5 Tips to Raise Your Credit Score

By  //  June 15, 2021

Low credit scores create many obstacles for US consumers. First, borrowing becomes a challenge, as lenders view such applicants as unreliable.

At the same time, the indicator is used by insurance companies, employers, and landlords, so it affects other spheres of life. Fortunately, boosting it is in your power. Follow our guide for the best strategies in 2021.

Raising the score may include repair, rebuilding, or both. As you can see from this Lexington Law review, such companies provide a wide range of services, including delegated fixing and guidance. However, the former is not always relevant.

Work out a Strategy

First, you need to understand if your score is fair. To check the total, you can go to My FICO or use apps like Credit Karma or Credit Sesame. Determine where you stand and if the total is sufficient for your current needs. 

Different lenders have different requirements, but generally, anything below 669 FICO points is too low. You may qualify for some types of mortgage with 580 — here is how to fix your credit to buy a house. Generally, loans insured by the government are the most accessible.

Collect your reports online to see if the score is fair. This information is accessible on www.annualcreditreport.com. Until April 20, 2022, the service is available weekly. Previously, consumers were allowed one free copy per bureau per year! 

All three major agencies — TransUnion, Experian, and Equifax — may be contacted through the website. Their reports are easy to download. If any of them is inaccurate, the score is unfair.

Analyze the documents. Do you notice anything suspicious? On average, one in five American consumers has some form of error in their reports. This could be an innocuous misspelling or outright false data like bankruptcy or eviction. If any of the derogatories are incorrect, you can dispute them. Otherwise, skip to tips 2-5 below. 

1. Hire Credit Repair Services

Repair professionals will collect the histories, scrutinize them, find any errors and evidence to disprove them — all on your behalf. Usually, there is a monthly fee, and you may track progress through a web portal or app. The agency will liaise with bureaus, lenders, and collectors in the process. 

At the final stage, it will send dispute letters to bureaus, so the mistakes are removed. Once this happens, your score is guaranteed to rise. These are the core services. 

Repair packages include extras like score monitoring, TransUnion alerts, identity theft protection, personal budgeting apps, and more. Professionals may send cease and desist letters to collectors (to stop their efforts), debt validation letters to lenders (to confirm the information on your report), and other forms of correspondence. 

2. Change Your Credit Card Balances

Credit cards are classified as revolving credit. Reducing total balances raises the score, as it is linked to credit utilization. This ratio is calculated as the sum of balances divided by the sum of limits. For example, if you have three credit cards for the total limit of $5,000, and you spend $2,500, the rate of utilization is 50%, which is too high. 

Experts recommend keeping the indicator below 10%. In our example, this would require bringing the balances down to at least $500. Different sources cite different percentages (from 30%), but one thing is certain: the lower your balances — the better for the score.

3. Adjust Credit Card Limits

This is another path to the same goal — lower utilization. It affects an influential element of FICO, which is the overall size of your debt. As available limits grow (provided the balances remain the same), the indicator drops. There are three ways to increase the size of accessible funds.

First, you could ask your bank to extend your limit. Alternatively, you could ask for another card. On the downside, borrowers with poor scores have difficulties doing either. 

The best solution is getting a secured credit card. To obtain it, you have to make a deposit (on average, $200). As a result, banks are more likely to overlook your current score.

4. Take out New Loans

Installment loans do not affect utilization, but they are also important for your status. The goal is to improve the payment history. Make payments diligently to prove that you are trustworthy. 

Here, consumers with bad credit face difficulties, as lenders are reluctant to accept their applications. Fortunately, repair companies may help, as some of them offer credit lines from partners. These services allow you to rebuild and repair credit at the same time. 

5. Add Information to Your Report

One of the bureaus allows consumers to add more information to their records. Experian Boost is a free online service. It allows you to include data like utility bills, Netflix or HBO subscriptions, Verizon payments, etc.

The results vary, but the average user sees their score jump by 12 points. Unfortunately, though, not all lenders use scores based on data from this bureau.

The Bottom Line

There are many ways to raise a score. Your starting point is accuracy. If any of the reports are flawed, you have grounds for repair. Otherwise, rebuild your status by adjusting utilization, adding more information, and taking out more loans.