Question: What are some ideas on how to boost my credit score?
Your credit score plays a leading role in your life.
“A good credit score makes life more affordable,” said Bruce McClary, vice president of communications for the National Foundation for Credit Counseling. “Even when you don’t need a good score in the moment, you should be doing things to help you build toward the best credit you can have.”
A good credit score goes beyond the ability to get a loan at the best terms — it can also save you money on things like utilities, rent or a cell phone plan.
Your credit score is calculated using a mix of data, including your payment history, how much credit you have and length of credit history.
The goal should be to have a score above 760, said McClary. “That means you are more likely to get approval for lower interest rates and more favorable terms.”
A low credit score doesn’t have to haunt you forever, but the process of improving your score is a marathon, not a sprint.
“It takes time to recover,” noted McClary.
Here are steps experts laid out to help improve your score and get back on the right borrowing track.
1. Know your credit risks
You can check your credit report for free once a year from each of the three main credit reporting agencies, TransUnion, Equifax and Experian. But your score won’t be included on these free reports — you’ll usually have to pay to see it.
If you do purchase your score, it usually comes with a list of risk factors, explained Rod Griffin, director of public education for Experian. This will give you a good starting point on what areas you need to improve.
“There are as many as 300 different risk factors in a credit score,” he said.
You can review your score for free in a few ways: many credit card companies include it on statements, and third-party websites like credit.com and creditkarma can also provide a simulated score. While it’s not exactly the same number that lenders see, it should give you a pretty good idea of where you stand. But not everyone will provide the risk factors, according to Griffin.
2. Pay your bills on time, all the time
Your payment history is the biggest factor in determining your credit score. Lenders don’t want to give money to someone who has a history of missed payments.
Paying a bill more than 30 days late can drag down your score. “One single missed payment can drop your score anywhere from 100 to 300 points,” said McClary.
If you went through a period of time where money was tight and you were late with some payments, it’s time to right the ship. Curb your spending and start a track record of paying your bills on time.
Here’s the golden rule: Only charge what you can afford to pay every month in full.
3. Manage the debt you have
Keeping your balances low will help boost your credit score. Aim to keep your debt utilization — which is amount of available credit you actually use — as low as possible.
“You never want the balance to be more than 30% of the credit limit — that is, any one card or in total,” said Griffin.
If you are carrying a balance on any of your credit cards, create a plan to get them paid off as soon as possible.
4. Open a credit card if you don’t have one
There’s no need to have a wallet full of credit cards, but having one or two that you use responsibly will help your score.
“You should apply for credit when you need it and know how you are going to repay it,” said Griffin.
But if you don’t have a credit card, he recommended opening an account and making a small purchase each month and paying it off. “Credit cards have a little more weight than installment loans because you decide how much to charge and pay,” he explained.
5. Be patient
Good credit scores don’t just happen overnight.
For instance, the positive effects of opening and making on-time payments on a credit card could take a few months to show in on your score, according to Griffin.