Although creditors all have different criteria for making credit decisions, a FICO score of 670 or above is generally considered a good score. A score of 740 is very good and anything over 800 is excellent. Under the less frequently used but still common VantageScore system, a score of 700 is good while a score of 600 gets ranked as poor. As you may already have learned, lower credit scores result in higher interest rates and fewer credit offers. Raising your credit score from 600 to 700 is quite beneficial and easier than you might think. Making a few changes to the way you use credit can really boost your score.
Check your credit report regularly to make sure there are no errors, which can lower your score. If you do spot an error, alert the credit reporting company immediately. Do so in writing and send the letter via certified mail so that you know that they received it. Provide proof that the disputed item is an error but send only copies: never send originals of your paperwork so they are not lost or damaged. Notify the creditor who made the error as well as the credit reporting agency.
Keep Your Accounts
It's true that having a pile of open accounts can reduce your credit score, but choose carefully when closing accounts. According to myFICO, scoring formulas base 15 percent of your score on how long you've had a credit history. The longer you've had credit, the better. If you have a credit card that you opened while in college but rarely use anymore, start using it rather than closing it, even if only once a month. If you close one of your first credit cards, you shorten your credit history. It's especially important to keep your accounts open if you've only had credit for a short time.
Make Timely Payments
Late payments make a big impact on your credit score, and not in a good way. Pay everything on time or before it is due. If you have a history of late payments, put an end to that now. If you've missed payments in the past, get back on track and continue to pay the amount due each month. Paying accounts on time will not automatically remove a history of late payments from your credit report, but creating a new pattern of timely payments will help you raise your score.
Your credit cards don't help your credit score if they always sit idle, so do use them. Do so sparingly, however, Charge gas or groceries one a month and then pay the credit card balance in full when the bill comes. If you must carry a balance, keep it low. The goal is to use less than 50% of your available credit at any one time.
Avoid maxing out your credit cards and pay down your debt as quickly as possible. When paying down your debt, you need to actually pay it off. Don't simply transfer debt from credit card to credit card in search of a better interest rate. Potential creditors frown on robbing Peter to pay Paul. Remember, the smaller your outstanding balance, the higher your credit score.
If you want to improve your credit score, stop asking for credit. Open new accounts only when necessary. If you apply for and open several credit cards at once, your score will drop. Every credit request you make gets recorded on your credit report, and too many look bad. Multiple credit requests suggest that you're in financial trouble and looking for more credit as a way out. If you want to improve your score, put the brakes on new borrowing.
Rally the Troops
Look for allies who can help you boost your credit rating. Maybe you've missed a few credit card payments, but there are likely other obligations you've paid faithfully. If you've never missed a rent payment or been late with your electric bill, ask your landlord or utility company to report that to the credit bureaus. These types of payments often go unreported unless you ask. Some of these creditors may say no, but others may be willing to help.
- MyFICO: How to Repair My Credit and Improve My FICO Scores
- Federal Trade Commission: Credit Scores
- MyFICO: What's in My FICO Scores?
- Federal Trade Commission: Free Credit Reports
- The Ascent: Here’s the Fastest Way to Boost Your Credit Score
- Bankrate: 7 Ways to Improve Your Credit Score
- Experian: What Is a Good Credit Score?
- The Balance: Strategies to Remove Negative Credit Report Entries