How to Increase a Credit Score: 5 Tips

If you're having problems getting a credit card or mortgage, then you probably need to figure out how to increase a credit score. Here are the five most effective ways to do so.

May 25, 2014 at 3:00PM


While I hate to say it, credit scores have become an increasingly central part of our lives. Banks check them. Employers do. Your score dictates whether you can finance a car or house. And even online dating services take them into consideration.

But fear not. If you have a low credit score, it's actually easier than you think to improve it. The key is to know how they're calculated. If you can determine this, then all you have to do is work backward to a solution.

How credit scores are determined
While credit scores have gotten a bad name -- and, in many cases, deservedly so -- they actually serve a positive and important function. That is, they provide information to creditors about whether a person is likely to repay his or her debts.

With this in mind, it should come as no surprise that one's credit score is a function of multiple behaviors weighing on financial responsibility. More specifically, as I highlight in the preceding presentation, the major credit bureaus take five factors into consideration (the weight of each is given in parenthesis):

  • Past payment history (35%).
  • Amount of money currently owed on all credit accounts (30%).
  • Length of credit history (15%).
  • Types of credit used -- i.e., revolving vs. installment (10%).
  • New credit accounts and inquiries (10%).

Not to belabor the point, but this is an extremely important list. Not only does it tell you specifically how the credit bureaus assess your creditworthiness, but it also discloses the relative importance of each factor.

For instance, let's assume that you're trying to improve your credit. How would you go about doing so? The correct answer is that you'd attack each of these five items in order of their importance. In other words, you'd prioritize.

The most important issue to remedy is late payments. Next is your outstanding debt load, followed by the length of your credit history, and so on. It's only by proceeding in this order that you can tackle the problem in the quickest and most efficient manner.

How to increase a credit score
Now, just to be clear, the point here is not to lecture. It's rather to empower. Make no mistake about it; everybody in this world has problems. And many people only wish their biggest challenge was a low credit score.

As a result, if you're struggling with a disappointing credit score, then keep this in mind: Improving it is an extremely surmountable challenge. By approaching it in a disciplined and systematic manner, you'll be surprised at how quickly you can put a bad score in the rearview mirror.

How to get even more income during retirement
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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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