How to Raise Your Credit Score to 700

A credit score serves as a numerical representation of an individual’s creditworthiness, indicating the likelihood of repaying borrowed money on time. These scores, typically ranging from 300 to 850, are compiled from information within your credit reports. Lenders, including banks, credit card companies, and mortgage providers, use credit scores to evaluate loan applications and determine the terms of credit, such as interest rates. A higher credit score generally signifies lower risk to lenders, which often translates to more favorable interest rates and better access to financial products. Beyond loans, credit scores can influence decisions for renting apartments, setting insurance premiums, and even employment for positions involving financial responsibility.

Credit Score Fundamentals

Credit scores are calculated based on several key factors, each carrying a different weight in the overall assessment.

Payment history is the most significant factor, accounting for 35% to 40% of a credit score. This component reflects your track record of paying debts on time, including credit cards, loans, and mortgages. A consistent history of on-time payments demonstrates responsible financial behavior. Conversely, late payments, especially those 30 days or more overdue, can significantly harm your score.

Amounts owed, also known as credit utilization, is another substantial factor, making up about 30% of your FICO Score. This refers to the percentage of your available revolving credit that you are currently using. A lower credit utilization ratio indicates that you are not overly reliant on credit and are managing your debts effectively. Experts recommend keeping your overall credit utilization below 30%.

The length of your credit history contributes around 15% to your credit score. This factor considers how long your credit accounts have been open, including the age of your oldest account and the average age of all your accounts.

Your credit mix, or the different types of credit accounts you have, accounts for approximately 10% of your score. This includes a combination of revolving accounts, such as credit cards, and installment loans, like mortgages or car loans.

New credit, specifically recent applications and newly opened accounts, also influences about 10% of your score. Each time you apply for new credit, a “hard inquiry” is recorded on your credit report, which can cause a small, temporary dip in your score. Opening multiple new accounts in a short period may suggest increased risk to lenders.

Actionable Steps to Improve Your Score

Improving your credit score involves addressing each of the fundamental components that contribute to its calculation. Consistent, responsible credit behavior across all aspects is paramount to achieving a higher score.

Establishing a flawless payment history is the most impactful step you can take. Since payment history carries the largest weight, ensuring all your debt payments are made on time, every month, is essential. Set up automatic payments directly from your bank account for all your recurring bills, including credit cards, loans, and utilities. Consider enrolling in email or text alerts from creditors to receive reminders several days before a due date. If you anticipate difficulty making a payment, contact your creditor immediately to discuss potential solutions, such as a temporary payment arrangement, before the due date passes.

Reducing your credit utilization ratio is another highly effective strategy for boosting your score. Aim to keep your overall credit utilization, as well as the utilization on individual cards, below 30%; however, a ratio under 10% is considered even better for top scores. To achieve this, prioritize paying down your credit card balances, focusing on cards with the highest balances first. You might use strategies like the debt snowball method, paying the smallest balance first, or the debt avalanche method, targeting the highest interest rate debt first.

Avoid opening new credit accounts solely for the purpose of increasing your available credit, as this can lead to a temporary dip in your score due to hard inquiries and a reduction in the average age of your accounts. If you have old credit cards with no annual fees, resist the urge to close them, even if you no longer use them frequently. Keeping older accounts open and active helps maintain a longer average credit history. If you have an old card you rarely use, consider making a small, recurring purchase on it each month and setting up automatic payments to keep the account active and positively reporting.

Strategically diversifying your credit mix can also contribute to a stronger credit profile over time. While it is not advisable to take on unnecessary debt just to diversify, if you are already planning to finance a significant purchase like a car or house, managing these installment loans responsibly will naturally improve your credit mix.

Exercise caution with new credit applications. Each time a lender pulls your credit report in response to an application, a hard inquiry is recorded, which can slightly lower your score by a few points. These inquiries remain on your report for two years, though their impact on your score typically diminishes after 12 months. Therefore, apply for new credit only when genuinely needed and space out applications to avoid multiple inquiries in a short period. When rate shopping for a single loan, like a mortgage or auto loan, multiple inquiries within a concentrated timeframe (14 to 45 days) are often grouped and counted as a single inquiry by scoring models.

Monitoring Your Credit Health

Regularly monitoring your credit health involves routinely checking your credit reports and scores for accuracy. By staying informed, you can quickly identify and address any discrepancies.

You are entitled to a free copy of your credit report from each of the three major nationwide credit bureaus—Equifax, Experian, and TransUnion—once every 12 months. The most direct way to obtain these reports is through AnnualCreditReport.com, the only authorized website for free reports. Stagger your requests throughout the year, perhaps pulling one report every four months, to maintain continuous oversight.

Upon receiving your credit reports, carefully review each one for any inaccuracies or unfamiliar entries. Look for incorrect personal information, accounts you don’t recognize, incorrect payment statuses, or outdated negative information that should have been removed. Errors on your credit report can significantly impact your score and your ability to secure new credit.

If you identify an error, you have the right to dispute it with both the credit bureau and the company that provided the information (the “furnisher”). Begin by gathering all supporting documentation that proves the information is incorrect. Then, contact the credit bureau(s) that show the error, typically via their online dispute portals, mail, or phone. Your dispute should clearly explain what information is wrong and why, along with copies of your supporting documents.

The credit bureau is required to investigate your dispute within 30 days. It is also recommended to send a separate dispute letter directly to the furnisher of the incorrect information. Keep detailed records of all correspondence, including dates, names of contacts, and copies of documents sent and received. If the investigation confirms an error, the information must be corrected or removed from your report.