Understanding your credit score isn’t a simple task for many. Whether finances just aren’t your strong suit, or you’re intimidated by the number, what’s important to remember is that you’re not alone. In fact, an online survey conducted by CompareCards by LendingTree, which sampled over 1,000 people, discovered that 37% of respondents strongly or somewhat agreed with the prompt, “I have no idea how my credit score is determined.”
It’s important to understand the ins and outs of this financial metric, so let’s take a look at how you can better understand your credit score and raise it if you need to.
Understanding Your Credit Score
First, let’s answer your most burning question: what is your credit score and what does it mean? The credit scoring system was invented by the Fair Isaac Corporation (FICO). There are other systems, but this one is the most widely used by financial institutions.
Your credit score is essentially a ranking on how effectively you have handled your credit in the past (e.g. making credit card or line of credit payments on time, meeting monthly minimums). It acts as a major deciding factor for lenders when they are deciding whether to lend you credit or not. If you have a subprime or poor credit score (669 or lower), you’ll be less likely to get approved for the loans you need.
Determining Your Credit Score
To find out what your credit score is, try any of the following methods:
- Check Your Bank Statement – Many financial institutions have started supplying borrowers’ credit scores on statements, so keep your eyes peeled.
- Purchase Credit Scores – You can pay to get your credit score from major credit bureaus, such as FICO.
- Use a Free Scoring Site – There are certain sites that offer free credit scoring to users, so do your research into some potential options.
Raising Your Credit Score
There are a few different ways you can raise your credit score, some of which include:
- Buying a Tradeline – A tradeline is a record of all activity for any kind of credit that has been extended from a lender to a borrower, such as a credit card. In some cases, you can have an authorized user (AU) on a tradeline; in this situation, the AU would share the credit on the account but has no repayment obligation. You can even buy tradelines (and there’s a wide selection of cheap tradelines available). If you pay someone to become an AU on their tradeline, your credit score could be boosted – as long as the primary owner of the account is responsible with their repayments. Be wary when selecting the tradeline you wish to purchase.
- Making Payments On Time – If you already have a credit card, ensure you’re meeting your monthly minimum payments and that you’re making these payments on time. If you want to simplify things, set up autopay for all your bills – you can just set it and forget it.
- Not Applying for New Accounts Too Often – Try to limit how often you’re applying for new credit accounts. Each individual application can potentially lead to a hard inquiry, which may negatively impact your score.
Having a strong credit score is an important ingredient in financial security and wellbeing. With that in mind, it’s essential to familiarize yourself with the details of credit scoring systems and how to bolster your credit score as needed. Reading this guide was an excellent first step – now all you need to do is put this knowledge into practice. Good luck!
