Before improving your credit score, you need to understand what it is and how it’s calculated. Your credit score is a numerical representation of your creditworthiness, ranging from 300 to 850, with higher scores indicating better creditworthiness. Your credit score is calculated based on several factors, including your payment history, credit utilization ratio, length of credit history, new credit inquiries, and credit mix.
Payment history is the most important factor in your credit score, accounting for 35%. Late payments, collections, and bankruptcies can all negatively impact your score. On the other hand, making on-time payments and paying off your balances in full each month can help increase your score.
The credit utilization ratio is the second most important factor in your credit score, accounting for 30%. This ratio is calculated by dividing your total credit card balances by your total available credit. Keeping your credit utilization ratio below 30% is ideal for maintaining a good credit score.
The length of your credit history, new credit inquiries, and credit mix make up the remaining 35% of your credit score. Having a long credit history, avoiding new credit inquiries, and having a diverse credit mix can all positively impact your score.
Your credit report is the information used to calculate your credit score. It’s important to check your credit report regularly for errors that could negatively impact your score. You’re entitled to a free credit report from each major credit bureau (Equifax, Experian, and TransUnion) once a year.
When reviewing your credit report, look for errors such as incorrect personal information, accounts that don’t belong to you, and late payments you’ve already paid. If you find errors, dispute them with the credit bureau and provide any supporting documentation.
As mentioned earlier, payment history is the most important factor in your credit score. Making on-time payments is crucial for maintaining a good credit score. Set up automatic payments or reminders to avoid missing all due dates.
If you struggle to make payments, contact your creditors to see if they can assist. Our lenders offer hardship programs to help you avoid late payments and negative marks on your credit report.
As mentioned earlier, your credit utilization ratio is the second most important factor in your credit score. Keeping your credit utilization ratio below 30% is ideal for maintaining a good credit score. If your credit utilization ratio is currently high, focus on paying down your balances to reduce it.
Consider requesting a credit limit increase, which can help improve your credit utilization ratio. However, be cautious with this approach, as it could lead to overspending and increased debt if you’re not careful.
The length of your credit history is another important factor in your credit score. If you’re new to credit or have a limited credit history, focus on building your credit by opening a credit card or taking out a small loan. Make sure to make on-time payments and keep your credit utilization ratio low.
If you have a limited credit history, consider becoming an authorized user on someone else’s credit card. This can help you build credit without taking on the responsibility of managing the account.
If you need help to improve your credit score, consider seeking professional help from a credit counseling agency or credit repair company. Our organizations can provide personalized advice and assistance in improving your credit score.
However, be cautious when selecting a credit repair company, as many scams and fraudulent organizations exist. Do your research and choose a reputable company with a proven track record of success.
