How to improve a low credit score

Do you have a low credit score?

First step is to get your absolutely free credit report & score, if you haven’t already. Your next step is to determine if your credit score is actually considered “low”.

Sometimes it’s hard to figure out what exactly is a good or a poor credit score. The best credit ratings are 770 points and up. Freddie Mac, for example, considers anything above 770 an “A plus.” A FICO score of over 750 will get you an “excellent” rating from Lending Tree, while Fannie Mae says a 740 is excellent. CBS reports that if you have a 720 or more, you have no worries at all, since that number is in the same level category as an 800. Fair Isaac has declared that anything over 700 is “golden.” Even a person with a credit rating of 650 or better can be considered a prime borrower, as long as there are no records of late payments on their record.

In Summary

If your credit score is below 700, you may not qualify for some of the best interest rates on credit cards, loans or mortgages. This means that just by having a credit score of 695, instead of 725 (just an example), you may end up paying thousands more in interest on any new credit you are granted, which you can avoid by just taking some simple steps to increase your credit score before applying for a new personal loan, auto loan or mortgage. It is widely believed that a credit score of 720 or higher is ideal.

How to improve a low Credit Score

If you have a recent bankruptcy on file, repossession, foreclosure, missed or late payments… it will take time to bring your credit score back up after such a blow. If you are in this position, in the mean time just be sure to borrow “within your means” (although you may have trouble getting approved for any new credit) and don’t overextend yourself. Keep paying your bills on time, and you will be back on the road to raising your credit score.

If you pay your bills on time, don’t have a recent bankruptcy on your record, and don’t have any missed payments or collections on file, look at your credit card balances. Normally you will want to keep your debt-to-credit limit ratio, on your credit card accounts, below 25%. If you owe more than 25% of your total credit limit on your credit cards, consider paying them down.

Example: if you have a credit card with total credit line of $10,000, and you have a balance of $2,500 on the card, you would owe 25% of your total credit line on that card.

Also keep in mind that even if you pay your credit card balance off each month, it still may be reported to the credit bureaus that you are carrying a balance on that card. It depends on what time of the month your credit card issuer reports to the credit bureaus, they will list whatever your balance is on the day they report it. However, most (if not all) lending institutions are aware of this, so this is generally not something to worry about.

Too many open credit card accounts

Also, too many open credit card accounts can be a bad thing. But, if you already have several open credit card accounts in good standing, don’t cancel them, the added “good” credit history can help your credit score. If you find that you have way too many open credit card accounts and you have decided to cancel some of them, be sure to cancel the most recently opened accounts. Keep the oldest accounts open. Normally the longer your payment history on an account, the better your credit score will be.

Try not to open any new credit card accounts that aren’t necessary. Generally when you open a new credit account, it will lower your credit score slightly, at least for a short period of time.

How you manage your “revolving credit” (credit card accounts) is a big factor in determining your credit score.

Newly Opened Credit Accounts

Usually your credit score will take a slight hit from newly opened credit accounts such as credit cards, auto loans, or mortgages. How many points your score will decrease depends on how many times you have applied for credit in recent months.

However, this decrease is only temporary, your score should rise again after several more months of making your payments on time. Normally this is not something to worry about, unless you have submitted many applications for new credit in a short period of time. That may indicate to credit issuers that you are beginning to overextend yourself (applying for too much credit), or that you are being denied credit and you keep trying other lenders hoping for a different result.

Short Credit History?

If you have a very short credit history (length of time you have been using your credit), that can also be a reason as to why you have a low credit score. Keep paying your bills on time and follow good overall credit management, and rest assured – with time – your score will rise!

No Credit History?

If you have absolutely no credit history, your credit score will most likely be low to start with. You can get started by applying for a credit card in an attempt to establish your credit history, or if you are trying to obtain an auto loan, but haven’t had any luck getting approved because of a short credit history (or no credit history), you can ask someone you trust to help you by co-signing on a loan with you.

Quick money saving tip: Don’t let your money sit in a no-interest-bearing checking account. Be sure to find the best savings accounts for you, and earn interest on the money you have worked so hard to save. It can really add up!

These are just 2 of the ways you can start establishing your credit, but probably the 2 most common ways. When you are approved for your first credit account, be sure to pay your bill(s) on time, and you will be on your way to a better credit score!

99 thoughts on “How to improve a low credit score

  1. Johnny

    Okay I read admin and PK comment lol it’s funny cause I don’t know why they are arguing lol I have been on both sides so I think I’m better at explain. Yes credit is based on computers and boobs sitting behind them. As for the fact anyone can mess up someone else’s credit with alittle information. Credit is not something for everyone and if you can pay for stuff out in full that’s great. As to many they can’t pay it off so they use credit as to the aspect that someone is using credit of there own free will. In the US credit is one of the most complicated and dumbest thing. As to it being a scam yes it is for really you don’t need to buy anything you don’t need. As to many places or companies have left the bank system and it’s more of a way of gaining profit instead of helping ppl get what they want. It’s not a need but more of an option. As you said PK you make 20k a month so realoy even with your income credit really little plays in effect. There are ways around credit and they base everything as being equal. Credit score are some of the most easiest things to build an generat. I went from being burned and left with a score around 520 something in 2 I was able to get back to 580 and entered the 3-4 around 600 I mean it’s more than payment. You have the income then sure your credit isn’t affected much. But complaining about it while saying you make that type of income just means you don’t know what to do or how. Credit can’t be based on income and equity alone. Your a land lord then you should know that. I have help others ppl generate credit scores that are unheard of from bad to good or fair it’s based on how much you know about the system and there are loop holes. Just need to know how to use them and it’s sad you can’t generate a 700 credit score with that tyPe of income I make a quarter of that now and have over 50k in med bills and still have a good credit score.

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  2. reggie

    my experience i had one repo a bunch of unpaid credit cards that were late collection accounts up the a$$. one day i said well lets see if i can figure out this credit thing. my situation i went applied for cap one secured card credit limit 200 paid it on time for 6 months. no change in score ok about a week later all kinds of credit cards came in the mail, ok. they say 3 is the limit so i got 2 more, once i payed on time score went from 570′s to 580′s. next month everything on time jumped to 600. next month on time jumped 620. i finally stopped it at 634 then i maxed all them out to see what would happen and also opened a snap on tool account maxed it also lol.score went from 634to 570′s in a month lmfao. ok lets see what happens if i pay on time maxed for 4 months. today i looked 574 to 585 all maxed except snap on cuz it comes out automatically and i havent bought any tools. what im trying to say is no situation is to bad to fix. within a year u can be back in the green this is how people keep filling bankruptcy every 5 years. my ex filled chapter 7 and a year went by and she had better credit than me which i never filled. so a starting point is a secured card and build from there it only takes a year to clean up. that house u want it will prolly be there next year after u get ur score better the way the housing market is. also shop around people still think there houses are worth alot more than they think, move to the next if they dont budge the next guy will guaranteed!

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