6 actually doable things that could raise your credit score

September 1, 2023

If you don’t know what your credit score is, you may be able to find it on one of your credit card statements or through the app of one of your financial institutions.

You may also be able to get your credit score through a credit monitoring service. These services can help you monitor your credit by alerting you when there’s a change.

If you’re a small business owner, it can also be worthwhile to stay on top of your business credit score.

Once you’ve found out what your number is, you’ll need to figure out how it ranks. For FICO® scores (the ones you’re probably going to see), the breakdown is as follows:

300-579: Very poor
580-669: Fair
670-739: Good
740-799: Very good
800-850: Exceptional

The average credit score of Americans in 2022 was 714, with 72% of Americans having a score of 670 or greater.

Ultimately, however, it’s important to remember that creditors can have their own definitions for good and bad scores and may consider other factors, as well.

Image Credit: tolgart/istockphoto.

6 Tips to Help You Manage Your Credit Score

If your credit score disappoints you, you can work to make a course correction. It helps to know what factors typically go into calculating your credit score. Bear in mind, though, that even if you try to address these factors, you’re unlikely to see an overnight change in your score since your past behavior can remain on record for many years. Closing an account, for example, or maxing out a credit card can affect your credit score for three months, on average, while a bankruptcy averages more than six years.

1. Check the Accuracy of Your Credit Reports

To start, make sure that the information in your credit reports is correct.

Your credit score is based on what’s called your credit report, which is a compilation of your credit history. The three major credit bureaus that track this information are Equifax, Experian, and TransUnion. You can get a copy of your credit report from each for free at annualcreditreport.com.

Examine each report for inaccuracies, like accounts that you’ve closed that are still listed as open or don’t indicate that you’re the one who closed them. If you find any errors, report them to the credit bureaus. Ultimately, any relevant corrections should be reflected in your credit score.

Image Credit: alexsl/istockphoto.

2. Prioritize Bill Payments

Approximately 35% of your credit score is based on your payment history, so it’s important to pay your bills on time. Paying your bills on time is also a good practice to adopt in order to stay on budget and on top of your finances in general.

You can set up a calendar reminder to alert you ahead of time when bills are coming due. Or you can set up automatic payments from your bank account so that you leave nothing to chance.

If your late payments are due to lack of funds, you might consider taking a part-time job or starting a side hustle to bring in extra cash. It may help to apply any extra cash like a tax refund or bonus toward paying off your debt.

Image Credit: fizkes/istockphoto.

3. Pay Down Credit Balances

As you work on paying your bills regularly, keep in mind that how much you owe is also important. In fact, it accounts for approximately 30% of what’s considered in your credit score. If you can, you’ll want to pay more than the monthly minimum on revolving credit, attacking the highest interest rate card first.

If you’re having trouble coming up with the money to make payments or pay off accounts, you may benefit from letting your creditors know that you’re having difficulty. If you let them know your situation, you may be able to negotiate a temporary reduction in monthly payments. Try to work this out earlier rather than later, though. Once your account has gone to a collection agency, it may no longer be possible.

Image Credit: damircudic/istockphoto.

4. Limit Opening and Closing Credit Accounts

The length of your credit history accounts for approximately 15% of your score. Generally, the longer a history you have, the better for your score. Bureaus may look at the ages of your oldest account and your newest, as well as the average age of your accounts.

How much new credit you have available accounts for about 10% of your credit score. Bureaus may feel that if you’ve opened several new accounts within a short period of time, that could suggest a credit risk.

Your mix of credit types can also play a small role (about 10%) in your credit score. While having a variety of types of credit can be a plus, that doesn’t mean you should take out unnecessary credit for the sake of your mix.

And know that, regardless of your credit mix, not all types of credit are good for your credit score. Some scoring models ding you for loans you may have from finance companies, for example.

(Learn more at Personal Loan Calculator)

Image Credit: damircudic/istockphoto.

5. Pay with Cash or a Debit Card

Consider not using your credit cards for a time. This could help improve your credit utilization ratio, another metric in your credit score. It measures how much of the total credit that’s available to you you’re actually using, and the lower it is, the better (at or below 30% is recommended).

Image Credit: DjelicS/istockphoto.

6. Keep Track of Credit Inquiries

Many scoring systems do not like if you have what they consider too many applications for credit in a short period of time. They gauge this by how many inquiries are made about your credit, but the situation is a little more nuanced than that.

There are two types of credit inquiries: hard and soft. A hard inquiry happens when you’re actively looking for credit, like when you apply for a credit card or a mortgage, and it can affect your credit score. A soft inquiry might occur when you check your own credit or when you get a new job and your new employer checks it. That typically won’t affect your credit score.

In addition, credit bureaus allow for what’s called “rate shopping.” If you’re looking for a mortgage, for example, and there are several mortgage-related inquiries within a short period of time, that may not count against you. But if you have multiple credit card applications in a short period of time, that might be considered a sign that you’re having financial trouble and could lower your credit score.

Image Credit: courtneyk/istockphoto.

What Credit Score Do You Need to Buy a House?

Ideally, you should check your credit score six to 12 months before you start home-shopping. That would give you time to work on fixing errors and changing behaviors to enhance your score.

Also, you don’t have to be in the 800+ credit score club to get a mortgage. In fact, you may be able to get an FHA mortgage with a 3.5% down payment and a credit score of 580. If your score is less than 580, you could still qualify for an FHA mortgage, but will need to put down 10%.

Just realize that while you will likely be able to get a mortgage, you won’t necessarily be offered the lowest mortgage rate or best terms without stellar scores.

Image Credit: Rawpixel/istockphoto.

Typical Minimum Credit Score by Mortgage Loan Type

When it comes to the minimum credit score you might need to get a mortgage, much depends on the type of loan you get. According to Experian, credit score expectations for different kinds of loans are as follows:

Conventional loans: minimum of 620-660 or higher
Jumbo loans: 700 or higher
FHA loans: 500 with a 10% down payment and 580 with 3.5% down
VA loans (insured by the U.S. Department of Veterans Affairs): 620 or higher
USDA loans (backed by the U.S. Department of Agriculture): minimum of 580

Image Credit: kate_sept2004/istockphoto.

Can You Get a Personal Loan With Bad Credit?

Yes, you can get a personal loan with bad credit. However, if your credit score is below 500, you may have more difficulty getting a loan or find it harder to get one with a good interest rate or terms.

You might take a few months to work on building your credit score. But of course, you may not have that much time. In that case, it might be tempting to take out a payday loan, but the terms on those can often be considered predatory and they may not be a good option.

Another option might be to consider asking a trusted friend or family member with a higher credit score to cosign your loan. That might get you better terms, but it also means that your cosigner is liable if you default on your payments.

Image Credit: designer491/istockphoto.

Can You Get a Business Loan With Bad Credit?

Yes, it may be possible for you to get a business loan with bad credit.

Online lenders may be more willing than traditional lenders to loan to you even if your credit score is lower. You may also be able to get funding that involves some kind of security, such as:

Merchant cash advances – can be used if your business involves credit card transactions
Inventory financing – can be used if you need the money to increase inventory
Equipment financing – used to purchase equipment for your business

Image Credit: filadendron/istockphoto.

The Takeaway

The good thing about credit scores is they aren’t forever. Where you are today isn’t where you have to be six weeks or six months from now. You can hit the reset button and begin building your credit management skills one step at a time.

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

Lantern By

SoFiSoFi receives compensation in the event you obtain a loan, financial product, or service through the Lantern marketplace. This Lantern website is owned by SoFi Lending Corp., a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. (nmlsconsumeraccess). This site is NOT owned and operated by SoFi Bank. Loans, financial products, and services may not be available in all states.

All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider’s discretion. There is no guarantee you will be approved or qualify for the advertised rates, fees, or terms presented. The actual terms you may receive depends on the things like benefits requested, your credit score, usage, history and other factors.

*Check your rate: To check the rates and terms you may qualify for, Lantern and/or its network lenders conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown on this website are from lenders and are estimates based upon the limited information you provided and are for information purposes only. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the lender you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are provided by the lenders and not by SoFi Lending Corp. or Lantern. Please review each lender’s Terms and Conditions for additional details.

Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit (consumer)

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.¹

SoFi’s Insights tool offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Personal Loan

SoFi Lending Corp. (“SoFi”) operates this Personal Loan product in cooperation with Engine by MoneyLion. If you submit a loan inquiry, SoFi will deliver your information to Engine by MoneyLion, and Engine by MoneyLion will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders/partners receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Engine by MoneyLion, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Engine’s Licenses and Disclosures, Terms of Service, and Privacy Policy.Personal loan offers provided to customers on Lantern do not exceed 35.99% APR. An example of total amount paid on a personal loan of $10,000 for a term of 36 months at a rate of 10% would be equivalent to $11,616.12 over the 36 month life of the loan.

Student Loan RefinanceSoFi Lending Corp. (“SoFi”) operates this Student Loan Refinance product in cooperation with Engine by MoneyLion. If you submit a loan inquiry, SoFi will deliver your information to Engine by MoneyLion, and Engine by MoneyLion will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Engine by MoneyLion, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Engine’s Licenses and Disclosures, Terms of Service, and Privacy Policy.

NOTICE: The debt ceiling legislation passed on June 2, 2023, codifies into law that federal student loan borrowers will be reentering repayment. The US Department of Education or your student loan servicer, or lender if you have FFEL loans, will notify you directly when your payments will resume For more information, please go to https://docs.house.gov/billsthisweek/20230529/BILLS-118hrPIH-fiscalresponsibility.pdf https://studentaid.gov/announcements-events/covid-19

If you are a federal student loan borrower considering refinancing, you should take into account the new income-driven payment plan, SAVE, which replaces REPAYE, seeks to make monthly payments more affordable, and offers forgiveness of balances that were originally $12,000 or lower after 120 payments, among other improvements. Also, please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as SAVE, or extended repayment plans.

Auto Loan RefinanceAutomobile refinancing loan information presented on this Lantern website is from Caribou, AUTOPAY, Engine by MoneyLion, and each of Engine’s partners (along with their affiliated companies). Caribou, AUTOPAY, and Engine by MoneyLion pay SoFi compensation for marketing their products and services on the Lantern site.

Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including but not limited to: credit standards, loan size, vehicle condition, and odometer reading. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness, consult with the lender for more details. Additional terms and conditions may apply and all terms may vary by your state of residence.

Secured Lending DisclosureTerms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.

BankingSoFi Lending Corp. (“SoFi”) operates this website in cooperation with Engine by MoneyLion presenting promotions for products and services offered by other banks, lenders, and financial institutions. If you select a promotion above, you will be connected to the website of the company offering the product. The promotions presented on this site are from companies that pay SoFi and Engine by MoneyLion compensation for marketing their products and services. This may affect whether a provider is featured on this site and could affect the order of presentation. Lantern and Engine by MoneyLion do not include all providers in the market or all of their available offerings. Click to learn more about Engine’s Licenses and Disclosures, Terms of Service, and Privacy Policy.

Image Credit: NicoElNino/istockphoto.