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How to help raise your credit score

For better or worse, credit checks are a fact of life. If you apply for a credit card, rent an apartment or file for a car loan, a lender will likely assess your credit. But what if your credit score isn’t what you want it to be? The good news is that there may be steps you can take to help raise your credit score.

What is a credit score?

Credit scores rate your creditworthiness. These three-digit numbers give creditors a quick read of your credit behavior over time and lenders, including credit card companies, request credit scores when they make decisions about granting a line of credit.

How are credit scores calculated?

Two of the common credit score calculation methods run through FICO® and VantageScore®. Each runs credit report data through a proprietary formula, resulting in a three-digit credit score. Interestingly, FICO was the only name in town until 2006 when the credit bureaus got together to create VantageScore.

What do credit score ranges mean?

FICO and VantageScore assess credit scores based on their individual models. They both have credit score ranges based on how low or high your credit sits. Here is how each of these scoring models break out, from Poor to Exceptional:

FICO credit score ranges are:

  • Exceptional: 800+
  • Very Good: 740 to 799
  • Good: 670 to 739
  • Fair: 580 to 699
  • Poor: 579 and below

VantageScore credit score ranges are:

  • Excellent: 781 to 850
  • Good: 661 to 780
  • Fair: 601 to 660
  • Poor: 500 to 600
  • Very Poor: 300 to 499

These formulas have some proprietary properties, but the systems share priorities, and both use credit reporting information. In fact, the information is often from the same three credit bureaus: Equifax ®, Experian®, and TransUnion®.

How credit works

Credit works in a cycle, and it starts with applying for credit. When applying for credit, a lender determines the amount of credit they’re willing to grant you as a credit limit. The lender also defines your interest rate based on your credit score. Once granted, that line of credit creates an opportunity to build credit history. This payment behavior creates a record that adds data to your credit report. That report continually informs your credit score calculation. The cycle then starts again when you next apply for a line credit.

What hurts your credit score the most?

Payment history accounts for 35 percent of a FICO score. So, late payments tend to hurt a credit score significantly. But several other factors may also cause a drop in your credit score, such as:

  • Closing a credit card account — especially an older one.
  • Identity theft or fraudulent usage of your account.
  • Applying for multiple credit lines at once.
  • Paying off a student loan or mortgage.

FAQs: How to improve your credit score

There are a few steps you can take that may help improve your credit score, whether you’re new to using credit or hold several accounts:

How do you build credit from scratch?

There are several ways to start building credit as a beginner. From debit and secured cards to authorized usage, options are there to help. There are choices you can make to rebuild or kickoff a credit history.

Does removing hard inquiries increase a credit score?

The short answer is likely, yes. Removing hard inquiries will usually increase a credit score. But it may take legwork to do this. Also, each inquiry counts for about one to five points and inquiries stay on your report for only about a year. Of course, those points can add up if you have multiple hard inquiries all at once.

What does paying the minimum on my credit card do to my credit?

Paying the minimum on your credit card gets the bills paid, in a technical sense. However, you might also carry an account balance as a result. This may lower your credit score depending on how much you owe, which informs your credit utilization ratio. This ratio indicates how much credit you use versus the amount available.

Does debt consolidation hurt your credit score?

There are at least two ways debt consolidation may have a negative impact on your credit score. First, using a consolidator typically involves a hard check, which can work against your score. Second, consolidation often means closing accounts as you combine them, which may affect your credit utilization ratio.

Does paying off collections improve my credit score?

It may be possible to improve your credit score by paying off the accounts that are in collections if your lender uses a FICO 9 scoring system. Under FICO 9, paid collections no longer harm a credit score. Unfortunately, most lenders still use FICO 8 for credit scoring — this leaves collections on the credit report even after they’re paid. There are still benefits to paying off collections, but it’s not guaranteed to improve your credit score quite yet.

Does paying off a loan help or hurt credit?

Paying off a loan can feel like a major financial accomplishment. However, it also closes a line of credit. While that means you have fewer bills to pay, your credit mix can also take a hit. This mix measures the different types of credit in your portfolio and accounts for 10 percent of your FICO score. So, if you close an account of one kind, it may shift your overall balance.

Does getting a new credit card help my credit?

Getting a new credit card can help or hurt your credit, depending on your credit situation as well as what type of card you’re seeking. If it's time to establish credit, some cards may help you get started. For example, a student card could be an entry point for someone in college who wants credit. This might serve as a kickoff to their credit journey without a likely negative impact. However, someone with many high balance cards may not be well-served applying for more lines of credit. That overload might harm their credit score.

How will paying off credit cards improve my score?

Paying the balance on your credit card bills on schedule can have the most significant impact on your credit score. The FICO score tends to give this behavior the most weight in their accounting method. However, credit scores also assign points based on a historical record of your open accounts. So, it may help your score to keep these accounts open even if they’re paid down.

Using a credit monitoring service

There are ways to help stay on top of your credit rating with a monitoring service. In fact, some ways are user friendly and even avoid the hard check that might hurt your score. Credit monitoring can help track your credit accounts without much effort on your end. A monitoring service, like Credit Journey, can also alert you if anything significant arises.

How often should you check your credit score?

How often you should check your credit score can often depend on how you do it. There are soft and hard checks. A soft credit check works like a peek behind the curtain. These credit checks typically have no lasting impact on your credit score. Hard checks are different. Your credit score records hard checks because they involve applying for credit, and several hard checks in succession may have a negative effect on your credit score.

In summary

You now know more about the factors that can help raise your credit score. Turns out that raising a credit score isn’t only about paying down balances. From checking your score to using a credit monitoring service like Credit Journey, there are resources to help guide you through the process.

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