If you want to know how to improve your credit score, you’ve come to the right place. This article describes what a credit score is, how you can obtain yours, and the things you can do to achieve a higher number.

Don’t despair if your credit score is less than optimal. You can do many things to boost it. Some tactics could help now, while others take time. Nonetheless, they are definitely worth the effort.

What is a Credit Score?

A credit score is a three-digit issued by a credit reporting agency. In the U.S., we have three agencies: Equifax, Transunion, and Experian. Each uses a particular scoring model, either FICO designed specifically for each agency, or VantageScore, used by all three agencies. As a result, you have multiple credit scores.

Even so, your credit scores shouldn’t differ radically. For instance, you shouldn’t rank poorly with one and excellent with another. If you do, there may be an error on your credit report with that particular agency.

Step 1: Get All Three Credit Reports

Luckily, as a U.S. resident it is very easy to get all three of your credit reports for free once a year. Just visit AnnualCreditReport.com. They are the only authorized website that can safely provide this information.

What Errors Should Your Look For?

Any error on your credit report could potentially lower your credit score. However, some are more concerning than others.

Always check whether you recognize every line of credit mentioned on your report. Otherwise, it could by be a sign of identity theft or mistaken identity.

Also check whether there are any incorrect reports of late or delinquent accounts. These definitely lower your credit score.

Finally, look for accounts listed twice and accounts that have incorrect credit limits or balances. These mistakes could also lower your credit score, because it can make you have more debt than you actually do.

If you do find errors, dispute them. Each credit reporting agency has its’ own protocol. However, you can’t ask these agencies to remove legitimate information. That stays on your report for a set amount of time, based on the type of debt.

Step 2: Understand the Factors Used to Calculate Your Credit Score

As mentioned, the credit reporting agencies pull data from your credit reports. They use their own algorithms to generate your credit score, but they consider similar information. Consequently, they may assign more or less importance to the following factors:

Payment History – this is record of your various tradelines, how well you paid, and how much you paid. It is the most important factor considered in your credit score. Consequently, it can determine whether you’re offered various products and at what interest rate.

Length of Credit History – the longer you can demonstrate you handle credit well, the better. This is the second most important factor considered in your credit score. Older adults tend to have higher credit scores, but younger borrowers can do many things to even the playing field.

Credit Usage – creditors want you to borrow, but you must do so wisely. Consequently, you should maintain a reasonable ratio between your available credit and what you owe. If it is too high, it lowers your credit score.

Types of Credit Accounts – if you can show you can handle various credit types well, it may have a slightly positive influence of your credit score. Credit types include credit cards, retail accounts, loans, and mortgages.

Credit Inquiries – hard credit inquiries lower your credit score and stay on your credit report for up to 2 years. Too many within a short time can make it seem you are a risky credit prospect.

Check How is Your Credit Score Calculated for more information.

Step 3: Get Your Credit Scores

The following options can help you get your credit scores for free. However, most provide either your FICO or VantageScore. You may need to subscribe to several services or pay for a subscription if you want more information.

Credit.com

Credit.com only provides two Experian credit reports and two VantageScore for free. Then you must pay for their service. However, they also offer helpful tips on how to improve credit scores.

Credit Karma

Credit Karma is free and often rated the best option for consumers. They provide your TransUnion and Equifax credit reports and your VantageScore.

Credit Sesame

Credit Sesame offers a free service that relies on Transunion data. It provides your VantageScore. You can also pay for a premium service that checks all three credit reporting agencies.

Credit Wise

Credit Wise is a free service offered by Capital One. You can use the service even if you aren’t a Capital One customer. They provide your Transunion credit report and your VantageScore.

Experian

This credit reporting agency offers a free service and provides your Experian credit report, FICO credit score, and other features.

Mint

Mint is primarily a budgeting and personal finance app, but you can also access your VantageScore based on Transunion data. Their entire service is free, except for bill negotiation.

myFICO

myFico only offers your FICO score and data from Equifax for free. However, they offer 3 bureau coverage as a subscription if you want more data.

Wallet Hub

WalletHub is 100% free and provides your daily Transunion VantageScore and credit reports, as well as credit monitoring. You’ll see a report card on how you’re handling the factors that affect your credit score too.

Step 4: Try These Ways to Improve Your Credit Scores

Now that you’ve optimized your credit reports and you know your credit scores, it is time to get down to the nitty gritty. While you can’t erase negative information on your credit reports, you can do many things to improve credit. Positive behaviours help you improve all your credit scores.

Pay Bills Automatically

A positive payment history carries the most weight of all credit score factors. If you want to improve your credit score, consider setting up automatic bill payments. Add a reminder to your calendar for the previous day to ensure you have funds in your account.

Pay Off Small Balances

Since a positive payment history is the most important factor in your credit score, the credit reporting agencies want to see you settle your debts. Consequently, when you pay in-full, it can boost your credit score.

Plus, as you free up available credit, you lower your credit utilization ratio, which also positively affects your credit score. Your credit utilization ratio compares your available revolving credit to what you owe.

Reduce Credit Utilization Ratio

As mentioned, the amount of credit you use compared to your available credit limits is an important factor used in credit score calculations. Experts recommend this ratio stays below 30%.

While you may be able to ask for a credit limit increase to reduce the percentage, that’s not a solution if you can’t manage debt. You may increase your debt load, instead of lowering it.

Instead, focus on knocking off your debts one at a time. If you don’t know which to attack first, choose the one with the highest interest rate. Reducing your debt is a surefire way to improve your credit score.

Apply for Credit Wisely

If you decide you want to open a new credit account, choose creditors that use a soft, not a hard credit inquiry.

Soft inquiries allow you to compare terms, but they don’t lower your credit score. Hard credit inquires lower your credit score by as much as 12-points and stay on your credit reports for up to 2-years. Consequently, applying for multiple credit products can have a very negative effect on your credit score.

Build Your Credit History

According to Transunion, around 45 million Americans have little or no credit history. Luckily, if you are one of them you have options to improve your credit score.

Borrowell offers Rent Advantage, a monthly subscription that reports your rent to Equifax to help you build credit history. KOHO offers a credit building option at a small monthly cost which they claim can improve your credit score by 22 points in just 3 months.

Companies such as FlexMoney offer loans of up $2,000 that can help you build your credit. Approval does not rest on your credit and the process does not lower your credit score.

Report Your Subscription Payments

Grow Credit offers a Mastercard you can you use to pay for your subscriptions like Netflix, HBO Max and Spotify. It’s free up to a monthly limit of $17. Paid plans with higher limits start at $2.99. Grow reports your payments to the credit bureaus to boost your credit score.

Altro helps you build credit and financial power through your recurring payments and subscriptions. The app pays them and you repay Altro to build your credit history and improve your credit score.

Take Out a Secured Credit Card

A secured credit card is a card backed by your own cash deposit. When you use it, your account and payments are reported to the credit bureaus. Taking out one can help you build a positive payment history to improve your credit score.

Piggyback on a Borrower

If you have a short credit history, you may be able to become an authorized user on someone else’s credit card. As an example, a student may be able to piggyback on their parent’s good credit.

Credit Sesame highly recommends this method. They claim it offers quick and sometimes significant results when you’re eager to improve your credit score.

Negotiate Delinquent Accounts

If you have late payments or think you won’t be able to pay, don’t ignore it. Talk to the creditor and negotiate a payment plan.

The creditor may offer some leeway and they would much rather set up a payment plan than send your account to collections. That costs them money. Plus, you could avoid having your late payments appear on your credit report for up to 7-years.

Settle Collections

In the past, paying a delinquent account did little for your credit score. However, that’s not necessarily the case anymore.

Your full payment shows as “paid” on your credit report and some credit scoring models ignore $0 balance collections. For instance, the latest version of FICO 10 ignores paid collection accounts as does VantageScore 4.0.

Besides the potential to improve your credit score, negotiating with a collection agency could mean you pay a smaller amount. They will try to collect payment in full, but will often settle for less.

The Bottom Line on How to Improve Your Credit Score

When it comes down to it, there’s no magic bullet to improve your credit score. Credit building companies don’t have some secret sauce they can use that speeds up the process and credit settlement companies can severely damage your credit.

Truthfully, it all depends on where you stand now and the steps you take to rebuild your credit. If your credit score has taken a single hit due to one missed payment, it won’t take as long to improve your credit score. When you’re over 90-days on multiple accounts it will take longer, but in both cases, negative remarks diminish over time.

As mentioned, the right loan can be an excellent way to improve your credit score. If you’re wondering how applying for a loan affects credit scores, the answer is the application process through the right lender doesn’t hurt them. However, your timely repayment certainly can improve your credit scores.

Fortunately, our Missouri installment loans offer a convenient online experience. We welcome all credit scores and provide a competitive product. Use our installment loan to improve your credit score starting today.