How to Fix Your Credit Score

A good credit score can help you get a better rate on a loan, help you rent an apartment, and in some cases, your credit history can even affect your employment opportunities.  If your score could use a little help, here are a few tips to up your number.

Start the repair process by looking at your credit report. Thanks to The Fair Credit Reporting Act (FCRA), this federal law gives every consumer the right to request all of the information collected about them. You are entitled to one free credit report every 12 months from each credit bureau (Experian, TransUnion, and Equifax). 

You can get your free credit report by visiting AnnualCreditReport.com. Your credit report will contain all of the credit activity reported to each of the three credit bureaus for the past ten years. Look for errors. If you don’t recognize a listing or see that an error has been submitted, contact the credit reporting agency and dispute it by following the steps outlined by the Consumer Financial Protection Bureau (CFPB).  

Missing or making late payments can significantly impact your score, staying on your credit report for up to seven years. Your credit score is made up of many factors but the biggest and most important component is your payment history which makes up 35% of your score. Help yourself remember to pay on time by setting up autopay and never miss a payment again. 

Along with payment history, your credit utilization shows lenders how financially responsible you are. A debt-to-income ratio compares your available credit and the amount you've spent (your balance). The goal is to keep your utilization at 30% or less. The lower, the better. 

If your cards at maxed out, you may want to start looking to pay down your debt. If you’ve received a pay raise, you could consider asking your credit card issuer for an increase in your credit limit to help increase your available credit and lower your credit utilization. But remember to inquire if the request will result in a “soft” or “hard” credit pull. A soft credit pull won’t impact your score whereas a hard pull will. 

It’s easier said than done but paying down debt should be a priority on your credit repair list. While there are several ways to pay down debt, two popular methods are the snowball method and the avalanche method. The snowball method centers around paying off small debts first and the avalanche method focus on tackling high-interest debt first. If your interest rates are high, you may want to consider consolidating your debt or transferring your balance to a card with a better interest rate. 

If your budget schedule allows it, try making several payments a month before the end of the billing cycle. This will help lower your balance which will work to improve your credit utilization ratio.

If you know someone that has a good credit history and high credit limits, you could ask them to become an authorized user on their accounts. This “piggybacking” method allows the authorized user to “borrow” the primary account holder’s good payment history without having to worry about making payments. The primary holder’s credit limit is also added to your credit limit and will improve your debt-to-income ratio.

Adding more positive credit history is crucial if your score is in the red but if you’re unable to actually acquire a credit card, consider getting a secured credit card instead. A secured card uses money in a savings account as collateral which means lenders feel a lot more comfortable lending you the credit. Be sure to look for a secured credit card that reports to all three major credit bureaus to get the benefits of making payments on time.