How to Raise Your Credit Score: 7 Tips

We all know credit scores are important; a higher score often means lower interest rates on loans, credit cards, and mortgages. The interest rate you pay can save or cost you a lot of money over time.

For example: Using the myFICO.com loan savings calculator, here’s how much you’d pay today rates for some credit score ranges. Examples are based on national averages for a 30-year fixed loan of $200,000.

To improve your score, you should understand what factors affect it. Payment history and balances owed are the biggest factors, followed by others:

Below are 7 tips for improving your credit score:

Remove Errors from your credit report

The first thing you should do is download a free credit report from any of the popular providers out there and review it for accuracy. For fixing it, we’ll leave the comprehensive steps to the professionals: Money.com has a comprehensive list of steps that should absolutely be your first resource: Money.com - How to Get Items Removed From Your Credit Report

Keep your credit utilization low

How much you owe on your loan, vs how much is available, makes a big difference. Experts suggest keeping your balances at 30% or less of how much is available to borrow.

This means that closing unused credit lines can hurt your credit score as your borrowing availability drops.

Pay on time

Missed payments sting your score, so making even the minimums on time is important. Try to set up your loans and credit cards on autopay so you don’t miss anything.

Become an Authorized User

One of the quickest ways an unexperienced borrower can build their score is to draw on someone else’s credit history. Becoming an authorized user on their credit card or loan. Even if you don’t buy anything, your score can benefit from their usage of that credit line.

Credit History matters

Closing a credit line or loan account with a long history can hurt your score. While it can feel good to close unused accounts, consider whether you should close one with a shorter history first.

Only apply when needed

Don't open accounts just to have a better credit mix—it probably won't raise your credit score. Newer and short-term accounts hurt your average history. Additionally, new credit inquiries impact your score negatively as well.

Pay down maxed out balances first

If you use multiple credit cards and credit lines, pay down the maxed-out balances first. This helps your credit utilization rate drop and improves your score.