Whether you’ve got bad credit, no credit or are simply looking for a boost in your quest for a loan, improving your credit score can seem daunting — after all, you’ve got all those different credit scoring models, terms (credit utilization ratio, anyone?) and nuances (how is credit age different from my actual age again?) to contend with. But, while there are certainly situations that call for outside help, there are also a few simple, free things you may be able do get results.
Remember, of course, everyone’s credit profile is different and what works for one consumer may not work for the other. The key, of course, is to understanding what factors specifically are driving your score. You can get an idea by viewing your free credit report summary each month on Credit.com.
1. Pay Your Credit Card More Often
Credit scoring models see large amounts of outstanding debt as a big red flag, even if you’re on-time with your payments. (The idea here is that you may be close to or already overextending yourself and new financing would push you over the limit.) If you’re consistently maxing out all or even one of your credit cards each month, your score would likely benefit, should you pay those balances down. (The general rule of thumb is to keep the amount of debt you owe below at least 30% and ideally 10% collectively and on individual credit cards.) If you can’t afford to pay off larger portions of your monthly purchases, you might still be able to improve your credit score by simply increasing the frequency of your payments. Most issuers report your balance as of your statement’s billing date, not due date, so putting some funds towards your bill each week could help ensure that a big statement total doesn’t wind up weighing down your score.
2. Check Your Credit
What you don’t know could be hurting you, so you will want to check your credit report. (You can do so for free each year on AnnualCreditReport.com.) There may be items in your credit file that you are unaware of (like, say, an unpaid medical bill) holding your score down. There’s also a chance you may find an error on your credit report (one in five consumers actually have one). Getting this information addressed or corrected could improve your score. You can find out more about why errors appear on credit reports and how to dispute them with the three major credit reporting agencies on Credit.com.
3. Get a New Credit Card
It may sound counterintuitive, but adding another line of credit could improve your score in a number of ways. For starters, most credit scoring models consider your mix of accounts in their calculations, so if you’re building credit exclusively off of an installment debt (like, say, your student loan) adding a revolving line of credit (like, for instance, a credit card with no annual fee) could bolster your score in the long term. Also, the credit limit associated with your new card could potentially lower your aforementioned credit utilization ratio (how much debt you owe versus how much credit has been extended to you.)
Of course, this strategy only works if you use your credit card responsibly, so if you do add a new one to your wallet, you should avoid running up a balance, and, if you do make any purchases, be sure to pay them off on time. Also, try not to over-course-correct and apply for a whole bunch of new cards. Doing so could leave you open to overspending and also may generate a few too many hard inquiries on your credit report, which can send your score in the opposite direction.
4. Asking Your Issuer for a Credit Limit Increase
In the same vein, asking an issuer to up the credit limit on on your current credit card could help put you under that 30% to 10% credit utilization rate — particularly if you’re just going over it. Just be sure, of course, to use that extra credit responsibly, if at all. (Note: this request, too, could generate a hard inquiry on your credit report.)
It doesn’t sound terribly exciting, but having a little patience with your score could be the simplest way to solve any credit problems. Negative information generally takes about seven years to “age off” of your credit report (bankruptcies can take longer), but effects will lessen over time. And consumers just starting out in the credit world may need some time to establish their credit history (and bolster performance in the “age of credit” category calculated by most major credit scoring models.) Of course, while you wait, you should focus on exhibiting and building smart spending habits. Paying all of your bills of time, keeping your amount of debt low and adding new accounts organically over time are good ways to build solid credit in the long-term.
More on Credit Reports & Credit Scores:
- What’s a Good Credit Score?
- How to Get Your Free Annual Credit Report
- How Do I Dispute an Error on My Credit Report?