The majority of credit bureaus adhere to the FICO scoring model, which ranges from 300 as the lowest possible score to 850 as the highest score.
Your credit score helps lenders determine your ability to repay a loan or debt, with higher scores indicating you are a responsible lendee and can repay larger debts on time. Lower scores indicate you may struggle to make timely payments in full, which can increase your interest rates or deny you loans and credit altogether.
Whether you are just beginning your credit journey or need to rebuild your credit, the best credit repair companies can provide meaningful insight and guidance to get you those higher scores.
There are four main ways to boost your credit, reaching the ‘exceptional’ score of 800: rebuild your credit history, continue making timely payments on bills, maintain low credit utilization, and review your credit reports for inaccuracies and outdated information.
Four Steps to a High Credit Score
Having a credit score of 800 can open up new financial freedoms. With a higher credit score, you may be able to attain lower interest rates on credit cards and loans, better insurance rates, more negotiating power with lenders, and more.
Here are four steps to increasing your credit score:
Build Your Credit History
If you haven’t started your journey into credit, it’s not too late to start! The length of your credit history accounts for about 15% of your credit score, so having minimal to no credit history can actually be a barrier to higher scores.
To begin building your credit, you can apply for your first credit card or take out a credit-builder loan. A credit-builder loan is a personal loan designed to help you add positive payment history to your credit report.
Credit-builder loans are different from traditional personal loans because the lender doesn’t directly deposit a lump sum of money into your account. The lender, instead, sets aside money into a savings account or certificate of deposit (CD) and you can gain access to those funds after repaying the loan.
Making your credit card payments on time and in full can also help build (or rebuild) your credit.
Make Timely Payments
Your payment history accounts for 35% of your FICO credit score, making it the most important credit score factor. To boost your credit score, never miss a payment. If your bills become thirty days past-due, your creditors will report this to the credit bureaus. This can cause a late payment to show up on your credit report and damage your score.
To avoid missing payments, enroll in autopay for your bills and schedule the autopay to align with your paychecks to avoid accidental overdrafts or bounced payments.
Maintain Low Credit Utilization
The other most important factor for your credit score is your credit utilization ratio, which makes up 30% of your score. This ratio measures the amount of credit you are actively using versus your total credit limit.
If possible, aim to use no more than 30% of your total credit limit. If your current credit limit is $1,000, use no more than $300 of it at a time. If you want to boost your score, keep that utilization rate as close to 0% as possible.
Routinely Review Your Credit Reports and Score
Getting into the habit of checking your credit score and credit report can help you catch inaccuracies or outdated items quickly and boost your score. You can actually remove collection items from your credit report, and even learn how to get hard inquiries removed. Both of these types of credit items can have serious negative impacts on your credit score.
Creditors are not infallible and can make mistakes. Someone else’s poor credit items can appear on your report by accident, or outdated negative items might stay on past the statute of limitations. With help from experts at The Phenix Group, you can quickly identify these inaccuracies and file a dispute with each credit bureau that has them listed to remove it.
While you can petition for these items to be removed yourself, The Phenix Group’s team of legal and financial experts can quickly comb through your report and spot those inaccuracies. They know what evidence to gather and what to write in their dispute letter to advocate for your rights and help you boost your score.
If you’re ready to embrace financial literacy and improve your credit score, contact The Phenix Group today for a consultation!