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How do I raise my credit score?
Learn about the different behaviors that can raise or lower an individual's score, such as the length of credit history, frequency of credit inquiries, and overall debt-to-credit ratio.
Raising your credit score
There are several things you can do to raise your credit score:
Pay your bills on time
Late payments can have a negative impact on your credit score, so it's important to pay all your bills on time and in full whenever possible.
Keep your credit utilization low
Your credit utilization is the percentage of your available credit that you're using. For example, if you have a credit card with a
Monitor your credit report
Keep an eye on your credit report to make sure there aren't any errors that could be hurting your score. If you find any inaccuracies, be sure to dispute them right away.
Build a longer credit history.
Your credit score is partly based on how long you've been using credit. So, the longer you have a credit history, the better. Do not close any credit accounts, even if you have not used them in a while.
Avoid applying for too many new credit accounts.
Every time you apply for a new credit account, your credit score takes a small hit. If you apply for multiple new accounts in a short period of time, it can add up and impact your score.
Keep a mix of credit types.
Having different types of credit (like a mortgage, car loan, and credit card) can show that you're able to manage different types of debt, which can boost your credit score.
What factors lower a credit score?
There are a number of things that can hurt your credit score. Here are six common factors:
- Missing payments. If you miss payments on a credit card or loan, it will show up on your credit report and negatively affect your score.
- Having too much debt. If you have a lot of debt compared to your income, this will raise your debt-to-income ratio and make you look riskier to lenders. This can also negatively affect your credit score.
- Applying for too many credit cards or loans. Every time you apply for a new credit card or loan, the lender will check your credit report. This is called a "hard inquiry," and it can lower your credit score by a few points.
- Defaulting on a loan. If you stop making payments on a loan and the lender charges it off as a loss, this will seriously damage your credit score.
- Having a short credit history. If you're just starting to build credit, you may not have enough history for lenders to determine how responsible you are with credit. This can result in a lower credit score.
- Bankruptcy. Filing for bankruptcy will significantly damage your credit score, and the bankruptcy will stay on your credit report for up to ten years.
Want to join the conversation?
Why do people start out with a low credit score for having little to no credit history? Shouldn't it be like grades where you start out good and raise or lower it from there? It just seems unfair that because you are just starting out, you don't get the interest you should be able to get.(16 votes)
Your credit score, Sir Knight, is something that you earn. You are not assumed to be worthy of another's trust just because you exist or reside in a certain Zip Code. It is like the biblical statement about those seen to be worthy in small things eventually becoming entrusted with larger things. We don't start out being seen as equally either trustworthy or untrustowrthy, we start out as nothing, and earn our way forward.(32 votes)
Seeing these teenagers in the comments makes me feel bad. I am 24 years old and feel like I wish I learned this earlier. I feel like I came 8 years late to the party.(20 votes)- Like many people, you can catch up now. And, because you're older than a teenager, and have more experience, you can learn it twice as fast. Go for it!(20 votes)
is there another way to raise my credit score(8 votes)- Go to a bank and take out a personal loan, then pay it back over a set number of months. That establishes a credit record. Discuss this with your banker.(10 votes)
around how much time is required to build a fair credit score (as I understand time is a factor when credit score is calculated)(7 votes)- I'd give it a year. The rating companies are looking for a solid record of charges and on-time payments of balances. If you freak out and pay everything off every month, you're not showing that you can have a debt and pay it over a period of several months. SO, it may cost you some interest to get a credit score, but it is an investment in your future ability to rent money when you need it big time.(12 votes)
Does every country follow this framework of do's and don'ts in terms of credit score?(7 votes)- The system, as described in this course, is particularly American, but most nations where there are systems of credit, especially those that extend across national borders, will have something that does the same thing. No bank wants its assets loaned out to places and people who might not repay.(6 votes)
I've noticed this on my FICO card that my provider offers, and this article seemed to confirm it. If you don't have a diverse mix of credit-seeking ventures, but you haven't applied for them because applying for new ventures hurts, don't those contradict each other? It just seems that bureaus want you to be diverse but penalize you for trying to be.(6 votes)
Creditors want to measure the likelihood that a debtor will repay a loan; the factors that creditors use to determine that likelihood are the debtor's payment history across all loans, the amounts owed, length of credit history, credit mix, and new credit.
The diversity that you referred to falls under "credit mix," the creditor wants to see that the debtor has been able to handle a diverse mix of credit and has consistently paid off their debts. The application penalty you referred to falls under new credit, as you will incur a minor penalty for "hard inquiries" on your credit, which are generally run when you apply for a new loan/line of credit.
There is an additional aspect to consider: time. In the short term, the two goals of credit mix and mitigating hard inquiries do contradict each other. However, hard inquiries only penalize your credit score for a specific period of time (~2 years), after which their effect fades. The creditor wants to see that you have handled a diverse credit mix over a long period of time, which can be achieved without adversely impacting your credit score because you can spread out your hard inquiries over many years. In the long term, the goals are not contradictory.
If a debtor applies for a large number of new credit lines/debts in a short period, as opposed to a long period, then it might represent that the debtor is overusing credit as a means of meeting immediate needs, and with more debt that the debtor is suddenly responsible for it may be less likely that they'll keep up with each obligation and pay what is due. This is the situation that creditors are looking to avoid, and the one that will adversely impact your credit score.(8 votes)
- What credit do I start with?(3 votes)
- You start out with no score at all, so the best you can do, initially, is to go to a bank with your mom or dad and take out a low limit (say, $500) credit card as a joint thing (if you don't pay your debt, they hit up your dad). Then, after 6 months of proving that you can handle credit, have your dad take his name off of the account and you're on your own. Using the card on your own, you will begin to demonstrate to the banking world that you are reliable, and your score will begin to grow. Were I you, I'd start this adventure around the time of my 16th birthday, so that by the time you finish high school, you'll have a record for when you need to increase the credit limit to deal with college-related credit needs.(10 votes)
- even though having too much debt is bad, having a small amount of debt can help your credit score(3 votes)
- Yes. Having a small amount of debt, and paying it off in a timely fashion, is good for your credit score.(7 votes)
Is there a recommended range of time in which a person could be recommended to open another credit card?(4 votes)
I'm pretty sure the recommended amount of time to wait between credit card applications is 3-6 months!(3 votes)
Why are we penalized for applying for a multitude of new credit accounts? Just curious about how it impacts the banks or our credit score.(4 votes)- What is normal and needful. Between my wife and I, we have three credit cards: two of them "joint" and a single one "hers." You don't need more. If you're just applying for fun, that can look bad.(3 votes)