How to Increase Your Credit Score

Bad credit will cost you real money, and there is no reason for you not to check your score before making a large purchase.  By making sure your score is as high as possible, you will significantly lower your interest costs.

A word of caution: there are many Internet sites that charge you a small fortune for repairing your credit.  What you need to understand is that they all try and repair your credit the same way as you would, by disputing items and trying to get them removed from your report.  You should not pay anywhere near the $500 we have seen being charged on some sites.  Remember, you can do the work yourself if you have the time and patience.

With the tips on this page, you can take steps to repair your credit yourself, and keep it high for the future.  These will cost you little to no money. 

However, if you would like to have somebody else do the work for you, we recommend The Lexington Law firm.   The Lexington Law firm.   They charge a small fee, however they have been around a very long time (since 1991), have many happy customers (over 100,000), and are rated highly by the BBB.  If you need help with your credit score, they will pay for themselves many times over since you will save so much money on your lower interest rates than they charge to fix your credit.  Again, it's like anything else, you can either mow the lawn yourself or pay a landscaper to do it for you. 

Here are the steps to quickly repair your credit:

• First, get your credit score by pulling your credit report.  Yes, it might cost $30, but you will make it back many times over if you fix something wrong or use the information provided to increase your score. The three credit scoring agencies are Experian, Trans-Union, and Equifax.  Since some lenders only report to one of these companies, you will probably have three difference credit scores.  Your credit score is determined by this breakdown:

  • 35% Payment history

  • 30% Outstanding debt

  • 15% Length of your credit history

  • 10% Recent inquiries on your credit report

  • 10% Types of credit in use

  Some lenders will look at the scores from all three reports, while some might only look at one. Mortgage lenders will look at all three and pick the middle one. Remember, you don't lose any credit points for checking your own score. You will lose some points if there a number of credit inquiries over time for applications such credit cards, auto loans, department store credit cards, etc. 

Once you've received your score, look at the percentage breakdown above and focus on the things you can change, such as payment history and outstanding debt:

• Make sure everything on your credit report is right.  If you see something wrong, make sure you dispute it with the agency right away. You can dispute it by way of phone, letter or email. By law, the creditor must prove the accuracy of what you are disputing within 30 days. If they don't, it simply gets removed from your report. If you have evidence that something is truly wrong, then go ahead and submit the evidence via USPS registered mail to the credit agency and they should be able to remove the inaccurate data right away.

• So now you know that repeated inquiries into your credit standing hurt your credit. Think about this next time you get an offer for 10% off your purchase just for signing up for a store credit card, and just say no! You might save $20 now, but could lose much more than that later due to worse credit. Also, if you are shopping for a car or mortgage, try and keep all the inquiries to within two weeks since credit scoring companies will only treat all these as one "inquiry."

• If your score needs a quick fix and you have extra cash, pay down as much of your debt as possible. The higher your ratio of current debt to available credit limits the better you look to a lender, and the higher your score will be. This means the higher your available credit is compared to your current debt, the higher your score will be. The flip side of this is to call existing credit card accounts you may have and ask them to increase your limit, though you won't use it. Note: Do not open additional credit card accounts to increase this ratio, since that may hurt your credit score. But increased credit limits on existing accounts may help.

• Cancel some cards if you have too many, but if you are carrying debt try  keep the ratio of debt to available credit limit at around 50% with about four cards for the best score.  Don't cancel cards if it will put you below this ratio, and if you have to cancel cards cancel ones that are more recent that you have less history with.  We would not recommend canceling cards unless you have to since it's not worth the risk short-term, however over longer time periods it will help.

• If you have no debt and have had no credit history within two years, go get some!  This may sound strange, but it works very well since it shows you can borrow and pay back large amounts of cash. Begin responsibly using a credit card for as much as possible and pay it back in full every month. Or take out one of those promotional 0% loans from one of your credit cards for as much as possible, put the cash into an account, and pay it back slowly (but before the 0% interest rate expires -- and don't spend it!).  You will notice your credit score dramatically improve after you have paid back the debt.  This will also create credit history for you, and it's never too late to start building your credit.

• If you have a partner/spouse with good credit, have them add you to their card. You will get some of the credit for paying their bills on time as well.

• Pay your bills on time by having them automatically deducted from your bank account or paid online before they are due.  Being consistently late with payments is the easiest way to lose points on your credit score, and the easiest way to keep your score improving month after month is just pay your credit card bills on time or early! Even if you can only swing the minimum payment, get the payment there before the due date. Most credit card companies allow you to pay online, so make sure you take advantage of this and don't waste time and money on stamps and mailings.

• By looking at your credit report, find out how often and when your lenders report.  By timing your payments to right before they report to the agency, you will be able to show less debt and thus have a higher score!  Again, this is why it's important to get your credit score to learn what is out there and when things are reported.

• If you are in a huge rush, look for "Rapid Rescoring" companies that may be able to fix your credit score in less than 72 hours if you have good evidence that there are mistakes on your report. You can find contact info on each of the credit bureau's websites if you need to contact them directly. (See above)

Make sure you look at our Credit Card tips for more free advice!    

So, before making any large purchases, you should always check your credit score. If you don't, you may needlessly pay a lot more for financing due to high interest costs, thereby increasing your total debt. By fixing your credit score before hand, you will save yourself money in the long run.

There are better things in life to spend your money on than high interest costs.