How to Get Your Credit Score Up 100 Points

A strong credit score is an invaluable asset in personal finance, influencing access to loans, credit cards, housing, and even some employment opportunities. It acts as a financial report card, indicating your reliability as a borrower to potential lenders. Understanding the factors that shape this score and taking deliberate steps to improve it can significantly enhance your financial standing.

Understanding Your Credit Score and Report

Your credit score is a numerical representation of your creditworthiness, based on information within your credit report. The most widely used scoring model, FICO, considers five main factors when calculating a score: payment history (around 35%), amounts owed (around 30%), length of credit history (around 15%), new credit (around 10%), and credit mix (around 10%). These percentages highlight the importance of consistent payment and managing debt levels.

To begin any credit improvement journey, obtaining and reviewing your credit reports from all three major bureaus—Equifax, Experian, and TransUnion—is a foundational step. Federal law allows you to receive a free copy of your credit report from each of these bureaus once every 12 months through AnnualCreditReport.com. This centralized website is the only authorized source for these free reports.

Carefully examining each report for accuracy is an important step. Discrepancies such as incorrect personal information, accounts you don’t recognize, or inaccurate payment statuses can negatively impact your score. Identifying these errors allows you to take steps toward correction, which can be a direct path to score improvement.

Improving Payment Behavior and Credit Utilization

Consistent on-time payments are important for credit score improvement, as payment history carries the most significant weight in credit scoring models. A single late payment, especially if it’s 30 days or more past due, can cause a notable drop in your score and remain on your credit report for up to seven years from the original delinquency date. Setting up payment reminders, utilizing auto-pay features, or even making payments more frequently than monthly can help ensure timely remittances and prevent negative marks.

Credit utilization, the amount of revolving credit you are currently using compared to your total available credit, is another influential factor, accounting for about 30% of your FICO score. A lower utilization ratio indicates responsible credit management, with experts suggest keeping it below 30%, and those with excellent credit often maintain it below 10%. To reduce your utilization, prioritize paying down credit card balances, consider making multiple smaller payments within a billing cycle, or strategically request a credit limit increase without increasing your spending, which would lower your ratio by increasing your available credit.

Derogatory marks, such as collection accounts or charge-offs, can lower a credit score. While their impact lessens over time, these negative items remain on your report for about seven years from the date of the original delinquency. Focus on preventing new derogatory marks by managing current debts responsibly.

Optimizing Credit Accounts and Mix

The length of your credit history also contributes to your credit score. A longer history with established accounts demonstrates stability and responsible credit use. Therefore, it is advisable to keep older, well-managed accounts open, even if they are not frequently used, as closing them can shorten the average age of your accounts and potentially impact your score.

Your credit mix, reflecting the diversity of your credit accounts, is another component considered in scoring models. This includes a blend of revolving credit, like credit cards, and installment loans, such as mortgages or auto loans. While diversifying credit types can be beneficial, it should only be undertaken responsibly; taking on new debt solely for the sake of improving credit mix is not recommended unless it aligns with a genuine financial need and can be easily managed.

Applications for new credit result in a “hard inquiry” on your credit report, which can temporarily lower your score by a few points. While these inquiries remain on your report for up to two years, their impact on your FICO score diminishes after 12 months. Avoid applying for multiple new credit accounts within a short period unless absolutely necessary.

For individuals with limited or poor credit history, secured credit cards or credit-builder loans can serve as effective tools to establish a positive payment history. Secured credit cards require a cash deposit as collateral, which sets the credit limit and reduces issuer risk. Credit-builder loans involve regular payments into a savings account, with funds accessible after repayment. Both options report payment activity to credit bureaus, helping to build a positive credit profile through consistent, on-time payments.

Addressing Credit Report Inaccuracies

Upon reviewing your credit reports, any inaccuracies identified require prompt action to dispute them. These errors might include incorrect personal details, accounts that do not belong to you, or inaccuracies in payment status or account balances.

The process for disputing errors involves contacting each of the three major credit bureaus—Equifax, Experian, and TransUnion—where the inaccuracy appears. You can initiate a dispute online through their respective dispute portals, by mail, or by phone. When submitting a dispute, clearly explain what information you believe is incorrect and why, providing copies of any supporting documentation, such as bank statements or canceled checks, to strengthen your claim.

Once a dispute is filed, the credit bureau has a legal obligation to investigate the disputed information within 30 days. They will contact the entity that furnished the information, such as a lender or creditor, to verify its accuracy. You will be notified of the investigation’s outcome, and if the information is found to be inaccurate or unverifiable, it will be removed from your credit report.