5 Surprising Things That Can Boost Your Credit Score, According to Finance Experts
You might not realize the small things you can do to lift your score higher and higher.
Like many things in life, your credit score is pretty easy to sink and a bit more difficult to raise. Late payments, spending beyond your means, or applying for too much credit in a short period are just a few things that can ding your score or even plummet it. But before we get all doom and gloom, financial experts say there are a few surprising ways you can boost your credit score closer to that coveted 850.
"A higher credit score means that you're considered less risky and may be more likely to receive favorable loan terms, lower interest rates, and higher credit limits," says April Eick, RN, financial coach to nurses and healthcare workers at Freebird Financial Coaching. "Having a higher credit score can help you qualify for credit cards with better rewards programs, lower interest rates on loans, and better mortgage rates. It can also make it easier to rent an apartment or obtain a loan for a car or home."
But it can feel daunting to build your credit—especially if you've racked up some debt—and you may not be sure where to start. According to Eick, this is because there are "many myths and misconceptions about credit scores," compounded by the fact the ways to lift them aren't "widely discussed." That's where our experts come in.
Whether you're on the verge of making a big investment or just trying to improve your credit for the future, financial experts have tips and tricks for getting it where it needs to be. Read on to find out five things you may not realize can boost your credit score.
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Paying attention to credit utilization
Credit utilization, or the amount of credit you're using divided by the amount you're allowed, is a key piece of the puzzle. The math seems simple enough, but there's a catch.
"The particular surprise is that this ratio is usually calculated as of your statement date," explains Ted Rossman, senior industry analyst for Bankrate.com. "So even if you pay in full—which is a great practice to avoid interest—you still might have a high credit utilization ratio which can drag down your credit score."
"Fixes could include requesting a higher credit limit and/or making an extra mid-month payment to knock your balance down before the statement even comes out," Rossman says. "FICO says people with the best credit scores often keep their credit utilization ratio below 10 percent. But whatever it is now, you can improve your credit score by lowering your credit utilization ratio."
Andy Kalmon, CEO of financial services organization Benny, recommends contacting your credit card issuers and asking to have your limit increased. "Depending on your current status they may not agree to it, but it doesn't hurt your score if you ask."
"When you increase your credit limit but stick to the same spending habits, you effectively improve your credit utilization score," Kalmon notes. "This significantly impacts your credit score, because it reflects how much credit you use in comparison to how much is available to you (and the less you use, the better)."
Checking your credit report
Another option that's not discussed as often: Review your credit report and dispute any errors.
"Online banking tools have made it pretty easy to figure out what your credit score is, but when was the last time you actually looked at your credit report?" asks Jonathan Petts, former bankruptcy lawyer and CEO and co-founder of Upsolve. "Your score is a reflection of what's reported by lenders and financial institutions to the major credit bureaus. If they report incorrect information, this could hurt your score."
"Luckily, you can get your credit report for free at least once a year," Petts says. "You should do this and look at the entries thoroughly. If you spot a mistake, dispute it."
Julien Brault, CEO of Hardbacon, a Canadian personal finance management mobile app, also recommends this as "one of the easiest low-effort ways to boost your score quickly."
"Credit reports are made by humans, and humans make mistakes, so if you request a copy of your report and find a valid inaccuracy, the bureau will recognize this and change it in your favor," Brault explains.
Petts says you should look for common inaccuracies like closed accounts that are listed as open, accounts you haven't heard of, and missed payments you know you made on time, among others.
As a note, your credit report contains details about your credit history, which lenders obtain via a "hard inquiry" to determine your risk level as a customer. This report contains more information than you would otherwise get from services like Credit Karma, where you can request "soft inquiries" and view your score without impacting your credit.
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Becoming an authorized user
No one wants to be a mooch, but in the credit world, it's not always such a bad thing. Becoming an "authorized user" on someone else's account—particularly someone who makes their payments on time—can help you build credit quickly.
"If you have a friend or family member with a high credit score, becoming an authorized user on one of their credit cards can help boost your credit score," Eick says.
Diversifying your debt
Financial experts also have advice that may seem like the exact opposite of what you should be doing: Taking out more loans.
"It sounds counterintuitive to take on more debt, but there are certain situations when it makes sense," Brault says. "For example, if you are carrying a large balance on your credit card but are making all the payments, this may impact your score, but you are also still a trustworthy borrower. Don't shy away from looking into a mortgage loan if you are trying to buy a house, as this may help you increase your score if you continue to make all the payments on time."
Ann Martin, director of operations for CreditDonkey, agrees, noting that both debt utilization percentage and "debt diversity" go into your credit score calculation.
"Debt utilization refers to the total amount of debt you have as a fraction of your credit limits. Opening a new line of credit, especially if you don't actually take that much money out of it, can be an excellent way to improve that utilization ratio," she says. "By the same token, opening a new type of debt will boost your credit score. If you have a credit card, inquire about a personal loan, for example."
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Keeping your old accounts
It can be tempting to close credit cards that you don't use as much or those that are (literally) collecting dust in the back of your wallet. But Brault advises against this, as these mature credit cards play a bigger role than you may realize.
"Keep all old credit accounts, even if they seem bad. Multiple factors, including the age of your credit, calculate your credit score. Therefore, older credit is actually important for your score, and as long as you keep them open, they will positively impact your score as they age," Brault explains.
These cards also contribute to that all-important credit utilization, as it just adds to the total credit you're allotted each month.
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.