Building and maintaining a good credit score can have a huge impact on your life. Your credit score can determine whether or not you can buy a house, buy a car, or put things like furniture and appliances on credit.
In some areas, your credit score may even determine whether you can rent an apartment.
Not to worry, because anyone can raise their credit score with a little bit of planning. Here are 6 ways to increase your credit score that anyone can do.
1. Pay on Time
The #1 rule of credit is to pay your bills on time. Make sure that you make the minimum payments on all of your credit balances each month.
Whether or not you consistently pay your bills on time lets other creditors know how trustworthy you will be with more credit.
If you have a steady income, try setting up automatic payments. Just make sure you have a budget in place so that your auto payments don't come as a surprise each month.
2. Keep Credit Balances Low
About 30% of your credit score is calculated by looking at your debt-to-credit ratio. That is, how much credit you have compared to how much of your credit limit you are utilizing.
The less of your available credit you are utilizing, the higher your credit score. One way of increasing your credit score is keep the balances on your credit cards and loans low, even if you have a lot of credit.
3. Raise your Credit Limit
Another way to increase your credit score via your debt-to-credit ratio is to have a higher credit limit. You can do this by applying for a credit limit increase with your credit card company.
Just remember, what matters is not necessarily your credit limit. Your credit score will increase by how much of a buffer there is between your actual credit limit and how much of that limit you are actually using.
The goal is to have a high credit limit, and a low usage rate.
4. Don't Apply for Too Much Credit
If you know that you're likely to get declined for new lines of credit, don't apply “just to see”. If you make a lot of applications for credit and they get declined, it impacts your credit score negatively.
Creditors look poorly on borrowers who keep applying for new credit when they obviously have trouble maintaining what they already have.
5. Dispute Reporting Errors
If you feel that there is an error on your credit report, don't hesitate to dispute it. The creditor will be required to provide reporting agencies with more information in order to make sure the report is accurate.
If it's inaccurate, the reporting agencies will either update the misreported information or remove it from your credit history.
Your first step is to obtain a free credit report in order to review what is on your credit report. You can dispute a credit reporting error online or in writing through Equifax, Experian, and TransUnion, depending on which reporting agencies the error appears through (in most cases, all three).
Read here for more information on how to report an error on your credit report.
6. Become an Authorized User
This last method of increasing your credit score is a bit risky, but a valid method nonetheless.
If you can get added as an authorized user on someone's credit card, it will also begin to be reported on your own credit report.
Here's the catch: This person needs to be a responsible individual who pays their credit card on time and who you can trust to improve your credit score. There's always a risk that the credit card holder could stop paying their credit card, which will negatively impact your credit score as well.
In addition, you need to have a trustworthy relationship with this person, as your use of the credit card could also impact their credit score. I recommend having an agreement in writing the amount in which you may use each month, and also an agreement that you will pay off this balance by a certain date each month.
What are you doing to improve your credit score? Let us know in the comments!