A 2014 survey conducted by the National Foundation for Credit Counseling found that “more people would be embarrassed to admit their credit scores than their weight.”
This might not come as a surprise since many people take pride in being responsible with their money and credit. They aim to pay their bills on time, which helps them qualify for the best loans and interest rates.
But even if you’re slightly embarrassed by your credit score, there’s really no reason to feel ashamed. Yes, a low score can result from bad decisions. But other factors also play a role in bad credit, such as the inability to pay bills after a job loss or divorce.
Regardless of the reasons for a low score, you can undo the past. Understanding credit bureaus and how credit scoring works is key to raising your credit score. Most people know that paying their bills on time helps maintain a high score. However, there are other lesser known ways to improve credit.
Credit scores are determined by information creditors report to the credit bureaus. Since creditors report to the bureaus monthly, the good credit habits you start today can slowly repair your score.
Here are four options for raising your credit score that you haven’t considered.
1. Challenge Credit Report Mistakes
This might come as a shock, but the information on your credit report isn’t written in stone. Creditors juggle a lot of accounts, and occasionally, they make reporting mistakes. If you find wrong information on your credit report, don’t think you’re powerless. You have rights as a consumer.
According to the article, “Credit Insiders Guide to Credit Bureaus and Credit Reports,” published by LexingtonLaw.com, “creditors want consumers to believe that challenging a credit report item is like questioning a courthouse record.” This isn’t the case.
Every consumer is entitled to one free credit report from each of the bureaus every 12 months. You can order your reports directly from each of the bureaus, or visit AnnualCreditReport.com. Read your report carefully and look for any mistakes or unfamiliar account activity. If necessary, file a dispute with the bureaus to get errors off your record.
2. Ask Creditors to Erase a Collection Account
If you have a delinquent account, your creditor might send this account to collections. This results in a collection account on your credit report, and this activity can stay on your report for up to seven years and drive down your credit score. However, you might be able to raise your credit score by contacting your creditor and making arrangements to pay off this old balance.
Ask the creditor to delete the collection account once the balance is paid in full. The creditor isn’t obligated to remove the collection account, but the company might grant your request. If your creditor agrees to erase the collection account, get this agreement in writing.
3. Get a Small Loan or Another Type of Credit Account
You might not realize this, but the type of credit accounts you have make up 10% of your credit score. Some people think it’s safer to have just one credit account. But even if you have a credit card that you pay on time every month, your credit score might stay the same if this is your “only” credit account. In this case, you can possibly increase your score by diversifying and applying for another type of account, perhaps a small installment loan. Only apply for a new credit account if you can afford the monthly payments.
4. Ask for a Credit Limit Increase
The amount you owe also impacts your credit score — making up as much as 30% of your score. A high credit card utilization ratio — which is the amount of available credit you use — can reduce your credit score.
Ideally, credit card balances should not exceed 30% of your credit line. You can improve your credit card utilization ratio by paying down your balances, or you can ask your credit card company for a credit line increase. Let’s say you have a credit card with a $1,000 credit line and a $500 balance. In this case, your credit utilization ratio is 50%, which is too high. However, if your credit card company increased your balance to $2,000, your credit card utilization ratio would drop to 25%.
This approach only works if you have self-control and you don’t add new charges to the card.
Credit Bureaus: Guide to Better Credit
The information your creditors report to the credit bureaus can either help or harm your credit score. For that matter, be proactive with your credit and regularly monitor your credit history. This is one of the best ways to learn about mistakes early and assess how you can improve your credit.
