Ways to Improve Credit Score

If you want to improve credit score, you'll need to learn the basics of how your credit score is calculated. You'll also want to set a few baselines for yourself. In this section of the hub, I'll outline the preliminary steps and the basics of credit score in general.

First off, request your credit score from the 3 unions, Transunion, Experian, and Equifax. The FTC has a good explanation page about getting your free annual credit report, and why sites like FreeCreditReport.com aren't free. The only FTC authorized and approved credit report site is AnnualCreditReport.com.

The reason you'll want to get a credit report is because you can't get to point B (a better credit score), without knowing what point A is! If you want to improve credit score, you have to figure out where you're at first.

Also, before you do any more work to improve credit score, check the reports for errors. Errors often do occur, for example, maybe a creditor has you down for a previous address, when you really moved 3 years ago! Even subtle errors like these, as well as larger ones, can affect your credit score. Fix these errors according to the processes set out by each of the 3 credit unions. Then we can really begin to improve credit score...

If you want to improve credit score, you'll need to know what makes it up in the first place. While nobody is quite sure of the exact formula (it's a big secret!), we do have a pretty basic idea of what goes into it. Here's the basic idea as laid out by MSNBC Answer Desk folks:

35%- Payment History- This is the biggest factor, and the easiest to control. PAY YOUR BILLS ON TIME. This all has to do with, "Do you pay your bills on time? Are you ever late on car/student loans, mortgages, credit card payments?" 

30%- How Much You Owe- Not only is this taking into consideration how much you owe and have taken out, but also how close to your limit you are. If you owe a small amount, but you're about to hit your limit, it's not as good as somebody who owes more but has a much higher limit.

15%- Length of Credit History- Newer accounts will lower your score, while older accounts raises it. If you close a lot of old accounts, you will probably end up dropping a bit. 

10%- New Credit- If you constantly change cards, or opened a lot of new accounts recently, that will lower your score.

10%- Types of Credit- The Bureaus want to know how you handle both revolving and installment credit. Revolving credit would be where there's no definite number of payments, like a student loan or credit card. Installment credit would be like a car loan or mortgage, has a set number of installments. 

Credit scores range from 300 to 850, and the median score is 723. Now that you have your credit score and a basic idea of what sets it, you can work on how to improve credit score. 

OK, here it is. The big kahuna. The actual steps you need to take to improve your credit score. I'm going to go over the basic idea of each step and what it exactly does, and for more detail you'll have to visit the actual website on how to improve credit score.

1. Fix Errors

Things like wrong addresses or phone numbers, etc. need to be cleaned up. These could be affecting your credit score, and 75% of all credit scores contain errors. (source: Benchmark).

2. Delete Inquiries, late pays, and judgements

Now, this may sound a little challenging/complicated, and it could be if you don't have the right tools and knowledge. These inquiries, late pays, and judgements are a core determining factor in your credit score. You will want a method to get rid of them, as well as letters and phone call scripts you can easily copy. To get those, visit the improve credit score website mentioned above.

3. Destroy Debt

I'm not going to go into much detail here, but you'll want to pay off your debts. If you need help, I'm sure there's plenty of websites out there as well as the one mentioned above.

4. Know How To Get Better Loans Later

At the website above, there's a video called "Interest Annihilation Method", and another called "The Credit Millionaire System" . I highly recommend watching them because they will show you how to get ridiculously good loans at 0% APR, which will in turn improve credit score.

5. Make a Killer Budget, and STICK TO IT!

Use budgeting software or free resources to help you budget your money. Make sure to include payments to your various credit sources! That above website has a great video series regarding budgeting.

Again, I highly encourage you to visit the Clean My Credit website as well.

Hope this lens was helpful in furthering your understanding of credit scores, and gave you some ideas to eliminate bad scores!