How To Improve My Credit Score

If you are here reading this blog, I assume you were taken by the title and interested in any tips herein that may help you improve your credit score.  It is a good thing you are taking of your time to find out if there is anything new I have to offer on this subject.  Your credit score alone does not sum up or make or break your life, but it could in some cases help or hurt you financially if you need financing to sustain any part of your lifestyle.  Taking credit comes with strings attached and if you strum the strings right your score will reflect that but strum them wrong and it will reflect that also.  

Off To Bad Start?

We often are not educated one iota in school about anything to do with personal finance or investment, but today, I believe more than ever, we are being told you are responsible for your own financial future and that means figuring out too how credit works.  For many of us, by the time we realize how credit works, we have already begun to strum those strings incorrectly before we wake up to what is the reality happening to us. 

I may be able to help you start to strum those strings correctly, but it may take time if you have already fallen.  If you are not among the fallen, I may be able to offer a few pointers to get you to that 800 plus score.  I am in a good place with my credit now and my credit score is in the low 800,

but it was not always that way, believe me, because in my twenties, I had student loans in default that were on my credit report and collections calling me on the phone asking for payment when I didn't even have a job.  I been there believe me, but I started learning to strum the strings the right way, largely unknowingly, and things turned around slowly.  Today, I know all the credit factors that are important in determining your credit score, but while I was steadily improving my credit I had no idea what the factors even were, or what my credit score was, but I found out when you start trying to finance stuff that the people who are lending to you surely knew.  If my credit score was low, they knew they could hit you with higher interest rates or shut you out to financing entirely which is the impact I was mentioning to your finances. 

Credit Factors That Determine Your Credit Score

So, let's get one thing out the way, do you realistically know ballpark what your credit score is?  If so, great.  If not, stop now and go here or click on the Credit Sesame banner link above this post to get it for free. Ok, so now I imagine you have got it and now know your credit score and you got it for free using one or all the services I mentioned available to you.  We will use it for the remainder of the post to help you determine what credit factors you need to focus on.  Let's proceed into the credit factors that are impacting your credit score.  The post is split out by high, medium, and low impact items on your credit score, and likely credit score range reason and fixes in that specific area. 

Credit Factors from Credit

High Impact

Payment History - Lenders are looking to see, if you borrowed from anyone, are you paying them back on-time, and in accordance to the terms of your agreement.  So if you have $300 car note, though you pay on time, if you are only paying $200, that boat won't float.  Who is going to be sure to report this information to the 3 credit bureaus, which keeps a credit report on you, is the person you owe and they are ensuring to let any future lenders how well you honored your agreement to pay. 

Your on time payments ÷ Your total payments = Your on time payment percentage  
Credit Score 300(Poor) - 620
Reason

• Very likely to be in this range because your payment history is sporadic for missed or no payments being made on accounts you opened with lender(s).

Fixes

• Consider setting up automatic bill payments or getting reminders when your bills are coming due.
• Paying the entire bill amount on or before the due date.
• Consider a bill pay service like Mint.
• Do not miss anymore payments due.
• Consider using tax return to start a payment plan and slowly pay from that money over several months on time payments.

Credit Score 620 - 750
Reason

• Very likely to be in this range because you may have been late on a payment here or there on accounts you opened with lender(s).

Fixes

• Consider setting up automatic bill payments or getting reminders when your bills coming due.
• Consider a service like Debitize to pay credit card bills and Mint to pay those bills which cannot be covered by Debitize.
• Paying the entire bill amount on or before the due date.
• Do not miss anymore payments due.

Credit Score 750 - 850 (Max)
Reason

• You pay on time 99% - 100% of the time.

Fixes

• Automatic bill payment can make your life easier if you aren't already.  
• Consider a service like Debitize to pay credit card bills and Mint to pay those bills which cannot be covered by Debitize.
• Continue making full on-time payments.
• Keep up the good work!

Credit Utilization - This metric is more for if you are or have utilized credit, like a credit card, department store card, and the like. If you don't have any credit cards, no worries for this metric; otherwise, lenders are looking to see of the credit you have available to you, how much of it are you using.  Here is the calculation used to determine the utilization:

Your total credit card balance ÷ Your total credit card limit = Your credit card utilization

In other words, if you have a one credit card with a $10,000 credit limit and you have a $10,000 balance on that credit card, then bingo, you guessed it you are at 100% utilization.  You don't want want to keep high balances on credit cards because not only is it expensive, it also dings your credit score.  Typically, it is best to keep under 7% utilization.  Mines is typically at 1%.

Credit Score 300 (Poor) - 620
Reason

• Very likely to be in this range because you had or have a credit card(s), department store card with a high balance that hasn't been paid.
• The credit limit and balance are close to or at the max utilization. 

Fixes

• This is tax season, if you are due to get a lump some, just hand it right over to the lender whom you have the highest interest rate credit card with a high balance.
• Make additional income to start bringing these balance(s) down more quickly and put no more spend on credit cards.
• Pay more than the minimum payment, if you aren't already.
• If you are investing in 401K, consider putting on hold and directing to debt reduction.
• Avoid new credit of any kind like the plague.

Credit Score 620 - 750
Reason

• Very likely just ignorant to this calculation.

Fixes

• If you have additional money, pay down your credit balances until under the 7%.
• Pay more than minimum payment, if you aren't already.
• Limit putting on more of a balance to your credit cards until this utilization is within more suitable range.
• Consider a balance transfer to lower or no interest rate card for a duration if possible to limit additional out of pocket expense.

Credit Score 750 - 850 (Max)
Reason

• Your utilization is at or below 7%.
• Perhaps debt averse.
• Credit savvy.

Fixes

• Keep utilization low.
• Keep up the good work.

Derogatory Marks - These are accounts which may be in collections, foreclosure, tax liens, or bankruptcy.  If you have any of these they tend to linger for 7-10 years even after you may have rectified them.  The best you can do is try to responsible and clear these up by either disputing them to get removed if they are wrong, paying the piper, and working hard on the above two factors and the bottom 3 to be discussed shortly.

Open accounts in collections + Negative public records = Total derogatory marks 
Credit Score 300 (Poor) - 620
Reason

• You likely have more than 4 of these types events.

Fixes

• Dispute them and get removed from credit report if erroneous.
• Work out payment plan with those in collections and start towards paying off and paying on time the amount due.
• Pay more than the minimum payment if possible.
• If you doing the first 2 high impact credit factors, just be patient and wait it out for it to fall off your credit.  It won't do so unless you face the piper, these creditors know how to keep it alive, so don't think you can just avoid paying for seven years and it will fall off.
• Consider credit counseling to assist in this matter.

Credit Score 620 - 750
Reason

• I doubt you have any or 1 of these types of event in this range.

Fixes

•  Stay out of collections and having negative public record.

Credit Score 750 - 850 (Max)
Reason

• You ain't got none of these problems.

Fixes

• Stay out of collections and having negative public record.
• Keep up the good work.

 

Medium Impact

Age of Credit History - This is metric showing how long you have managed the credit you have and the longer the better in showing your credit worthiness.  Like I said the longer the better, but this doesn't mean squat in comparison with the above 3.  So, if you have a credit card(s) that don't have annual fees on, keep it open and don't close it even if it means spending and paying off quickly to keep it open.  If you are responsible with credit and use for award travel I also teach, this hasn't really done anything to impact my credit score.

We calculated your age of credit history by averaging the ages of your open credit accounts.
Credit Score 300 (Poor) - 620
Reason

• You may/may not have an issue here, but the other metrics above are probably doing most damage to your score; although if the age of your credit is low meaning you have a lot of new credit lines, this can hurt your score as well.

Fixes

• Don't open any new credit lines.
• Don't close any old credit lines that don't have an annual fee.

Credit Score 620 - 750
Reason

• Less likely to be because of this metric.

Fixes

•  Don't close any old credit lines that don't have an annual fee.

Credit Score 750 - 850 (Max)
Reason

• You ain't got none of these problems.  I actually have average age credit history of 3 years, but my score still in the 800s, so don't sweat this so much.

Fixes

• Don't close any old credit lines that don't have an annual fee.
• Keep up the good work.

Low Impact

 

Total Accounts - Lenders like to see this and varying accounts because it demonstrates that other lenders have trusted you with credit.  You'll have this naturally if you pay off things like student loans, a car payment, a personal loan, etc. and you open new accounts as needed.  It all goes back to paying people back what you say you were going to pay them, when you said you were going to pay them.

Your open accounts + Your closed accounts = Your total accounts 
Credit Score 300 (Poor) - 620
Reason

• You likely have less than 5 because the word gets out that you are not likely to pay back what is owed and lenders will stop lending to you as you are too high risk.

Fixes

• Work on all the credit impacts before this one and the final one I will speak to in a moment.  That will all feed into getting the trust back of lenders.

Credit Score 620 - 750
Reason

• You might want to open a few more accounts and pay them off quickly, like a loan, or credit card that you use on low cost item and pay off right away and do it all over.

Fixes

• Possible take short term loan and pay on time every month the amount due. I want to preface, by saying you don't have to do this if you are doing the others credit impacts well.
  

Credit Score 750 - 850 (Max)
Reason

• You ain't got none of these problems.

Fixes

• You may need to take on more non-consumer debt like for real estate.
• Use your good credit score to your advantage more, as you already are high on other metrics, it's tweaking these little one that can get you to that 850 if you aspire to that.

Credit Inquiries - When you go to try to get new credit lines, you remember I mentioned that people who you borrow from are reporting to the 3 credit bureaus your status in keeping with your agreements and if you happen to go to another establishment in search of financing, they will inquiry into what others you have borrowed from in the past have been saying about you.  If good, they will come back with smile on their face ready to do business, but if it is bad either a handshake and no thanks or yeah we can do business but it's going to cost you.  

These are your hard inquiries.
Credit Score 300 (Poor) - 620
Reason

• You likely have a bad rap about being credit worthy.

Fixes

• Since you know your credit score, do even seek new credit lines until your score is in the 640 - 700 range.
• Continue to do all the above credit factors to perfection and monitor your credit score and report as you progress.

Credit Score 620 - 750
Reason

• Too many requests perhaps for new credit lines and not enough good marks in the high impact credit factors.

Fixes

• If your score is below 700, you should avoid new credit lines until you are near perfect in the high impact credit factors.  You should also continue to monitor your credit score and report as you progress.
• If above 710, consider utilizing your good credit for things like award travel to a limit.  You should also monitor if you do that that you credit score doesn't plummet as a result. 

• Award Travel for Beginners
• Award Travel with Chase Credit Cards
• How To Meet Credit Card Minimum Spend
• How to Meet Credit Card Minimum Spend on Chase Sapphire Preferred

Credit Score 750 - 850 (Max)  
Reason

• You are moderate in use perhaps of new credit.

Fixes

• You should be using your credit to optimize opportunities for investment and award travel. 
• You are leaving money on the table if you don't take advantage. 
• Don't be so credit adverse if you score is up here, but continue to do the above factors which got you hear in the first place.
• Consider using a service like Debitize which makes using credit less risky.
• If you have a spouse or significant other with low credit score, consider letting them piggyback off your good credit by making them authorized user on one of your credit cards with limited spending capabilities laid out.  I have done this with my wife several times and at one point her credit was higher than mine.

• Award Travel for Beginners
• Award Travel with Chase Credit Cards
• How To Meet Credit Card Minimum Spend
• How to Meet Credit Card Minimum Spend on Chase Sapphire Preferred

Recap

So quick recap of points to remember to get or keep things trending in the up direction:

• Know and monitor your credit score and report.
• Pay who you owe what was agreed to in full and on time all the time.
• Keep credit balances under 7% of available credit.
• Stay out of collections and public records.
• Keep oldest credit open and minimize or avoid opening new credit if your score is low.
• Try to keep good mix of open and close accounts.
• Avoid unnecessary hard credit inquiries.

Conclusion

Now, I realize that this has been a lot to take in, but as you can see those with a low score can use a lot of help and knowing the credit factors determining your credit score and some of what you should be doing is half the battle, then other half is you doing the work.  Everyone can do a little to improve and like I mentioned to those with good to great credit, if you are not taking advantage of your credit score, you have work to do as well.  In some regards, the world is yours and you should take it especially when it comes to award travel.  The credit factors impacting your credit score either negatively/positively, you can effect change in the positive direction by focusing primarily on fixing the high impact areas which in some cases directly contribution to the medium and low impact areas. 

Let us all show that we can be responsible for our financial futures and that we can learn how to strum those strings right and lead to better financial ramifications like:

• Access to more credit of all different kinds
• Lower interest rates to finance, lower security deposit, etc.
• Creditworthiness
• Access to award travel and perks that come with credit cards

Because we know that strumming those strings wrong means the opposite of these bullets above.  For additional information on resources I use, please visit under Credit Monitoring Tools in my Affiliate and Referral link here.  These are all "free" tools to assist you to get your credit score, or report or both, and monitor you credit as you work towards improving your credit score.

PS: Please share your experience with improving your credit score or if you have questions by leaving a comment on this post.  Also please be sure to share this content with your friends and family if you find it useful.  I thank you in advance.