5 simple steps to boost your credit score

Victor Polich
Posted by Victor Polich
Mortgage Banking

A credit score is an indicator of financial health. It signifies your strength to banks and can help determine how easy or expensive it is for you to buy a home or car.

Young couple sitting against stacked moving boxes in their still-empty, sunny new home.If you’re in the market for a new home, want to refinance your existing mortgage, or simply want to manage your personal finances more effectively, it’s essential to maximize your credit score.

How credit scoring works

First, let’s consider how credit scores are determined. Most creditors use the FICO scoring system, which combines financial data collected from the three major nationwide credit reporting agencies – Equifax, Experian, and TransUnion.

Second, your credit score is tied to your payment history, amounts owed, length of credit history, new credit, and credit mix. Each scoring system ranges from 300 to 850; the higher the number the better.

Tips for boosting your score

Here are five ways to increase your credit score:

  • Pay your bills on time. Making timely payments in full is key to improving your credit score. And if you miss a payment or are late, get current as quickly as possible. Your payment history is typically the most important factor in your credit score because lenders want to know if a potential customer has paid past debts on time.
  • Keep low balances on credit cards. A rule of thumb is to maintain balances below 30% of total available credit. Paying down debt because helps your score more than simply shifting the balance to another card.
  • Be selective about opening new credit accounts. Think twice about opening a new store credit card to get a 20% discount on a one-time purchase.
  • Avoid opening new accounts that you don’t need. Opening multiple credit accounts in a short time may be perceived as a sign of financial trouble and may lower a person’s credit score.
  • Maintain the right mix. Using a credit card can help your FICO score, but only if you manage your debt responsibly and make payments on time. Don’t add accounts just to attempt to boost your credit score.

Overall, it’s important to stay aware of your credit score by checking it periodically. In fact, the Federal Trade Commission estimates that 20% of consumers have errors in their records that could affect their score.

To better manage your credit, request a copy of your credit report from any (or all) of the three credit reporting companies. Remember that you’re entitled to one free copy per year of your credit report from each credit service.

View your reports for free at AnnualCreditReport.com.

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  • Anonymous says:

    Great tips!

    Reply | 2 years ago
  • Anonymous says:

    Is there still loans where I can write off the interest or write off the whole thing ?

    Reply | 2 years ago
    • Editor says:

      Thanks for your question. As your question appears related to tax matters, I would recommend consulting a tax professional about this.

      Reply | 2 years ago
  • Anonymous says:

    Does it hurt your score to pay off credit cards? Should I keep them open when I pay them off?

    Reply | 2 years ago
  • Anonymous says:

    I was in a terrible situation sometimes last year. We urgently needed to get a new house, my score and partner’s credit was low and bad. We tried all we could to get a loan but all effort was in vain due to the bad credit score after paying back all on the credit cards.An lawyer I contacted to help dispute our collections ,requested for $1000 upfront, for no results, lexington law credit repair company gave at least a year estimate to get us to where we need to be, in the 700s ,God so good to us, out of my desperation to get my credit fixed, I later met a credit repair specialist and instructor, he gave me some instructions and requested some information from me regarding my credit history . Luckily for me, was able to fix my credit profile, my transunion grew from 560 to 730.I was so amazed because he completely removed all my inquires, collections and late payments and the most, my student loans, I’m happy to tell you that I’m writing this ,from our new house which I wouldn’t have

    Reply | 2 years ago

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