Looking to improve your credit score? This is an ultimate guide on how to increase your credit score with Credit Sesame.
Today's post is sponsored by Credit Sesame.
One of the key aspects of financial freedom is understanding your credit score.
In fact, learning how to increase your credit score is a skill you can use for the rest of your life.
It's important to know how your credit is affected and how to improve it so that you can achieve low interest rates for loans, apply for housing/mortgages, and get a low APR on credit cards.
A high credit score can help you get ahead financially and set you up on the path to success.
With so many things affecting a credit score, how can you actually improve it?
In today's post, you'll learn how to check your score, monitor it for fraudulent activity, and how to increase your credit score with the help of Credit Sesame.
This post is all about how to improve your credit score.
What is a Credit Score?
A credit score is essentially a score of your financial health and is extremely important in today's world.
It can range from 300-850, with 850 being the highest credit score one can achieve.
Why is a Credit Score Important?
A higher credit score makes a person look more appealing to a borrower.
For example, a credit score lets lenders and banks know how likely you are to repay a home mortgage loan.
Therefore, having a high score is important to secure the lowest interest rates on loans and credit cards. It is also often a factor when searching for rental housing and apartments.
What Affects a Credit Score?
A credit score is made up of many components, which is why it's sometimes difficult to determine exactly how a score is affected.
Here are some of the ways a credit score is affected:
- Bill paying history
- Length of time you've had lines of credit
- Current debt
- Collections charges
- Deliquent charges
- Quantity of credit lines
- Type of credit lines
- Credit utilization
- New applications for credit
The question then becomes, how do we improve a credit score?
How to Increase Your Credit Score
There are many steps you can take to work toward increasing your credit score. This is a 10 step tutorial to improving your credit score quickly and effectively.
1. Monitor Your Credit Report
The first step in increasing your credit score is to monitor your credit report.
My favorite tool for monitoring my credit is Credit Sesame. You can sign up for a free account and instantly get access to your credit score.
In addition, Credit Sesame will give you a list of recommendations to help you improve your credit score
that is based on your personalized information.
The first thing you'll want to do is analyze your credit report thoroughly. You should double-check that all accounts are yours, check payment history, and look for anything out of the ordinary.
2. Check Your Score Often
The best part about using a financial tool like Credit Sesame is that checking your score doesn't impact your credit score (contrary to popular belief).
In fact, I encourage you to check your score often! I always set up alerts so that I am notified anytime my score changes.
That then allows me to log in right away to see what may have altered my score so that I can act on it immediately.
PSA: Setting up alerts for my credit score was extremely valuable to me recently.
Let me explain what happened and why this can happen to anyone.
I got an alert saying that my credit score decreased.
I logged in to Credit Sesame and within minutes, I noticed I had a collection on my account.
I looked up the charge, made some phone calls, and found out that it was a charge from 2 years before from a doctor's office.
After some further investigation, I found that my doctor accidentally charged my old health insurance company so the bill was never paid. They also sent the remaining bill to my old home address so I didn't receive a payment deliquency notice.
I was immediately able to give the doctor's office my new insurance so they could fix the billing and take the collection off of my credit.
Within 45 days, the issue was fixed.
(Yes, 45 days. When a deliquency happens, it takes a while to get it off your credit report so it's very important to set up alerts to stay on top of it in real time. Learn from my lesson.)
3. Follow a Debt Payoff Method
The next thing to do to improve your credit score is to follow a debt payoff method.
One of the most important things you can do is bring down the amount of debt you have. Credit Sesame can help you do this by giving you a bigger picture of the debt you have.
Within Credit Sesame, you will be able to see a debt analysis with your debt to income ratio.
Take a look at the debt you have and begin to prioritize it.
Follow a debt payoff method that allows you to pay off the debt in a responsible way.
My two favorite methods are the debt snowball method and the debt avalanche method. You can download my free printables for both debt payoff methods to start paying off your debt efficiently.
Related:
- Free Debt Payoff Printables: Exact Steps You Need to Know to Get Out of Debt FAST
- How to Make Your Own FREE Personal Finance Organizer
4. Aim for a Credit Utilization of 30% or Less
Credit utilization is also an important factor that makes up your credit score.
Take a look at your credit cards and aim to use 30% or less of the credit you are allowed.
For example, if your credit card gives you a credit limit of $10,000 a month, aim to only spend $3,000 a month or less.
Less is more when it comes to your credit score.
In fact, people that utilize 7% or less are highly rewarded when it comes to an increase in their credit score.
Related:
5. Freeze Your Credit
This step isn't necessarily something that will increase your credit, BUT it will protect you from fraud, which could hurt your credit so it makes the list.
It's extremely important to freeze your credit because it adds an extra level of protection for you against fraudsters that may try to open up a line of credit in your name.
If someone is successful in opening a line of credit in your name, this could have major financial ramifications down the road for you and could be extremely detrimental.
Example: I have a friend that had a fraudster buy a $80,000 car in her name.
She had no idea until 6 months after the car was purchased.
The fraudster hadn't paid the bills on the car so her credit had tanked.
The worst part was that she was about to buy a home.
Needless to say, the home buying was certainly put on hold.
In fact, it took over a year for her credit to improve, but it still isn't back to where it was before the incident.
(Credit impacts can take a very long time to fix, even if they aren't your fault so make sure you are constantly monitoring your credit. That's why alerts are so wonderful!)
In fact, Credit Sesame offers a free solution that would have helped my friend! They offer free identity theft protection complete with identity theft insurance that will cover you up to $1,000,000 if someone steals your identity.
Related:
6. Limit Credit Inquiries
Another thing to be cautious of when trying to increase your credit is credit inquiries.
Limit credit inquiries on your account, specifically hard inquiries. In fact, if your credit is frozen, you won't be able to do inquiries on your account, until you unfreeze it.
A hard inquiry can temporarily bring down your credit score a few points so you want to limit the amount you do, especially since they compound over time.
You'll also want to think twice before opening a new account as it can sometimes affect your credit score because it decreases the average age of your accounts.
Yes, you must really think through actions when it comes to credit. Luckily, this is something Credit Sesame can provide tips on and help guide you through, all for free!
7. Be Consistent with Paying Bills on Time
Paying bills on time is one of those things that is an absolute MUST if you are trying to improve your credit score.
Simply missing one bill payment can significantly hurt your credit.
If you do miss a bill payment, go pay the bill as soon as you can.
If it showed up as a delinquent payment on your credit report, then, I'd recommend calling the bill collector and asking if they would kindly remove the delinquency from their report to the credit bureaus.
I have been successful in doing this when I forgot to pay a credit card bill one time. It was only for $4 and yet it dinged my credit score BADLY.
Once they removed it, it took months to get back to normal, but that's why the alerts are so critical!
I was able to resolve it within a few days of them reporting it so they could remove the deliquency as soon as possible.
I'd highly recommend setting up Autopay for all of your credit card and debt accounts if you're able to.
Then, set a money date with yourself (like the 1st of the month) to review all charges, debt paid, etc. In fact, for your credit cards and bank accounts, set up all of your credit cards and banks to text you every time there's a charge over a penny so you're always informed.
Related:
- Free Net Worth Tracker Spreadsheet to Reach Your Financial Goals
- 9 Money Saving Tips to Increase Your Savings Immediately
8. Ask for a Credit Increase
Another way to increase your credit is to call your credit card company and ask for a credit increase.
Yes, it's as simple as that and it never hurts to ask!
A credit increase will automatically lower your credit utilization, which will improve your credit score. Remember, the lower the credit utilization the better.
9. Resolve Collections and Delinquent Charges
If there is a collection or delinquent charge on your account, you'll want to resolve it immediately.
First, call the collector and pay the delinquent amount as soon as you can.
Next, ask the collector to take the collection amount off of the credit reports and to report the change to all 3 credit bureaus.
It's important to get these resolved right away as it typically takes 30-45 days after the collection is paid to get removed from your credit report.
10. Become an Authorized User
Did you know you can improve your credit score by becoming an authorized user on someone else's account?
This is one of my favorite credit hacks!
In fact, this is something parents should do for their children.
If you have a family member or close friend with a high credit limit and good credit standing of consistently paying bills on time, ask to be added as an authorized user.
This will add their credit history and credit limit to your account which will improve your credit utilization and average age of your accounts. The best part is, you don't need to know their credit card information to benefit from this!
Doing this will have a quick effect on your credit score!
Next Steps to Take to Increase Your Credit Score
The next step to increasing your credit score is to sign up for a free account at Credit Sesame.
Here, you will see your credit score and get immediate recommendations on how to improve it based on your personal financial situation! From there, you can set up credit monitoring alerts and get on the path to improving your credit score!
Good luck with your financial health journey!
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