The top lenders use FICO scores to determine creditworthiness, and they are determined by five factors:- The most important factors in determining a credit score are payment history, your credit usage, the age of your credit account, and your mix of new and old inquiries.
The best way to get the most out of your credit limit is to keep a 30% or less utilization ratio.
If you are in need of a credit card, then you should definitely check out a recent post about improving your credit score. I’ve been using the 3 credit reporting companies (Equifax, Experian, and TransUnion) for years and have had to pay their annual fees multiple times for their services.
Are you trying to raise your credit scores fast?
Credit scores are a big deal. It's important that you do your research before taking out a loan, especially if you're purchasing something brand new. As someone who is not always the most informed consumer, I'm always trying to educate myself on how to improve my credit score. In this post, I'll be focusing on the best way to improve your credit score, and hopefully make it a little easier for you to do so.
8 strategies for getting a better credit score
1. Check Your Credit Reports
Did you know your credit reports can affect your life? I don't mean the credit reports on your credit card statements (although that's a pretty big deal), I mean the ones about your finances. And if you're not paying attention, they can be a big problem. They may not show up in your credit report, but they do affect how lenders see you. They can affect how much you can borrow, and thus how much you pay in interest.
2. Stop Paying Bill Late
FICO is the most common credit score used by lenders and it accounts for 90% of top scores.
Payment history (35%)
Credit usage (30%)
Age of credit accounts (15%)
Credit mix (10%)
New credit inquiries (10%)
At the end of each month, you will almost certainly have a large pile of bills to pay. If you’ve been paying your bills on time, you probably don’t have any need to worry about overpaying for a few months. But if you can’t keep up with your bills — because of a delay, for example — or if you pay late, you can end up in trouble with the government.
To improve your credit score, it is important to avoid late payments and not be carried over to the next due date.
Creating a paper or digital filing system for monthly bills
Setting bills and other important reminders
Automatically paying your bills from your bank account
3. Aim for 30% or less of Credit Utilization
A credit utilization charge, also called a negative amortization charge, is an expense that is charged when a borrower’s debt service exceeds its available credit. A credit utilization ratio is the percentage of the total debt service costs that are funded by available credit. The higher the ratio, the more money lenders must pay out in interest and principal to pay off debt.
Keeping your credit utilization to a manageable level is as easy as making sure you pay your credit card balances in full each month. If you have no other option, keep your credit utilization (total outstanding debt) at 30% or less of your total credit limit. Many homeowners get started with a budget of 10% or less and work their way up to a more manageable amount.
4. Make it hard to get a new credit
The credit card companies know what’s best for us. From a consumer perspective, they’re great. But as the market for credit cards continues to grow, it’s clear that credit card companies are running out of room. As a result, they’re increasingly taking steps to limit consumers’ options for new credit cards.
Hard inquiries can sometimes be bad for your credit score-but only for as long as a few months to two years. Hard inquiries are a way for an applicant to make sure they're approved for a new credit card, mortgage, auto loan, or some other form of credit. The occasional hard inquiry will not have much of an effect.
5. Build your credit profile with a thin file
Credit files can be a really tricky thing to work with, especially when you’re trying to build one up. It’s not always easy to figure out what credit reporting institution (CRA) will be the most helpful to your particular situation. But, as you’ll see, there are a few factors that can help you create the most success with your credit file, and each of them has a specific benefit for you.
This program collects financial data that isn't normally in your credit reports. includes your banking history and utility payments when calculating your FICO credit score. It is free to use and designed for those who have a history of paying other bills on time.
6. Keep Old Accounts Open and Deal With Delinquencies
If you are a consumer with an old credit card, consider yourself lucky; because this is a problem that is not likely to happen to you again. In fact, there’s a chance your account could be closed and all the benefits of your card could disappear.
It’s a real struggle for small businesses to keep track of all of their accounts. Not only are many of them using different names and different companies, but some companies also have more than one office. And when they do come across a delinquent account, what are they supposed to do?
7. Consider Debt Consolidation
Debt consolidation is a great idea. Unfortunately, many people do not understand debt consolidation means or how it can benefit them. It may sound like a great idea to consolidate your debts and save money, but there are some important considerations.
For some of you, debt consolidation is a dreaded word. The fear of being unable to keep up with the interest payments has led many Americans to turn to pass-through businesses. The problem? There are no guarantees when it comes to investing in these pass-throughs.
8. Track your progress with credit monitoring
As a credit monitoring company, we’ve seen many people take advantage of our service to avoid financial worries. This article looks at exactly how to do this.
You know how sometimes you see your credit score increase and then a few months later you see it decrease? While this is a natural thing, it can happen on a regular basis. I only noticed it happen a few times in the last two years; the first time was from my bank, but I never had any issues with my credit card. This post will discuss how to keep track of your credit by monitoring your credit report.
Credit monitoring service is the best value in the industry. It’s a simple, effective way to stay on top of your credit health. But if you’re one of those people who just want to know when your score has changed, credit monitoring is not for you.
The Bottom Line
Achieving a high credit score is an excellent goal. if you're going to ask for a loan to buy something, like a car or home, or try to qualify for one of the best rewards cards. It may take a long time to see a noticeable effect on your score when you start taking steps to improve it.
You may need the help of one of the best credit repair companies to get rid of some negative marks.