Improving Credit Scores
We believe the best way to improve your credit scores is by teaching you how your credit scores are calculated.
Your credit scores are what lenders judge you to determine whether they want to lend you money or do business with you. Your scores tell lenders how responsible you are with credit. The higher your scores, the easier you will find it to be approved for new loans or lines of credit. A higher credit score can also open the door to the lowest available interest rates when you borrow. If you would like to improve your credit scores, there are several simple things you can do. It takes a bit of effort and of course, some time.
There are five factors that determine your credit scores:
Payment History 35%
Credit Utilization 30%
Age of Credit Accounts 15%
Credit Mix 10%
New Credit Inquiries 10%
Now that you understand the factors that determine your credit scores here is a step-by-step guide to improve your credit scores.
1. Check Your Credit Reports
It's good to know what is helping and hurting your scores. You want to look for your payment history, pay attention to the balances on your accounts, collections, inquiries, late or missed payments, judgements.
If your credit report has any of the items listed, we can help you dispute any you spot so they can be corrected or removed from your file.
2. Make Sure Everything Gets Paid On Time
As you can see in the five factors of your credit scores, your payment history is the biggest factor to impact your credit scores. The best way to keep improving your credit scores is by avoiding late payments at all cost. To avoid them, you could use auto-pay with your providers or from your bank account and set reminders on your calendar for due dates.
3. Aim for 30% Credit Utilization or Less
This is the second most important factor in your score calculations.
The simplest way to keep your credit utilization under control is to pay your credit card balances in full each month. If you can't do that, keep your outstanding balance at 30% or less of your credit limit. If you really want to optimize your scores as much as possible, we recommend bringing your balances as close as possible to 0 or at max 10% of your credit limit.
4. Limit Your Inquiries
Hard inquiries can be part of your application for a new credit card, mortgage, auto loan, or some other form of new credit. Hard inquiries can affect your credit scores for two years.
5. Make the Most of a Thin Credit File
Having a thin credit file means you don't have enough credit history on your report to generate a credit score. To help you improve your scores you can use UltraFICO or Experian Boost. These are free programs that use your banking history to help build a FICO score. If you pay rent monthly, there are services that allow you to get credit for those on-time payments such as Kharma and RentTrack.
6. Keep Old Accounts Open
The age of your credit can improve your scores. The longer your average credit age, the more favorable you are to lenders. If you have old accounts you are not using, don't close them down.
7. Deal With Delinquencies
If you have delinquent accounts, charge-offs, or collection accounts, take action to resolve them. We would be more than happy to help if you're not sure where to star. Contact us to help you remove these items to improve your scores.