There are five ways to increase your credit score by 100 points or more safely and legally.
However, there are no quick fixes, shortcuts, or easy ways out of a poor rating. It will take time, money and patience, and an understanding of how credit scores work.
The equations work by taking information found on your consumer report and calculating a number. That number predicts your likelihood of being delinquent on one or more accounts within the next 18 months.
The equations utilize 5 basic factors to calculate this prediction. Take steps to improve on each of these components and watch your credit score rise by 100 points or more – over time.
1 – Improve Payment Status
Payment history determines 35% of your credit score result for the average consumer. You can improve your payment status in one of three possible ways.
- Bring accounts that are delinquent now back to current by paying all amounts in arrears. This is the fastest method to give your rating a boost.
- Dispute any negative errors that appear on your consumer report. Hiring a repair clinic to dispute accurate entries is a waste of time.
- Wait for negative information to age. The impact lessens over time. By law, the agencies must delete derogatory data 7 years after the first date of delinquency.
2 – Reduce Amounts Owed
The amount of money you currently owe lenders makes up 30% of your credit score result. You can raise your ratings quickly by paying down these balances.
- Paying down credit card balances has the fastest impact. The equations are more sensitive to changes in the revolving utilization ratio.
- Paying down installment loan balances takes longer. The principal amount naturally dwindles over time anyway due to the nature of the contract.
3 – Lengthen Your History
Your length of borrowing and repayment history makes up 15% of your credit score. You can only build your rating slowly with this factor – no quick fixes here.
Start early. Your record does not begin automatically at age 18. You have to establish a file by opening an account with a lender that will report the relationship to the three bureaus.
4 – Diversify Account Types
The types of borrowing accounts in use make up 10% of your credit score. You can raise your rating by opening a diversity of borrowing relationships.
- Installment loans feature fixed initial principal and monthly payments
- Personal loans are unsecured
- Car loans are secured by your automobile
- Mortgages are secured by your home
- Revolving contracts feature flexible limits and payments
- Credit cards can be secured or unsecured
- Home equity line of credit is secured
5 – Minimize New Activity
New account activity makes up 10% of your credit score. You can lift your ratings by taking a break from applying for new accounts.
- Hard inquiries are an early warning signal that you may be taking on more debt in the future. Your rating goes down when checked when the lender places a hard inquiry on your report.
- Ratings drop again when the newly opened account first appears on your consumer report.