10 Best Ways to Raise Your Credit Score

There are three major credit bureaus -- Experian, Equifax, and TransUnion -- that play a huge role in determining the availability and cost of consumer loans for everything from low credit limit credit cards to jumbo mortgages. You need to keep up with what their reports say about you.

They use your payment history to determine your creditworthiness, giving you a score that goes a long way toward determining how much you can borrow and how much interest you'll pay for the credit you get.

A major kind of credit score is the FICO score, which ranges from 350 to 850. It’s a brand so widely used that it’s become synonymous with "credit score," but there are other brands, too. The bottom line is that most people need good credit to afford life in these here United States, and here are some best practices around how to improve yours.

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Paying bills on time is the No. 1 factor considered in credit scores. Late payments can show on your credit reports for more than seven years. Avoid them as much as possible. Call the creditor if a payment reaches 30 days late. If you make payment arrangements, the creditor may agree not to report the missed payment.

ALSO READ: The Complete Guide to Understanding Your Credit Score

Credit utilization is the second-most important factor that goes into a credit score. It’s how much of your available credit you’re actually using. It changes all the time, and the lower the better. Spreading your use among more than one credit card is an effective way to lower the percentage use on any card, as is making more than one payment a month on each of them. Keeping a card at 30% utilization or less is the rule of thumb here.

Applying for a credit card or pretty much any other kind of loan will generate what’s called a hard inquiry by the lender to the credit bureaus. That can affect your score, especially if you apply for multiple cards at once. If you decide to spread your credit as part of your utilization strategy, keep it to one or two cards and leave as much time as you can between applications. (How long you’ve had a particular line of credit, including credit cards, matters, too. The longer, the better.)

This is a follow-up to the previous tip about credit utilization. Having a higher credit limit on a card, or any line of credit, means you’re using less of the credit available, and that lower utilization will positively affect your credit score. This also can be a way to grow your debt if you’re not careful, so be judicious with this strategy.

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All of the three major credit bureaus are required to provide you reports if you ask. You might be surprised what you find. If you do find errors, dispute them and be prepared to prove the error. This takes time, but the effort pays off, especially when it comes time for a larger loan, like a mortgage on a house or a car loan.

ALSO READ: Why You Need to Check Your Credit Reports -- Even if You Know Your Score

An unpaid account that’s gone to collections looks very bad on a credit report. Don’t ignore the collector even if you can argue the charge is unjustified. Resolve it with the collector and be sure to ask to have the charge stop being reported once it’s resolved.

A secured credit card is backed by cash deposited in an account. It’s the collateral the bank or credit union has to secure your use of their credit card, and the credit limit is typically equal to your deposit. On-time payments over time can help raise a credit score, as well as create the opportunity for nonsecured cards and higher limits.

Becoming an authorized user on someone else’s credit card account is much like having them act as your cosigner on any loan. You get access to their good credit, and even if you don’t use it, you share in the positive payment history on that account. Just be sure that particular account is reported to the credit bureaus.

Not every credit scoring model includes monthly bills like utilities and rent, but a growing number of creditors -- including lenders and landlords -- are including these and other indicators of responsible bill payment in their underwriting and renting decisions. All three of the major credit bureaus consider them, too, but not all landlords report the payments. There are rent reporting services that will take care of that for you. Some charge a fee.

ALSO READ: The 1 Key Piece of Information Your Credit Report Won’t Tell You

Many Americans simply don’t have enough credit use to even generate a score but have a positive history of paying their bills on time and responsibly using checking accounts. Some of the major bureaus have services that can help with that, by incorporating utility payments and other parts of your banking history into their calculations. Having your rent reported, as mentioned in the last slide, also helps. They’re called credit files, and they’re worth fattening.

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Your credit score doesn’t just matter when you borrow, although it’s pivotal to getting the best rates on loans of all types. But that’s not all. Property managers will check your scores. Insurance companies can. Prospective employers do. Ensuring yours is as high as you can get it may not open every door, but it can keep some from closing, too, and the effort to improve it can be well worth it.

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