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Pacific Debt Relief is not a credit repair organization nor does our program aim to improve your credit score. The information below is for educational purposes to help consumers make informed decisions as it relates to credit and debt.
A good credit score helps you save money and get better deals when you need to borrow money for things like buying a car or a house. It's like having a good reputation that banks and companies trust, so they offer you lower costs.
If you're wondering whether you can raise your credit score by 100 points, the answer is yes, you can. This guide will show you easy steps to follow. Whether you're just starting or you want to make your score even better, we'll help you understand how to do it in a way that's easy to follow.
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Why Does a Good Credit Score Matter?
Credit rating measures how well you can pay back debt. Higher scores mean that your lender will see your credit report and your credit history. In the FICO system, credit scores of 900 or higher are considered perfect.
Is it worth having good credit? Simple solutions include flexible repayment conditions and easier approvals. A credit score can save millions of dollars over a lifetime. Those who have good credit get better rates for loans like autos and home loans.
What's considered a good credit score?
FICO scores range anywhere from 450-985. In this area, the scoring is divided by five credit levels. A score of 670–773 on the FICO scale is generally viewed as good credit.
It's calculated through your credit scores that have been provided to the three major credit bureaus, Equifax and Xerox. Interestingly, FICO scores are created by bureaus themselves.
How to Build Good Credit
The good news is you can increase your credit score fast and easily. Some of these are things that take place in weeks and months. Others are achievable in one day and help you improve your credit. Let’s see if there are steps in establishing good credit in this process.
Understanding How Credit Scores Are Calculated
Before you can start improving your credit score, it helps to understand what goes into it. Your FICO credit score and VantageScore, the two most common credit scoring models, both take into account five main factors but weigh them differently.
FICO Score Factors
- Payment history (35% of your score)- Your track record of on-time payments and any negative marks like bankruptcies, collections, and late or missed payments.
- Amounts owed (30%)- Also called the credit utilization ratio. Measures how much of your available credit you are using.
- Length of credit history (15%)- How long you've had credit accounts opened? Age of your oldest and newest accounts.
- Credit mix (10%)- Variety of credit types - credit cards, retail accounts, installment loans, mortgages.
- New credit (10%)- Number of new accounts opened and inquiries on your credit report.
VantageScore Factors
- Credit utilization (highly influential)- Your balances are compared to credit limits on revolving accounts.
- Credit balances and mixes (highly influential)- Total balances across different types of revolving credit accounts.
- Payment history (moderately influential)- Records of on-time payments and any negative credit events.
- Age of credit history (less influential)- Length of average age of time accounts have been opened. Age of oldest and newest accounts.
- New credit applications (less influential)- The number of recently opened accounts and hard inquiries.
As you can see, there is considerable overlap between the FICO and VantageScore models when it comes to what factors impact your credit the most.
By monitoring your credit reports and scores regularly, you'll get insight into what's working for or against you across these different factors that build credit together. Then you can work to improve them. Now let's get into the specific strategies for raising your score by 100 points or more.
Disputing Credit Report Errors
Before doing anything else to try to increase your credit score, it's important to make sure your credit reports are accurate. Errors in your reports could be unfairly dragging down your score.
The three major consumer credit bureaus - Equifax, Experian, and TransUnion - each maintain a credit file on you based on information reported to them by lenders and creditors.
If any pieces of information in these reports are inaccurate or outdated, you have the right to dispute them. For more guidance on this topic, you can also refer to the Consumer Financial Protection Bureau's article on maintaining a good credit score. Here are some tips for fixing errors on your credit reports:
- Obtain a free copy of your reports from each bureau annually at AnnualCreditReport.com. This allows you to review all the information they have on you.
- Scour the reports for any inaccuracies - accounts that aren't yours, payments wrongly reported as late, outdated information.
- File disputes with each credit bureau by mail or online if you find incorrect information. Explain clearly what is inaccurate.
- Include copies of supporting documents like bank statements or receipts.
- Be persistent and continue filing disputes until the errors are fully removed.
- You can also file complaints with the Consumer Financial Protection Bureau if issues are not resolved.
The credit bureaus have 30 days to investigate the items you dispute. If they can't verify the information is accurate, they must remove it from your reports. While raising your credit score by 100 points overnight is unrealistic, disputing errors can provide a quick initial boost.
This can provide a quick boost to your credit, especially if errors like late payments are holding back your scores. Even identity theft issues can tank your credit, so disputing unauthorized accounts is critical.
Reducing Your Credit Utilization Ratio
After ensuring your credit reports are accurate, one of the most effective ways to increase your credit score is lowering your credit utilization ratio. This measures how much of your credit limit increases the available credit you are actually using. Here are some tips for decreasing your credit utilization:
- Aim for a ratio of 30% or less on each credit card. So if you have a $1,000 limit, keep your balance under $300.
- Get your utilization as low as possible, since the lower the ratio, the better for your scores.
- Making an extra payment just before your billing cycle ends can instantly bring down your utilization.
- Paying off entire balances gives the best optimization for this important factor.
- If you can't pay down balances, ask issuers for higher credit limits. This lowers your utilization without increasing debt.
- Consolidating debt with a personal loan or balance transfer card can help utilization by reducing card balances.
- Limit how many new applications you file for, as new accounts lower your overall available credit initially.
- Being added as an authorized user on someone else's account can also expand your total credit limit.
Reducing your credit utilization rate has a direct, immediate impact on your credit score calculations. As soon as your lower balance is reported to the credit bureaus, your score should improve. So pay special attention to this factor.
Paying Off Debt and Eliminating Late Payments
In addition to lowering your credit card balances, paying down debts in collection and avoiding late payments are other critical steps for credit improvement. Here are some strategies for accomplishing this:
- Create a budget to aggressively pay down credit card and loan balances. Get balances to zero whenever possible.
- If you have accounts that are past due, get current as soon as you can and make on-time payments going forward.
- Any accounts that went to collections should be paid off if possible. This won't remove them from your reports but will show they are settled.
- If you paid a collection account, negotiate with the agency to stop reporting it to the credit bureaus.
- If you make a late payment, call the creditor immediately and ask if they will waive the late fee and/or not report the delinquency.
- Set up automatic payments on all accounts to avoid unintended late payments due to forgetting.
- Review statements carefully each month to ensure no payment issues or errors occur.
Having late payments and unpaid collections drags down your credit scores significantly. Addressing these problems directly and re-establishing positive payment habits while building credit, will provide big gains over time.
Limiting New Credit Applications
When trying to raise your credit score, it's generally wise to limit new credit applications and only open accounts you actually need. Here's why:
- Every application for credit results in a "hard inquiry" on your credit report, which can lower your scores by a few points. Too many inquiries over a short period are seen negatively.
- Opening new accounts also lowers your average account age, since new accounts start at zero. Longer age adds to your credit stability.
- Each new account also initially decreases your total available credit utilization, since new accounts start with zero balances.
- Having too many new accounts in a short time frame can be seen as a sign of financial distress.
That said, applying for useful new accounts such as your credit card debt to cards with better terms or installment loans to consolidate high-interest debt could still benefit you in the long run.
When trying to raise your credit score quickly, just be selective and strategic about only applying for accounts that will clearly provide more value than any temporary dings. And avoid opening accounts just for the sake of expanding your available credit.
Becoming an Authorized User
One shortcut some people use to quickly build their credit history is becoming an authorized user on someone else's credit card. This links their account to your credit report and shows up like it's your account too. Here are some tips on being added as an authorized user:
- Ask a family member or friend with a long credit history to add you to their oldest credit card account. This instantly gives your credit profile a positive account.
- Make sure the card you are added to reports authorized user activity to the major credit bureaus. Not all do, so check.
- You don't need to actually use the card. Simply being added as an authorized user provides the credit score benefit.
- If possible, the target is added to an account with a high limit and low balance. This can help improve your credit utilization ratio.
- Keep your own credit utilization low on your real accounts, since the authorized card isn’t factored into your overall utilization.
When you are added as a credit card issuer to an authorized user, you benefit from the entire payment history of that account. So it's an easy way to give your credit profile a quick boost. Just make sure to also work on building your own positive history with responsible habits.
Diversifying Your Credit Mix
While not as influential as payment history or credit utilization, having a mix of different account types can also benefit your credit score. This shows lenders you can responsibly manage diverse forms of credit. Here are some ways to diversify your credit mix:
- If you only have credit cards, consider adding an installment loan - auto, personal, student - to demonstrate you handle both revolving and term debt.
- If you only have installment loans and no credit cards, open a card (secured or unsecured) and use it lightly to build a positive history. Prepaid credit cards can be an easy way to start establishing positive payment habits.
- Over time, work to have a balance of revolving (credit cards), installment (loans), and mortgage accounts on your credit profile.
- Avoid opening accounts just to expand your mix. Only apply for accounts you need that will provide financial value.
- If you open a new account, keep utilization low and make on-time payments to ensure it helps your scores rather than hurts.
Having a good mix of credit shows lenders you can handle different types of accounts responsibly. But payment history and utilization are still more important, so focus on those first.
