of their report from each of the bureaus weekly. Previously, this was only possible once a year. The only official source is www.annualcreditreport.com. To download the files, you need to submit some basic information, including your Social Security number.

1. Analyzing the Histories

Print out the documents for convenience and scrutinize all three versions of your financial past. Pay attention to everything — spelling, amounts, and accounts. You may notice an account that does not belong to you, incorrect size of the debt, or false events. 

Any entries that look suspicious may be disputed. By law, all reporting agencies must provide only verifiable information. Negative entries or derogatories reflect your failure to meet financial obligations. Here are some of the possible scenarios:

• missed payments
• evictions
• repossessions
• collections
• charge offs
• bankruptcies. 

1. Gathering Evidence

Mark any disputable items and find proof for the bureaus responsible for the mistakes. Collect bank statements and other documents from your lender.

1. Opening a Dispute

Finally, you may compose and send dispute letters to the agencies. Check the website of the Consumer Financial Protection Bureau for a template. Send the letter by certified mail with a return receipt. This way, you will know exactly when it will be received. The bureau will conduct its internal investigation for 30 or 45 days. If it accepts your changes, you will receive a free copy of the amended report.

Tip 2. Adjust Your Balances

Consumers should try to use as little of their limits as possible. Bringing down the balances reduces credit utilization, which affects 30% of your FICO score. This is calculated as a proportion between the balances and limits on all cards. The ideal ratio is 10%. 

Tip 3. Find More Revolving Credit

If you cannot afford to cover the balances, work with the available credit. It is calculated across all of your cards, and there are several ways to boost it. First, you may ask your bank for a limit extension. 

If this request is declined, try to get a card from another issue. Consider secured credit cards, as they are the easiest to get (on the downside, you need to make a deposit upfront). Finally, ask your friend or relative to accept you as an authorized user. Explain that you will not use the funds in their account, and this is only necessary for your history. Their limit will become part of your utilization.

For the same reason, keep your credit cards open. Unless the service charges are too high, let this extra available credit help you get to the 10% target. For example, someone with four cards giving $6,000 in total should have a balance of $600. You may achieve the goal by working with your balances and limits simultaneously.

Tip 4. Never Miss a Due Date

Late and skipped payments tarnish 35% of your FICO and 40% of the VantageScore total. Being diligent with payments is paramount. Create reminders or set auto-transfers to avoid delays. Note that financial institutions report missed payments when they are 30 days overdue. If you act quickly, your slip-up may not appear in the records. 

If you find yourself in a difficult situation, let the lender know about it as soon as possible. You may be able to negotiate a change of the due date, restructuring, or refinancing. In any case, do not wait until missed payments drag your score down. These derogatories stay on the records for 7 years. Communication is key, so negotiate instead of ignoring the legit demands of your lender. 

Tip 5. Use Experian Boost

This free service from the bureau lets you add more information to the report. Utility payments, phone bills, and streaming video subscriptions may work in your favor. On average, consumers see 12-point growth. The gain is modest, but it could still close the gap between the “fair credit” and “good credit” categories. 

The Bottom Line

Repair your score if it is skewed, and be careful with payments if you want your status to improve. Note that repair companies work with erroneous credit histories. If there is nothing to fix, focus on your borrowing patterns. Reduce the utilization and become a more responsible consumer overall. Rebuilding a damaged history may take months or even years.