Learn How to Improve Your Credit Score

"How to improve my credit score" is one of the most popular financial topics. Your credit score measures your financial responsibility. In a nutshell, it tells lenders whether they can trust you to pay your balances on time. Those with high credit scores are the first in line to be approved for loans, while those with less stellar standings may have their applications declined. Fortunately, there are many ways to improve your credit score, some of which may surprise you.

How to Fix My Credit Score

Many factors affect your credit score. Outstanding debt, late payments, and frequency of payments tell credit bureaus how well you're paying your bills. Credit utilization shows how much you owe in relation to your credit limit, with 30 percent being the ratio recommended by Experian. Hard inquiries made by lenders will temporarily reduce your credit score. If you're wondering, "how can I raise my credit score fast," the following tips can help:

  • Pay off your balance on time.
  • Make two or more payments each month.
  • Increase your credit limit (this will lower your credit utilization).
  • Open a new credit card account (this will also lower your credit utilization).
  • Settle outstanding debts.

How to Challenge Your Credit Score

If you don't like the number you see on your credit report, you may be able to change it. The three major credit monitoring agencies (Equifax, Experian, and TransUnion) are run by people just like you, and people make mistakes. In fact, most credit reports contain at least one major error. It's vital for you to review your credit score several times each year. Requesting your own credit report won't harm your score, and you're entitled to one each year free of charge.

Look for inaccuracies such as late payments, unpaid bills, duplicate accounts, and closed accounts still listed as open. Check that your personal information is correct. If the wrong address is listed, the bureaus may have confused you with someone with the same name. If you notice accounts that you never opened, you may be a victim of identity theft and should file a fraud alert ASAP. Challenging credit score errors by reporting them to the credit bureaus is paramount.

How to Fight Your Credit Score

Uncorrected mistakes can negatively impact your credit score for years. Even a small reduction in credit can prevent you from being approved for a loan or credit card. Large errors can even prevent you from buying or renting a home. You can report errors to both the associated financial institution and the credit bureau. After receiving your claim, credit bureaus have roughly 30 days to review it. Often, they will fix the errors and repair your credit score accordingly. In the unlikely event they choose not to investigate your claim, they will send you a letter within one week.

The next time you wonder "how to improve my credit score," know that you can get the credit bureaus to fix mistakes on your credit report. Managing your credit wisely and monitoring your score regularly will help maximize your credit score.

Bill Natale

William “Bill” Natale, creator of YouCanChangeYourCreditScore.com and co-author of Erase Bad Credit, spent more than 30 years working in the credit industry and helping customers improve their credit scores.