How Can Someone Increase a Credit Score?

Fair Isaac Corp. (FICO) introduced the first credit score. The Experian, Equifax and TransUnion credit bureaus followed along with their own scores. All of these companies use similar formulas, so you can increase your score if you know which financial actions have the biggest influence on that important three-digit number. A good score gives you better access to credit cards, loans, insurance policies and even employment.

Factors

MyFICO, the Fair Isaac Corp. website, explains that scoring formulas use five different categories of information. The two most important factors are your payment history on credit accounts, which accounts for 35 percent of your score, and money you owe, which makes up 30 percent of the score. Fifteen percent of your total number comes from how long you have used credit, while your account variety and your most recent accounts each account for 10 percent of your score. The exact calculation depends on the specific information in your credit reports and how it all fits together, MyFICO explains.

Most Important Strategies

Paying your bills by the deadline every month is one of the most important methods of increasing your credit score because payment history has such a big influence. The MyFICO site advises catching up your accounts as quickly as possible if they are past due and avoiding future delinquencies. Maintain low balances on your credit cards because your debt level strongly affects your score. Pay more than the minimum payment to reduce your debt load as rapidly as possible.

Other Strategies

Refrain from opening many accounts within a short time frame when establishing your credit history, MyFICO advises. Keep your credit cards open and manage them carefully. Too many inquiries from creditors bring down your credit score, so limit your credit applications to necessary accounts. Confine rate shopping for a mortgage or car loan to a short period, as scorers will recognize that you are shopping around and treat the multiple inquiries as just one credit check to preserve your score.

Credit Repair

You credit score comes directly from the data in your credit reports, so your reports can hurt your score unfairly if they contain harmful but inaccurate entries. You are allowed to get your three reports for free once each year through annualcreditreport.com. This gives you the opportunity to search for and dispute mistakes. Experian, Equifax and TransUnion are bound by the Fair Credit Reporting Act to look into your allegations and repair or remove erroneous items. Your credit score should go up once negative data gets erased from your files.