The majority of Americans actually have rather high credit ratings. According to credit bureau Experian, close to six out of ten Americans have credit scores that are deemed to be “excellent” or higher.
That’s a 703 FICO score, in case you’re wondering. FICO’s credit scores range from 300 and 850.
That’s fantastic news because your credit score plays a crucial role in your ability to obtain a mortgage, establish a credit card, rent an apartment, and even qualify for some employment chances. However, 12% of Americans still have test scores that fall between fair and bad, at or below 550.
There are strategies to raise your credit score if you fall into this category, according to Tiffany Aliche, personal finance expert and creator of The Budgetnista.
Remind yourself that improving your score normally takes time. According to experts, you can improve your score in one to two months, but it can take longer depending on the root cause of your poor score.
Here’s a look at three easy things Aliche says you can do to get started.
1. Automate your bill pay
Improving and maintaining your payment history is the most important thing you can do to boost your credit score. That entails making your payments on time and for what you owe, according to Aliche.
Automating your payment is one simple approach to achieve this. So that you never forget to make a payment, set up bill pay with your bank. She advises automating things so that you can “set it and sort of forget it” rather than having to think about it constantly.
According to Aliche, your payment history accounts for around 35% of the calculation of your score. So it’s important to stay on top of paying your payments.
However, it’s important to remember that not all bills affect your credit score. According to FICO, a provider of credit scoring services, credit cards, store retail cards, auto loans, and mortgages are the types of accounts that typically have an impact on your score.
2. Piggyback on good credit habits
Adding an authorised user is another simple way to improve your credit. This advice is particularly helpful if you’re just starting out and may not yet have a high score.
You can request to be added as an authorised user on a parent’s or family member’s credit card if they have acceptable credit. I have excellent credit, Aliche claims.
Lisa, the younger sister, not so much.
Aliche added her sister as an authorised user to aid her. There was no chance of her sister overspending because Aliche prevented her from obtaining a card.
What that meant was that when I used my card correctly, it appeared as though we had also used the card correctly, according to Aliche. So she inherited good financial habits.
Despite the fact that it can be a useful tactic, Credit Sesame reports that less than 1 in 5 individuals have been added as authorised users. According to the financial website, adding an authorised user allowed people with credit scores under 550 to quickly increase by 10%.
3. Use your credit card to “pay off pennies”
Although it may seem that you are not overspending if you are letting your credit cards gather dust, this could be problematic. An issuer may consider your credit card account inactive and close it if you don’t use it. This can decrease the total amount of credit you have available while raising your use rate.
The ratio of the money you have on your credit cards to the overall amount of credit you have access to is known as credit usage. And it has a significant impact on determining credit risk and, consequently, credit scores. Your credit score will normally be worse if you use more than 30% of your available credit because this indicates to credit card providers that there is a higher possibility that you won’t pay it off in full or that it might take some time.
“You do those three things and your credit score will start jump, jump, jump, jump jumping,” Aliche says.