Money Subsidiary

Credit Score

Effective Ways to Boost Your Credit Score

Too many people out there, their credit score is just a number, but what they may not realize is that those three digits can influence a number of areas of everyday life. For anyone who wants to make a minor or major purchase or invest in real estate, their credit score will be taken into consideration. According to Time contributor, Lisa Bernardi, “Having good credit is advantageous in many ways, while having bad credit may cost you money in ways you may not expect.”

What’s a Good Credit Score? 

A credit score of 800 or higher is excellent and should attract the lowest interest rates for personal loans. Scores of 740 to 799 are very good, and 670 to 739 are good. Scores of 579 and below are poor, and they can keep people from being able to borrow money, rent an apartment, or get a job. The good news is that the average American has a credit score that would rank as good – 698 – but raising a good credit score to very good or excellent can save hundreds or even thousands of dollars a year. 

How Is a Credit Score Calculated? 

FICO is an analytics company that scores consumers’ credit based on five categories: payment history, amounts owed, length of credit history, new credit accounts, and the mix of credit used. Payment history makes up 35 percent of the score, with amounts owed coming in a close second at 30 percent.  

Why Pay Bills on Time 

Raising a credit score to 700 or higher can be done over time by making sure bills are paid by their due date. Late payments can drop credit scores but pay on time can help in credit repair. Payment history is the weightiest consideration in credit ranking, so organizing bill-paying or setting up auto payments online can keep past-due payments from happening. Doing this can save consumers hundreds of dollars in late fees each year. Keep up with logins to stay on top of online payments.  

Check Credit Report for Accuracy 

Credit reports can contain errors that can thwart efforts to make major purchases. Scanning a credit report for inaccurate information and working to get those corrected can boost scores quickly. 

Consider a Personal Loan 

Personal loans can boost credit scores in several ways. Those who haven’t established credit or have a less-than-perfect record can create a record of on-time payments with a small personal loan. Also, the interest rate on a personal loan can be far lower than the interest rate credit card companies charge. Taking out a personal loan to pay off consumer debt could save thousands of dollars and increase credit scores.  

Raise Credit Limits 

One factor in determining a credit score is the ratio of available credit to debt. Keeping this credit utilization rate to 30 percent or less will raise your credit score. Having a higher amount of credit available should lower the credit utilization percentage. 

Avoid Closing Old Accounts 

Because closing an old credit account that you don’t use will increase your credit utilization rate, don’t do this before refinancing a home or financing the purchase of a car. It can drop a credit score by 50 to 100 points or more.  

Pay More than the Minimums 

On-time payments are the most effective tool to boost credit scores, but to put a dent in consumer debt and lower credit utilization percentages, pay more than the minimum payment. Doing so will save thousands of dollars in interest over the life of the loan. 

Smart money decisions can increase credit scores and make the most of personal finances.

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