6 Easy Ways to Get a Higher Credit Score

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An Excellent Credit Score Opens Many Doors

Having a good credit score opens up so many possibilities for a young adult. If your credit score is solid, your chances of getting approved for a car loan, new credit card, or home loan are much higher. Even potential employers and home renters sometimes look at your credit report. It is no secret that a good credit score makes your life so much easier, but keeping that three-digit number at an admirable value is no easy task.

What exactly is a credit score, and how does it work? A credit score is a measure of your creditworthiness, a numerical value that reflects your credit actions, which is why it has the power to determine your loan interest rates. If your credit score is low, it is a red flag for lenders - it means that there’s a risk of you not paying the loan back. In a sense, a low credit score shows financial irresponsibility, which plays a huge role in how you’re perceived by lenders. Your credit score determines which credit card you qualify for, which house you can purchase, or which auto loan is available to you. Therefore, naturally, you should pay close attention to your credit score, and try to keep it at the highest number possible.

The credit scoring system used by major credit agencies are the FICO scores, which range between 300 and 850. There is also VantageScore, which was developed through a joint venture of the three major credit bureaus: Equifax, TransUnion, and Experian. VantageScore and FICO scoring scales are similar, however, their values may vary. Finally, most credit applications are still evaluated by FICO scoring, but customers are more likely to receive Vantage scores through online credit score calculator tools, as well as when ordering their credit reports from Equifax, TransUnion, and Experian.

So, what you now need to know is: what’s a good credit score, and what counts toward my credit score? Here’s how the range of credit scores is evaluated:

750 and higher - excellent credit score
700 - 749 - good credit score
650 - 699 - fair credit score
550 - 649 - poor credit score
549 and lower - bad credit score

There are five components to the FICO score: payment history (35%), amounts owed (30%), credit history length (15%), types of credit (10%), and number of credit inquiries (10%). This means that keeping your credit score in its highest digits is a skill. Here’s what can help.

1. Don’t Miss Payments

This is the easiest way to a good credit score. Missing a payment has happened to many of us, and it is not the worst thing; sometimes it slips your mind, and sometimes you just can’t afford that minimum payment. However, if it’s something that’s become a trend in the way you deal with your finances, then you should be aware that you’re going down a dangerous path. If you’re grown and responsible enough to own a house, car, or a credit card, then you should be responsible enough to make your payments regularly. It’s only fair. Also, a missed payment usually means a late payment fee, and if you didn’t pay off your credit card on time, interest on your balance.

When I got my first credit card, I was so scared of missing a payment, that I regularly paid off all my monthly debt, little by little, so that I would never carry any debt over into the next month. This has saved me from late payment fees and interest, and even though it is not the easiest task when you have a ton of bills to pay, it is worth trying to get on top of everything as soon as possible. It’s crucial to build a habit of regular payments. Even though my obsessiveness with paying everything on time during my college days was sometimes annoying, it has prepared me for the post-college world of bills, bills, bills. So do whatever you need to do to remind yourself - set up reminders, e-mail or text alerts, print out a sheet and post it on your fridge, set up automatic payments or download an app to help you keep up. Anything, just bring missed payments to a minimum.

2. Pay Attention to Your Credit Utilization

Owing some money on your credit card is okay; after all, that’s what credit cards are (kind of) for. It is suggested, however, that you keep your balance at 30% or less of your credit limit. Maxing out your credit card regularly can hurt your score immensely; however, even if you don’t reach that 100% all the time, but keep your balance above 30%, your credit score will suffer.

Let’s say your credit card limit is $2,000, and you monthly charge it $1,500. Even if you pay it all off in a month, this can hurt your credit score because you’re using three fourths of your credit. This is why it’s crucial not to reach your credit limit. If this issue persists, however, look into raising your credit limit. Until then, make small payments (micropayments) toward your balance, don’t transfer debt from one card to another, and attend to cards with the highest utilization first.

During my college days, I used my credit card only for purchases that I knew I could immediately pay off, and I still try to stick to this policy to the best of my ability. Sure, it gets tough sometimes, but trying to stick to this will make a huge difference in your credit score!

3. Aim for Long Credit Card History

Having a long credit card history is highly beneficial; it counts toward 15% of your overall credit score, as it demonstrates stability and responsibility. If you’re just starting out the whole credit card thing, try to convince a family member or friend to add you on their credit card as an authorized user, that is, if they have a long, solid credit history. This means that you’d have to be extra careful, responsible, and respectful, because as your co-signer, they are responsible for all charges you make. If this is not an option for you, simply wait and don’t close any accounts, especially if you’re having trouble keeping your score in the higher digits. If you do everything else right, this will just come with time. If you don’t want to use your credit card much, or if you have a lot of cards (be careful with this also), just charge a utility bill to it monthly - that should do it.

4. Vary Your Credit

Credit score improvements can be seen if you use different kind of credit. This includes credit cards, mortgage, installment loans, or consumer finances. It is a no-brainer that this counts toward your credit score; it basically means that you have multiple bills to keep track of, and if you manage to do it successfully, you get rewarded with a credit score increase. If you’re exposed to different type of credit, it means that you’re familiar with it and take it responsibly. It’s easy to keep track of only one payment, and therefore have a clean history, but once you take on a new loan, it gets a little trickier. Your future behavior is judged based on your credit history sample size - if your credit history is varied, it’s a better representative of your overall credit behavior. Still, only get new credit if you are sure you can handle it.

5. Limit Hard Inquiries

Rate shopping while looking for a loan or applying for a new credit card might require a hard inquiry - when lenders request to see your credit history data. This can affect your credit score in a negative way. People are expected to shop for mortgage, auto loan, or student loan rates at a large number of lenders, which is why credit pulls which occur within 14 to 15 days are considered as one request. In order to be judged fairly while shopping, these inquiries take 30 days to affect your credit score. This is why it’s important to be smart about when and how you’re looking for loans - plan accordingly.

6. Dispute Potential Errors

A large number of people have errors on their credit report, which hurt their score so badly that they result in a higher price for insurance or loan. It’s important to keep track of your credit score. You’re entitled to view your credit report for free every 12 months from Equifax, TransUnion, and Experian, just visit AnnualCreditReport.com. Go through them, check for mistakes, and then dispute any potential errors.

Dealing with credit is not the easiest thing out there, but it is our reality, and as such should be treated seriously and responsibly. Stay on top of your payments, don’t open accounts you don’t need, don’t take on loans you can’t pay off, or use your credit card too much. A good credit score opens the door to better credit card offers and lower loan quotes. It takes some time to reach that financial maturity, so take it step by step, and your credit score will follow.