• Meredith Adhate

How to Improve Your Credit Score


There are a variety of reasons you may have a low credit score - missed payments, unpaid bills, identity theft, high credit card balance, etc. Not only do these hurt your wallet, they also hamper your ability to qualify for certain loans, making it more difficult to purchase a home. Conventional loans require about a 620 minimum score and most FHA loans want 580 or higher (though some can go down to 500). So are your dreams of homeownership dashed forever? Not necessarily. Here are a few tips of how you can improve your credit score over time (and some ideas that sound good but could end up hurting your score more!)


First, what is your credit score?

This is the main step! Each year, you're allowed to get one free report from each of the 3 credit bureaus (Equifax, TransUnion, and Experian) at AnnualCreditReport.com Review each report to see where you may have some issues. If anything looks wrong, you're allowed to dispute it and the bureau has 30 days to respond to your request.


Tip 1: Start paying bills on time

Your payment history is the biggest factor that goes into your FICO score (which is the score most lenders look at) so it's most imperative to start paying bills on time. Are you forgetful like me? Try some techniques such as automatic bill pay (if available), phone/calendar reminders, or alerts through your bank. Another tip is to pay your bills through a single credit card, if you're able to pay off the credit card bill at the end of each month.


Tip 2: Ask for a higher credit card limit

The goal here is not to use that new higher limit, but to reduce the ratio of what you owe to your limit (ex. you owe $1000 on a $10,000 vs you owe $1000 on a $30,000 limit). This can make a small uptick in your credit score. But make sure to check with your credit card company that it won't be a hard credit pull to change your limit. Hard credit pulls can negatively affect your credit score.


Tip 3: Keep your credit card accounts open!

You might think, "Oh, I have 4 credit cards, let me close 2 of them and I can keep track better." Stop! One of the other factors lenders look at is the length of time you've had accounts open. If you haven't used a credit card in a year or two, just leave it be. If you have balances in all of them, try to catch up on payments.


Tip 4: Get a credit monitoring service

Check out this list from Investopedia.com . Some options are paid, but some, like Credit Sesame, are free. These sites can send out daily or weekly credit alerts to keep you completely up to date on any changes.


Tip 5: Consolidate debt

Consolidating debt involves taking out a new loan to help pay down the debt, but it combines all your owed money and generally has a lower interest rate overall (as we know, credit cards can be intense with their interest rates for late payments). Talk to your bank or credit union to see what options you may have as far as consolidation.


Tip 6: DON'T open a bunch of new accounts

It may seem like a good idea to open some new accounts or credit cards, but this will lead to several credit pulls to approve you for the cards, and lenders don't like seeing a bunch of brand new "baby" accounts. They'd rather see you have a longstanding account on which you're now actively trying to pay down the debt.


Tip 7: Use a boost program

There are a few programs and companies out there that can help improve your credit score for you, but make sure they're reputable. They should never ask for money up front before a service is completed. Always google reviews and make sure the company is not a scam. Experian offers one that's free and can help you get credit for paying smaller bills on time like your cell phone or Netflix.


So while it may not happen overnight, there are a number of ways to improve your credit score. Again, speak to your bank or credit union for additional advice or consolidation programs. Debt is difficult to live with and can happen for a number of reasons - don't feel like you're alone if you're struggling and having trouble getting your credit score up. It's common especially with the prevalence of credit cards and student loans. Hopefully these tips can help you at least a little!







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