4 Steps to Raising Your Credit Score to 750 or More
What's your credit score? We all have one. The purchases we make daily influence our credit positively or negatively. Since the world runs on credit, our credit score directly impacts our buying ability. Loans may be denied or only offered at a higher rate. If we own a business and rely on borrowing, having a good credit score saves money on interest rates and lending options.
The highest score anyone can have is 850. It's considered a perfect score, dubbed 'the unicorn of credit scores' by financial institutions since it is so rare. As of 2019, only 1.2% of credit-holding Americans have a credit score of 850.
A strong credit score that is far more common is 750. A credit score of 750 would mean we are in good company with 46% of other Americans. That score would mean we apply for the most competitive rates and loan options available.
So what's your score? If you know it (or are checking now) and find it nowhere close to 750, that's ok. There are a few simple ways to improve your credit score and increase your borrowing power.
Your credit score is determined by what is included in your credit report. This report consists of positive and negative information. The way to reach a credit score of 750 is by adding lots of positive information to your credit report.
Let's break down the main ways you can bring your credit score up to 750 and increase your trust with lenders.
Pay Off Debt as Soon As Possible
To start improving your credit score pay off any debt. Lowering what you owe will help improve your payment history and reduce the number of late payments you make. Paying off debt is the best thing you can do to improve your credit score and stay in good standing with lenders.
Start with credit cards. Paying off credit card balances before they're due increases your credit score since it doesn't automatically close your account and frees up the amount of credit you can use, which lenders like. Paying off accounts that close once you have repaid them can negatively affect your credit score as the length of your credit history decreases if you pay off an account and close it.
Shorter credit history can hurt your score if it drops your average lower. So to avoid lowering your score by closing accounts, take advantage of the lower interest long-term accounts such as mortgages or car loans. Don't be quick to pay off and close those accounts.
Instead, pay back mortgage and car loans for the entire term amount rather than early. This shows a good and extended credit history with open accounts. Some loan agreements include early payment penalties, which can ironically affect your credit.
So check the terms of your loan to see if there are any penalties for early payments. If there isn't, make sure that any additional payments go towards the principal loan only instead of interest payments.
Avoid Late Fees
Another thing you can do to raise your credit score is to avoid paying late fees. It's common for people to miss a few payments because of an unexpected expense. However, your credit score will suffer if you consistently pay your bills late. Even once closed, accounts with late payments stay on your credit report for seven years, while accounts that are close in good standing that was paid as agreed (full-term) remain on your report for up to 10 years.
Avoiding late fees is the simplest way to boost your credit score. Often late fees come with a penalty, so stop paying more than you have to. If you find it challenging to stay on top of your bills, consider a short-term cut back in expenses to get ahead of your monthly payments. Once done, you'll save more money while improving your credit score.
Monitor Your Credit Report Regularly.
Check your credit report a minimum once a year. Review your credit history, payment history, and any negative items on your report. You can view your credit reports free from the three nationwide credit bureaus once every 12 months. That means three free credit report checks a year. Use them!
The information on your credit report can impact your life. The home you live in, how much money you can borrow, and the interest you'll have to pay. There are a few reasons why it's worth checking your credit report every year.
About 25% of people find errors in their credit report. When your report contains information from someone else's report, it's called a 'mixed file.' These inaccuracies may affect your credit, and resolving them may take weeks. Errors can cause problems if you wait to review your credit report ahead of a loan application. If you find the information you think is inaccurate or incomplete on your credit reports, contact your lender or creditor. Don't wait to find these errors after you have started the process of borrowing.
Another reason to check your credit report regularly is if you have cosigned on others' loans or credit cards. If they are late on payments, it can impact your credit. If you regularly check your credit, you won't have to scramble to dispute errors or pay more interest than you have to. Good credit can save you thousands in interest payments throughout your life.
If your score is low, periodically reviewing your credit report can help determine how to rebuild it. Instead of guessing at the problem, you'll be able to see which negatives are bringing it down.
Check Your Credit Scores Often.
One of the easiest ways to improve your credit score is by paying off debts as quickly as possible. Paying down debt will help you build positive payment history, raising your credit score. Credit reports don't include the score; instead, a detailed list of what is currently on your credit history.
Ask your credit card company or financial institution, or check your loan statement to obtain your credit score. Many believe that checking their credit score will lower it. Don't worry; it won't. Credit score are only lower when being looked at for a credit application. You won't hurt your score by checking often.
The time it takes to improve a damaged credit score varies depending on your circumstances, but it will require patience and won't happen immediately. Some factors that negatively impact a credit score are more easily overcome. Your score can bounce back quicker from one late payment than if you have had a foreclosure or an account go to collections.
Checking your credit score often informs you what exactly is keeping your score lower. Most negative information, like late payments, usually remains on your credit report for up to seven years. Chapter 7 bankruptcies will stay for up to 10 years.
Improving your credit score takes effort and patience. But you can do it. There is no perfect solution that will change your credit score overnight. Pay off debt, don't allow a few late payments to impact the buying power you may need down the road. Stay diligent by monitoring your credit reports at least once a year.
Finding errors and disputing them before borrowing will save being delined or paying a higher interest rate. Remember, it's free to check once times a year from each national lender. Take full advantage of that. The same goes for checking your credit score. Knowing your score will give you a better understanding of your current credit position.
Check out Synture Academy for more on credit. There are videos, books, and resources on growing your business and developing good credit.