How Do I Increase My Credit Score?

Know Your Credit Report

The first step to increasing your score is understanding your credit report. The three major credit reporting agencies provide one free credit report per year. Due to the pandemic all three credit reporting agencies are offering free credit reports more often than just annually. The credit report will list all open and closed accounts on record. It will list lender or creditor, credit limit, balance, date opened, and payment history (on time, late, 90-days late, charge off, bankruptcy). To request a free credit report, visit the website of one or more reporting agencies to learn more. Of course, you will also want to find out what your credit score is. A credit report does not include a credit score; that requires a separate request.

Credit Mix

Every credit mix should include installment loans such as a mortgage or auto loan; a few revolving accounts such as a Visa, MasterCard, or American Express; a department store credit card, or a gas card. Having a long credit history will boost a credit score, so avoid closing credit accounts. Leaving accounts open with a zero balance will boost a credit score. Closing credit card accounts will lower credit scores.

Credit Utilization

The amount of debt compared to the amount of credit available will also have a significant impact on credit scores. It is recommended that the debt to credit available ratio not be above 30%.

There are two ways to improve credit utilization. Pay down debt or increase available credit. Increasing available credit will have a more positive impact on a credit score than paying down debt. In the scenario above, increasing the credit limits will lower the credit utilization percentage to 15%. Increasing total credit available can raise a credit score by as much as 20 points.

Credit Monitoring

Last, but not least, monitoring credit will help inform consumers what is happening on a daily basis with their credit. Credit monitoring is a great tool to help guard against consumer fraud and identity theft. When you sign up for credit monitoring, you receive a notification any time there is activity that may impact your credit report. Most credit monitoring services are free and provide a current credit score, payment activity, account balances, available credit, and a tool to help you assess how a score can be improved.

First Federal customers have access to Credit Sense, which provides a detailed credit report listing all lenders, account balance, date opened, limit, and credit utilization. There is a simulation tool to experiment with adjustments to credit. For example, you can visually see how increasing a credit limit affects a credit score. You can experiment what will happen to your credit score if you obtain an auto loan, or what happens if you miss one or three months’ worth of payments. Credit Sense grades the different categories used to compute a credit score. This is helpful to know where a credit report needs improvement and what steps could be taken to improve a credit score.

Monitoring credit is important and should be done regularly. Having a good mix of credit accounts, paying bills on time, and keeping a low credit utilization will help to maintain a higher credit score. In 2006, Equifax, Experian, and TransUnion created another credit score model and it’s called VantageScore. Some major credit reporting agencies and credit monitoring services use VantageScore to assign a credit score to consumers. VantageScore Solutions, LLC is a company that rivals FICO. However, FICO is still the leading credit score model so FICO still remains the industry standard.

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