How To Improve Your FICO Credit Score in 7 Clear Steps
Your FICO® score isn’t a random number lenders like to ask about—it’s a gateway to a more secure financial future. Your credit score is a reflection of your financial activities and behaviors, a useful tool for opening doors to financial opportunities or a roadblock to achieving your financial goals.
If you’re hoping to secure better interest rates or qualify for a mortgage, the three digits that make up your credit score can significantly define your chances of success. If your past credit behavior caused your score to take a hit, all hope is not lost.
With consistent and responsible habits over time, you can build your score back up. In this guide, you’ll learn the basics of responsible credit management and discover how to improve your FICO credit score.
What Is a Credit Score, and Why Does It Matter?
A credit score is a number between 300 and 850 that describes your creditworthiness. It’s a major factor creditors and lenders use to predict how likely you are to repay your debt. Your potential landlord or employer may also ask for your credit score—they use it to determine how financially responsible you are.
Of all the credit-scoring models, there’s one that the majority of credit agencies and bureaus recognize—the FICO score. This score comprises five main components that determine the range you fall into. This table summarizes each factor:
ComponentDescriptionPayment history (35%)The most important factor, reflecting how consistently you make on-time paymentsTotal debt owed (30%)The main indicator of the amount of available credit you’re utilizingLength of credit history (15%)The representation of how long your credit accounts have been open. A longer history results in a higher scoreCredit mix (10%)The diversity of your credit. Having a diverse credit portfolio, including auto loans, mortgages, and credit cards, can be beneficial in increasing your scoreNew credit (10%)The factor that indicates how frequently you apply for credit. Multiple account openings lower your score
Your credit score significantly influences how likely you are to get credit and how high your interest rate will be. It could also be the difference in whether you get a house or car loan and at what cost. Simply put, a strong credit score saves you a lot over time, while a poor score can cost you substantially.
What Is Considered a Good FICO Credit Score?
Different scoring models classify their scores with varying ranges, so what may be good for a scoring model like VantageScore may not be considered good with FICO. According to FICO’s classification, a good score ranges between 670 and 739. Here’s what the total score breakdown looks like:
Excellent: 800–850
Very Good: 740–799
Good: 670–739
Fair: 580–669
Poor: 300–579
The above scores forecast your chances of defaulting on a credit product, such as a credit card, mortgage, or personal loan. However, having a good credit score may not guarantee your qualification for certain financial products. Lenders or creditors may evaluate other factors, such as your income, to determine your eligibility.
The Benefits of a Strong FICO Score
There are a lot of benefits to having a strong FICO score. Some of these benefits include:
Reduced cost of borrowing—A good FICO score helps you bring down the total cost of borrowing because it makes you eligible for lower interest rates. Reduced rates significantly save you money over time
Increased chances of loan approvals—The stronger your score, the more likely a lender will approve your loan. A high score portrays you as financially responsible and less risky
Improved eligibility for housing—A great score gives you a higher chance of getting your desired apartment. Most landlords will be less reluctant to accept applicants with a better credit score as it demonstrates reliability
Improved qualification for rewards—When you have strong credit, you become eligible for better rewards, including travel points, exclusive perks, and cash back offers
Does a Credit Score Increase Over Time?
Yes, your credit score can increase over time with positive borrowing habits and other responsible financial behaviors.
Improving your credit score is a gradual process, not a quick fix. As negative items naturally fall off your report, or you eliminate errors and inaccuracies, you may likely notice an increase in your score. Even if the negative items on your score are accurate and, therefore, irremovable, practicing consistent and positive credit building habits will help raise your score.
Avoid credit repair services that claim to be able to remove accurate but negative items on your report, as they’re likely scams.
How Long Does It Take To Rebuild a Credit Score?
There’s no specific timeline for rebuilding your credit. It will largely depend on the extent of the damage your credit has sustained and the way you approach the rebuilding process.
Negative items take about seven to ten years to fall off on their own. It may take longer to recover from other grievous credit issues, such as bankruptcy or foreclosures. You have a better chance of boosting your credit score over time if you follow the steps below.
How To Build FICO Credit Score Yourself in 7 Steps
If you’re eager to rebuild your credit and start seeing a positive increase in your credit score, follow the steps below consistently:
Pay down your revolving credit
Raise your credit limit
Review your credit report frequently
Dispute inaccuracies in your report
Don’t miss payments
Have a diverse credit mix
Use credit building resources and solutions
Pay Down Your Revolving Credit
The sooner you pay off your balance every month, the better it is for your credit score. Pay off more than the minimum amount as often as you can to significantly reduce your revolving debt because the amount of debt you owe accounts for 30% of your score.
If you can afford it, make multiple monthly payments to erase your balance since paying off debt has the most impact on your score.
You should also reduce your credit utilization by keeping it below 30% every month. The lower the percentage of the credit you use, the greater the impact it will have on raising your score.
Raise Your Credit Limit
The higher your available credit, the lower your credit utilization rate—that is, if you’re not maxing out your credit card every month. To increase your credit limit, you can request an increase on your present credit card or open a new card.
Before you apply for a card, you must be sure that you will only spend what you can afford to pay off. If you decide to open a new credit line, do your research first. Applying for new credit will trigger a hard inquiry on your credit report, which will ding your credit score.
Multiple hard inquiries on your account within a short period could cause further damage. Choose a creditor who will not make a hard inquiry on your account and ensure your score is in excellent standing for a better chance at success.
Review Your Credit Report Frequently
If you’re not frequently going over your credit report, you may miss out on errors that negatively impact your score. Common errors you’ll find on your credit report include duplicated accounts, misreported payments, incorrect balances, and incorrect account status.
You can request your credit report from AnnualCreditReport.com for free and comb through it to spot negative items and derogatory remarks so you can take immediate action.
Dispute Inaccuracies in Your Report
Disputing the inaccuracies on your credit report is the next step after spotting them. Due to your past credit behaviors, your credit report may have some accurate derogatory remarks that may be affecting your score. If this is the case, it’s unnecessary to file a dispute to have them removed—they will naturally fall off your report after some time.
If the errors or remarks are false or outdated, you have the right to request that they be removed. Contact the credit bureaus to find out their dispute process so you can clean up your report. You can also contact the creditor involved to request the removal.
Don’t Miss Payments
Paying your bills on time has the most significant impact on your credit report. Turn on reminders or set up automatic payments to ensure you never miss a payment. If you unavoidably do, stay consistent afterward to ensure you don’t miss more payments.
The impact of a missed payment on your score will eventually diminish as time passes and you maintain good payment habits.
Have a Diverse Credit Mix
Your credit mix makes up 10% of your score—this means having different types of credit in your credit portfolio is good for your score. For instance, if you have two credit cards, one auto loan, one personal loan, and one mortgage, you’ll have a stronger credit mix than someone who has only one type of credit.
There’s no need to apply for different types of credit all at once if you don’t need them, but adding them to your portfolio over time when the need arises will be beneficial for your score.
Use Credit Building Resources and Solutions
Credit building resources can be valuable for improving your score if you’re rebuilding after past mistakes. They educate and guide you on responsible credit management to avoid making more mistakes that may hurt your score.
A credit building platform like CreditStrong also helps you establish a positive credit history, significantly affecting your score. CreditStrong offers three main types of FDIC-insured accounts that help improve your FICO score by 45–86 points.
Each product is designed to help you build your credit and regain your financial confidence after past damage.
Boost Your Credit Score With CreditStrong
CreditStrong is an independent community bank owned by Austin Capital Bank. It is focused on helping you build positive credit and growing your savings through responsible financial habits. A CreditStrong account combines a secured consumer installment loan or a revolving line of credit with a savings account, enabling you to build your score and savings together.
To ensure the utmost transparency, CreditStrong works with the three major credit bureaus in the U.S.—Equifax, Experian, and TransUnion. It reports your on-time payments to the bureaus to build your score and allows you to track your progress with a free monthly FICO score.
CreditStrong is not a credit repair service, and it does not help you remove negative remarks from your credit profile.
CreditStrong Accounts and Key Functions
CreditStrong offers three main account types:
Instal/CS Max—An installment credit builder account that can build up to $1,100 of installment credit
Revolv—An account based on a secured revolving line of credit at 0% utilization that helps to increase the total available credit and lower your overall utilization
MAGNUM—A special installment account designed to build large credit ($2,000 to $30,000 worth of credit)
The table below provides a summary of how these accounts work:
Type of AccountHow It WorksPotential FICO Score IncreaseInstal/CS MaxYou make monthly payments to pay off a secured installment loan and locked savings. The funds are released after you complete your payment.Ideal for beginners looking to build credit and save45 pointsRevolvYou receive a revolving line of credit at 0% utilization and make payments to build your savings and payment historyGreat for people struggling with a high credit card balance or high utilization62 pointsMAGNUMYou make monthly payments toward a large installment loan and locked savings. After completing the payment, you get the funds Excellent for building a substantial installment loan history and unlocking higher credit limits86 points
To improve your score faster with any of these CreditStrong accounts, you must make significant and consistent on-time payments. Your payment history is the largest and most significant factor in determining how strong your credit will be.
Getting Started With CreditStrong
To open a CreditStrong account, take the following steps:
Click here to get started and discover account options
Select a CreditStrong account based on your credit goal:
MAGNUM—$30/year
Revolv—$99/year
Instal—$28/month
Fill in the form with the necessary information to apply for a CreditStrong account
Monitor your progress with the credit dashboard provided
The post How To Improve Your FICO Credit Score in 7 Clear Steps appeared first on Credit Strong.
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