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How Do You Raise Your Credit Rating

Check With Your Utility Company

How To Improve Your Credit Score Without Debt

The majority of utility providers only report derogatory information to the credit bureaus, but if you live in Detroit and you pay your bills on time, youre in luck. DTE Energy reports all payment histories, both positive and negative. Customers who pay their bills on time benefit from responsible management of this household expense.

Not in Detroit? Contact your utility provider to find out if it reports to the credit bureaus, and if so, put the bill in your name. If not, you can still use the positive payment history to your advantage. Most utility providers are happy to provide a letter of reference for an account holder in good standing.

Check Your Credit Report For Errors

One way to quickly increase your credit score is to review your credit report for any errors that could be negatively impacting you. Your score may increase if you are able to dispute them and have them removed.

About 25% of Americans have an error on their credit reports, so it’s important to take the time to review. Some common errors to look out for include fraudulent or duplicated accounts, as well as misreported payments.

“Most of the clients we meet with have not reviewed their report within the past year, and are often surprised by what we find to discuss with them,” says Thomas Nitzsche, a financial educator at MMI.

You can get a free credit report from the three major credit bureaus on a weekly basis by going to AnnualCreditReport.com now through April 2021.

Consider Consolidating Your Debts

If you have a number of outstanding debts, it could be to your advantage to take out a debt consolidation loan from a bank or credit union and pay off all of them. Then youll just have one payment to deal with, and, if youre able to get a lower interest rate on the loan, youll be in a position to pay down your debt faster. That can improve your credit utilization ratio and, in turn, your credit score.

A similar tactic is to consolidate multiple credit card balances by paying them off with a balance transfer credit card. Such cards often have a promotional period when they charge 0% interest on your balance. But beware of balance transfer fees, which can cost you 3%5% of the amount of your transfer.

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Make Your Payments On Time

Paying your bills on time is the most important thing you can do to help raise your score. FICO and VantageScore, which are two of the main credit card scoring models, both view payment history as the most influential factors when determining a person’s credit score. For lenders, a person’s ability to keep up with their credit card payments indicates that they are capable of taking out a loan and paying it back.

But your credit score isn’t just impacted by your credit card bills. You need to pay all your bills on time. That includes all your utilities, student loan debt and any medical bills you might have.

Diversify Your Credit Mix

Understanding your Credit Score and how to improve your Credit Rating ...

The diversity of your credit mix accounts for about 10% of your credit score. It shows the credit rating agencies that you can responsibly manage several types of debt.

Dont take out debt you dont need, because it results in unnecessary interest payments. However, you can be strategic with your debt.

For example, if you have credit card debt and your credit score is decent, then taking out a peer-to-peer loan, like with Lending Club, can help you pay off your higher interest rate credit card debt and diversify your credit mix at the same time.

Or, lets say you just have student loans, and you need to get a car. Taking out a small auto loan to finance part of it, and paying down some of your student loans quicker with the cash you save up front, means your credit is more diverse.

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Use Credit Monitoring To Track Your Progress

are an easy way to see how your credit score changes over time. These servicesmany of which are freemonitor for changes in your credit report, such as a paid-off account or a new account that youve opened. Also, they typically give you access to at least one of your credit scores from Equifax, Experian, or TransUnion, which are updated monthly.

Many of the best credit monitoring services can also help you prevent identity theft and fraud. For example, if you get an alert that a new credit card account that you dont remember opening has been reported to your credit file, you can contact the credit card company to report suspected fraud.

Things You Shouldn’t Do If You Want A Better Credit Rating

DON’T …

  • Prematurely close down old credit card accounts. Some lenders dont like customers to have unused credit, because they might suddenly use it all and struggle to pay it back. Closing an unused account could therefore be a good idea. However, if youve had an account for years and used it responsibly, it can be a great sign to potential lenders that you know how to manage your money. So, dont close old accounts before considering both the pros and the cons.
  • Make too many applications for credit. Multiple lenders carrying out credit searches at the same time can affect your credit score and make rejection more likely.
  • Overburden your overdraft. Just like credit cards and personal loans, an overdraft is a credit agreement, so be careful to not exceed the limit.
  • Have no credit history. It might seem a bit unfair that lenders want to see that youve had to borrow money in the past before lending to you in the present, but its only because they want to see that you are a responsible borrower.

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How Long It Takes To Raise Your Score

The length of time it takes to raise your credit score depends on a combination of multiple aspects. Your financial habits, the initial cause of the low score and where you currently stand are all major ingredients, but theres no exact recipe to determine the timeline. Thanks to studies done by CNBC and FICO, weve compiled the typical time it takes to bring your score back to its starting point after a financial mishap. The following data is an estimate of recovery time for those with poor to fair credit.

Event
Applying for a new credit card 3 months

Tips To Increase Your Credit Score

How To Raise Your Credit Score By 200 Points

If you are like many consumers and dont know your credit score, there are several free places you can find it. The Discover Card is one of several credit card sources that offer free credit scores. Discover provides your FICO score, the one used by 90% of businesses that do lending. Most other credit cards like Capital One and Chase give you a Vantage Score, which is similar, but not identical. Same goes for online sites like Credit Karma, Credit Sesame and Quizzle.

The Vantage Score comes from the same place that FICO gets its information the three major credit reporting bureaus, Experian, TransUnion and Equifax but it weighs elements differently and there could be a slight difference in the two scores.

Once you get your score, as Homonoff suggested, you might be surprised if its not as high as you expected. These are ways to improve the score.

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Add Utility And Phone Payments To Your Credit Report

Typically, payments such as utility and cellphone bills wont be reported to the credit bureaus, unless you default on them. However, Experian offers a free online tool called Experian Boost, aimed at helping those with low credit scores or thin credit files build credit history. With it, you may be able to get credit for paying your utilities and phone bill even your Netflix subscription on time.

Note that using Experian Boost will improve your credit score generated from Experian data. However, if a lender is looking at your score generated from Equifax or TransUnion data, the additional sources of payment history wont be taken into account.

There are also services that allow rent payments to be reported to one or more of the credit bureaus, but they may charge a fee. For example, RentReporters feeds your rental history to TransUnion and Equifax however, theres a $94.95 setup fee and a $9.95 monthly fee.

How much will this action impact your credit score?

The average consumer saw their FICO Score 8 increase by 12 points using Experian Boost, according to Experian.

When it comes to getting your rent reported, some RentReporters customers have seen their credit scores improve by 35 to 50 points in as few as 10 days, according to the company.

Pay Down Debt Strategically

OK, lets build on what you just learned about utilization ratios.

In the above example, you have balances on more than one card. Note that Card A has a 42% ratio, which is high, and Card B has a wonderfully low 10% ratio.

Since the FICO score also looks at each cards ratio, you can bump up your score by paying down the card with the higher balance. In the example above, pay down the balance on Card A to about $1,500 and your new ratio for Card A is 25% . Much better!

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Optimize Your Credit Utilization Ratio

If you already have one or more credit cards, this could be the biggest move to make if you want to get to 800+. Its the second most important factor that affects your credit score, since it accounts for about 30% of your score. You can change it quickly, and it has a major impact if you get it right.

Ideally, you want a credit utilization ratio of below 10%.

First, if you carry a credit card balance from month to month, pay that off asap. The interest rates are horrendous and its negatively impacting your credit utilization ratio.

Second, if you have two cards that each have, say, a $7,500 credit limit, and you have $6,000 in debt on one card and only $1,000 in debt on the other card , then try to balance them out. Pay down the higher debt one first, so that none of your individual cards have a very high credit utilization ratio.

Third, even if you do pay off your credit card balance each month, your payment timing might be unfairly hurting you. Credit card issuers usually report your credit information to the credit rating agencies once per month, around the end of your billing cycle. But what if you just paid for a major $3,500 car repair on your $5,000 limit card right before they report your credit utilization? Theyll say you have a 70% credit utilization ratio, which is bad, even though you always pay your card off every month.

There are two main ways to fix that:

Periodically Use Dormant Credit Cards

How to Improve your Credit Score

As your credit history grows, you likely qualify for credit cards with better rewards and interest rates. Instead of closing your first credit card, make occasional purchases to keep it active.

When you keep the card active, banks are less likely to reduce your credit limit or close the card. The credit bureaus look at each revolving credit account’s credit utilization ratio as well as your overall credit utilization ratio.

A credit line decrease impacts your total credit utilization ratio.

Closing an old credit card account can also hurt your score. If your old card charges an annual fee, see if you can downgrade it to one without an annual fee. You maintain your account history and that continues to strengthen your credit.

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Pay Your Bills On Time Every Time

Your payment history accounts for 35% of your FICO Score, making paying on time, every time, the most important thing you can do to build a good credit score.

If you struggle to keep track of payment dates, you may want to set up autopay through either your card issuer or your bank. You may also be able to set email or text message reminders for when a due date is approaching.

It can also help to use a budgeting website or mobile app especially if you have multiple credit cards, because then you can easily see when charges appear.

The good news is that if you do miss a payment by a day or two, it typically wont be reported late to the credit bureaus until its at least 30 days past due. That said, you may still face a late fee and an increased penalty interest rate, so its best to avoid missing your due date even by a little.

Reach Out To Your Lender

The steps you take to boost your credit rating dont have to be tackled alone. Speak to your lender about your situation if you feel youre struggling to keep up with credit card repayments or if youre having other financial difficulties. They may be able to help you get back on track with suggestions like changing due dates and taking the trouble out of remembering when to make repayments by setting up a Direct Debit.

Just remember a direct debit will only help if you have enough money in your account. Tactics like these can help you clear outstanding credit balances, which in turn will reflect positively on your rating.

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Clever Ways To Improve Your Credit Score Fast

Playful girl biting credit card, thinking of doing online shopping, standing over yellow background

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Your credit score is a critical piece of your financial life.

If you want a good rewards credit card, youll need a good credit score. If you want to get a low mortgage interest rate, youll need a good credit score.

There are also other non-obvious places where a good credit score can help – like when you want to get a new cell phone or when youre getting car insurance.

Building credit can be a long process where good behavior helps increase your score gradually. Achieving good credit can take years but there are a few steps you can take to give your score a boost.

These wont work for everyone because many solve specific problems but review the list to see if you can take advantage of any of these ideas.

Review Your Credit Reports

How to Build Credit and Improve Your Credit Score

To improve your credit, it helps to know what might be working in your favor . Thats where checking your credit history comes in.

Pull a copy of your from each of the three major national credit bureaus: Equifax, Experian, and TransUnion. You can do that for free once a year through the official AnnualCreditReport.com website. Then, review each report to see whats helping or hurting your score.

Factors that contribute to a higher credit score include a history of on-time payments, low balances on your credit cards, a mix of different credit card and loan accounts, older credit accounts, and minimal inquiries for new credit. Late or missed payments, high credit card balances, collections, and judgments are major credit score detractors.

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How Long Does It Take To Go From A 700 To 800 Credit Score

The amount of time it takes to go from a 700 to 800 credit score could take as little as a few months to several years. While your financial habits and credit history will play a role in how long it takes, there are some factors that have specific timelines. For example, it takes up to 2 years for a hard inquiry to go off your credit report. As hard inquiries are removed, your score can go up. Your score also goes up the longer youve had credit. Each year you have your credit, your credit history gets longer, helping your score improve.

Both of these examples show why its important to consider opening new accounts when building your score. When you open a new account, you put a new hard inquiry on your report and you bring down the average age of your credit. Youll also want to consider the impact closing an account can have on your score, too. Closing an older account can lower the average age of your credit history.

Consider Applying For A Secured Credit Card

If youâre having trouble getting approved for credit, a secured credit card might be a good place to start. Secured and unsecured cards work in much the same way. But secured cards typically require a security deposit to open an account. Want to know more? You can read more about how secured cards workâand why they may be a good option for people trying to establish or rebuild their credit.

New credit inquiries can cause your credit scores to dip temporarily. But credit cards are one tool that can be used to build credit. Responsible use of credit cards, like paying your bills on time every month, can help improve your scores.

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Too Much Credit In Use

Another 30% of the FICO score is based on the amount you owe as a percentage of the credit you have available to you, such as the limits on your credit cards. Having too high a percentage may mean that you are overextended and could have trouble repaying your debts in the future. This is often referred to as your .

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