Adding a few extra points to your credit score could save you a lot of cash.
Lenders, employers, and landlords all consider your credit standing when making crucial decisions that have a major impact on your life.
So, it’s no surprise that people are looking for fast ways to raise their credit scores. There are organizations that promise to do just that if you pay them to help.
But you don’t need to shrink your wallet just to expand your credit score.
There are several free ways to boost your score.
To be sure, there are no quick fixes for someone who has serious credit problems and wants to turn things around. Only time — and a lot of hard work on your part — can fix such issues.
But if you just need a modest boost to your credit score, there are several tools available to help you accomplish the goal.
Why Boost Your Credit Score?
There are many good reasons to try to increase your credit score, but arguably the most important is to get a better deal on a loan.
When you apply for a personal loan, mortgage, debt consolidation loan, auto loan, credit card, or another type of borrowing, the lender will look at your credit score to see how big of a risk you pose. The higher your credit score is, the less risk you are as a borrower.
When a lender sees that you have a high credit score, it indicates that you have a history of borrowing money and paying it off on time and in full. For obvious reasons, lenders love to work with borrowers who have that type of track record.
So, lenders usually offer the best terms to borrowers with high credit scores. That means the interest rate attached to your loan will be lower, which can save you a lot of money — potentially tens of thousands of dollars or more — over the course of the loan’s lifetime.
The vast majority of lenders use the FICO score as the yardstick in determining your creditworthiness.
The first step in boosting your credit score is knowing your credit score and understanding what those numbers mean.
The following is the range of FICO credit scores, and what they tell lenders about your credit standing:
- 800-plus: Exceptional
- 740-799: Very good
- 670-739: Good
- 580-669: Fair
- Less than 580: Poor
While getting the best terms on a loan is the most common reason why people want higher credit scores, it’s not the only motivation. Credit scores can impact your life in other important ways.
For example, some employers look at your credit score before deciding whether to hire you. And landlords may look at your credit score when deciding whether to rent an apartment to you.
Add Your Utility Bills to Your Credit Report
In the past, the chief way to establish a credit score — or to increase it — was to borrow money, and pay it back on time every time.
But now, credit-reporting agency Experian offers a program that can help you build a stronger credit score simply by paying household bills.
Experian Boost is a free program that allows you to establish a new credit score — or increase an old one — through paying bills such as:
- Mobile and landline phone
- Internet
- Cable and satellite
- Gas and electricity
- Video streaming services
- Water
- Power and solar
- Trash
Experian says you can use the program to quickly boost your FICO Score. As you faithfully pay your bills, the information will be added to your Experian credit file, boosting your score.
You can sign up for Boost at the Experian website and add information about the credit card accounts or bank accounts you use to pay bills to the account. You have the choice to decide what is and is not reported to Boost.
Add Rent to Your Credit Report
You can also use your monthly rent payments to push your credit score higher.
If you pay your rent online to specific property management companies or payment platforms that participate in Experian Boost, you will receive credit for those payments that can increase your credit score.
Experian says more than 1,500 U.S.-based property management companies participate in Experian Boost. You may be eligible if you pay your rent directly to these companies or through platforms such as:
- AppFolio Property Management
- Buildium
- Yardi
- Breeze
- Zillow Rental Manager
Become an Authorized User
Becoming an authorized user on someone else’s credit card account is one way people traditionally have built or improved their credit score for free.
The process of becoming an authorized user is simple: You simply ask someone who has a good credit history to add you as an authorized user to his or her account. You typically receive your own credit card from the lender and can then use the account to make your own purchases.
When you become an authorized user, you are not legally responsible for making payments on the account, but you do get the benefit of having the account added to your own credit report.
That means that as long as the account is maintained in good standing, you should see your own credit score improve.
Pay Credit Card Balances More Frequently
One of the biggest factors that determine your credit score is your credit utilization ratio. This is the amount of credit you are using compared to the amount of credit you have available to you.
In fact, the amount you owe on your credit accounts makes up 30% of your FICO score, which is by far the credit score lenders use most.
When you charge a lot of things to your credit card, the balance builds up. That causes your credit utilization to climb, which in turn can send your credit score lower.
However, if you pay off your card several times during the month, your balance does not have a chance to balloon. Instead, it stays low throughout the month, which should help boost your credit score.
Ask for Higher Credit Limits
Another way to keep your credit utilization ratio low is to ask for higher credit limits from your lenders.
If your credit limit is $10,000 and your credit balance is $4,000, your credit utilization ratio is 40%. That is higher than the 30% ceiling that many experts say should be your maximum credit utilization ratio.
However, if you talk to your lender and successfully request that your credit limit be raised to $15,000, that $4,000 balance only puts your credit utilization ratio at about 27% — under the 30% ceiling. That should help to improve your credit score, provided you don’t use that extra credit.
Dispute Credit Report Errors
About 1 in 5 Americans have at least one credit report that contains at least one error, according to an analysis by the Federal Trade Commission. Such mistakes can unfairly drag down your credit score.
The good news is that if you spot such an error and report it, the credit-reporting agency that maintains your file must remove the mistake. This should result in an improved credit score, especially if the incorrect notation was for something especially serious.
However, the only way to spot errors in your credit report is to look over your report. Federal law gives you the right to view one credit report from each of the three major credit-reporting agencies — Equifax, Experian, and TransUnion — every year.
Even better, the three credit-reporting agencies are allowing consumers to look at their credit report once a week for free through the end of this year.
To access your credit report for free, go to the official website that offers this option, AnnualCreditReport.com.
If you find an error in one of your credit reports, let the following relevant credit-reporting agency know:
Dos and Don’ts of Boosting Your Credit Score
Most of the techniques above are designed to boost your credit score quickly.
But there are some things you should and should not do to keep your credit score healthy over the long haul:
DO make sure to pay your bills on time, every time
Your payment history accounts for 35% of your FICO score, making it the No. 1 factor in determining your score. Nothing will boost your score more than paying in full on time. And nothing will hurt your score more than failing to do that.
DO keep your credit utilization ratio low
This is the second most important factor in your score, with the amount you owe accounting for 30% of your score. Try not to borrow too much over the course of a month. And if you do have to borrow throughout a given month, make several payments over those 30 days to keep your balance low.
DO maintain a healthy mix of credit accounts
FICO says your credit mix accounts for 10% of your score and notes that a typical mix might include things such as “credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans.”
DON’T pay your bills late, or pay less than the minimum
FICO says “a few late payments are not an automatic ‘score-killer.'” However, a consistent pattern of paying late will indeed send your score south. And even one or two late payments will keep you from getting a truly great score, at least in the short term.
DON’T close old accounts
Even if you no longer use a credit card, it’s wise to leave the account open, especially if it’s very old. The length of your credit history makes up 15% of your score, so old accounts help. Plus, the credit available on the card helps you to keep a lower credit utilization ratio.
FAQs
What are some of the risks of being added as an authorized user on someone else’s account?
Becoming an authorized user can backfire if the account is not used responsibly. If either you or the primary cardholder do not pay the bill on time and according to the card’s terms, your score actually might fall.
In some cases, there also is a fee for becoming an authorized user.
What can I do if my credit is severely damaged?
If your credit is severely damaged and you are hoping to raise it quickly, you likely are out of luck. Time and patience are required to rebuild a credit score that has suffered a lot of damage.
If you are struggling to pay your debts, consider meeting with a nonprofit credit counselor who can help you craft a plan to right the ship.
Eliminating your debt and paying your bills on time over months and years will help your score to gradually improve. No matter how much you damaged your score in the past, it is still possible to turn things around and eventually achieve an excellent score.
Is Experian Boost the only program that can help me boost my score?
Experian Boost can be a great option, especially considering it is free. However, eCredible Lift allows you to add utility payments to credit reports, although that service costs $24.95 a month.
