How to Raise Your Credit Score 100 Points — 2 Simple Steps

How to Raise Your Credit Score 100 Points — 2 Simple Steps
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Brittney Mayer
By: Brittney Mayer
Posted: December 21, 2017
BadCredit.org's popular "How-To" series is for those who seek to improve, rebuild or better understand their subprime credit rating.

When the air conditioner in my car sprang a leak, it took me nearly two months to pinpoint the source of the problem — during which time I was stuck driving a mobile swamp. No matter how much I aired it out, my poor car seemed to have a consistent humidity level of about 150% until I finally stemmed the flow of water.

As with draining my personal bog, the key to raising your credit score is to determine — and fix — the source of the problem, rather than focusing solely on the symptoms. Thankfully, the process of raising your credit score is remarkably straightforward, consisting of only two simple steps.

Step 1: Determine What’s Dragging Down Your Credit Score

Before you can think about fixing the problem, you have to identify it. When it comes to your credit score, this means obtaining a copy of your three credit reports — one each from Equifax, Experian, and TransUnion. This can be done for free once a year through AnnualCreditReport.com. Otherwise, plus you can get free credit report summaries from many credit score tracking sites and apps, or pay for your credit reports through the individual bureaus.

With your reports in hand, it’s time to go over them with the proverbial fine-toothed comb. Since your credit score is based on the information found in your credit reports, it can be helpful to examine your reports while keeping in mind the factors that contribute to your credit score calculation. The FICO scoring model uses five main factors to calculate your credit score.

Payment History — 35%

The single largest contributor to your credit score is your payment history — which is little surprise, since lenders obviously want to be sure you’ll pay them back. Since the most obvious way to gauge whether someone will repay a future debt is to see if they’ve repaid past ones, any potential creditor is going to take a lot of interest in what your past creditors have to say about your payment behaviors.

Late Payment Categories

Late payments aren’t reported to the credit bureaus until the payment is at least 30 days past due.

Among the negative items that can drop your score, perhaps the most common are delinquent payments and charged-off accounts.

Though most creditors will give you a little leeway, you can technically be charged a late fee for payments made even a few minutes late — and a payment made two or three weeks late will almost definitely garner a late fee.

However, forgetting the credit card bill by a few days or weeks generally won’t have a negative impact on your credit score (or any impact at all). This is because late payments aren’t typically reported to the credit bureaus until they’re at least 30-days late. After your payment becomes 30-days delinquent, it will be reported to the credit bureaus — and the credit damage will begin.

Since payment history is such a large part of your score, the credit damage from even a single delinquent payment can be dozens of points, depending on your initial score. And it only gets worse from there.

If your delinquent payment goes unpaid, the amount of damage it causes to your score will also escalate for every additional 30 days it goes unpaid (60-days late, 90-days late, etc.). Once your payment becomes 150-days late, it will typically be written off by the creditor as a loss and declared a charge off.

Chart of FICO Score Impacts from Negative Accounts

Even a single delinquent payment can drop your FICO score dozens of points.

At this point, you are considered to be defaulted on the debt, and you could be taken to court or have your debt sent to a collection agency. You’ll also suffer severe credit damage that will take up to seven years to come off your credit report. About the only thing worse than a defaulted debt is a bankruptcy discharge, which can take up to 10 years to fall off of your report.

Total Amounts Owed — 30%

The next biggest portion of your credit score calculation is your total amounts owed. This factor looks at how much debt you have, how that debt is distributed, and how much debt you could have if you used all of your available credit. This is where your debt-to-income ratio can come into play; having more debt than your income can reasonably repay will lower your credit score.

When looking at your total debt, scoring models will consider all of the debts you have across all of your credit accounts (mortgage, auto, personal, or school loans, revolving credit lines, etc.), as well as breaking it down by type of debt. For loan products, your amounts owed factor will incorporate the size of the loan, as well as how much you’ve already repaid.

For revolving credit lines, the calculations incorporate your credit utilization rate, which is the ratio of how much revolving debt you have to how much revolving credit you have available. For example, if a credit card has a $350 balance and a total credit limit of $2,500, then the credit utilization rate for that card would be: $350 / $2,500 = 0.14 = 14%.

As with your debt-to-income ratio, having a high utilization rate can imply an inability to repay your debts in a timely fashion, or even indicate more comprehensive financial problems. A high utilization rate can decrease your credit score by dozens of points, and the higher your utilization rate climbs, the more damage it will do to your credit score.

Length of Credit History — 15%

The length of your credit history is the third most important factor in your FICO credit score, for basically the same reasons your payment history is so important. In other words, creditors want to know you can handle debt — and that you’ve been doing it for a while.

Think of it this way: would you rather lend your car to someone who has been driving for a decade — or a teenager fresh out of driver’s ed? The longer your credit history is, the more information creditors can garner about your ability to repay a future debt.

Concurrently, a short credit history tells a lender practically nothing about your ability (or willingness) to repay your debts. Unknown borrowers are risky borrowers in the world of finance, and that increased risk is typically reflected by a decrease in your credit score.

Chart Showing Ideal Average Account Ages

It isn’t solely your oldest account that determines how your credit history is scored, however. The scoring models also look at the age of each of your accounts, namely through your average account age (this is calculated by adding the ages of all of your accounts, then dividing by the total number of accounts). A large number of new accounts can lower your average age, negatively impacting your score.

Mix of Credit Types — 10%

Although not as impactful as other credit scoring factors, your credit mix — how many different types of credit products you have on your report — still have a strong influence on your score. The same way that potential creditors want to see that you can handle long-term debts, they also want to see that you can responsibly handle multiple types of debt.

In general, creditors — and scoring models — like to see a mix of installment products (e.g. loans) and revolving credit lines (e.g. credit cards). That’s not to say you need to run down the credit product checklist and collect them all, but a heterogeneous credit profile may keep you from reaching the highest credit scores.

Number of New Credit Applications — 10%

The final factor in your FICO credit score considers your new accounts and recent credit applications. It’s here that hard inquiries impact your credit score, which can give this factor more influence over your chances for credit approval than its percentage may indicate.

Essentially, many lenders will balk at an applicant with a slew of recent hard credit inquiries, as each application for new credit represents — to other creditors, at least — the desire (and ability, in the case of new accounts) to take on more debt. It can also indicate other financial problems, also a red flag for lenders.

Step 2: Address the Specific Problems

Once you know exactly which items and accounts are causing your credit score problems, you can work on addressing the issues. You can start with the simplest issues to solve for an immediate boost, or work on the items impacting your more important credit scoring factors — payment history and amounts owed — for the most significant credit score increase.

Remember that credit score improvements take time; depending on the problem and your chosen solution, it could take weeks to months to see positive credit score results. Be patient and stay diligent.

Improving Your Payment History

Since your payment history is the most influential credit score factor, it makes sense to start by dealing with any items negatively affecting your payment history. The very first thing to do is address any errors, outdated information, or unsubstantiated items.

For example, if a creditor incorrectly reported a payment as late that was really made on time, you can dispute the late payment with the credit bureaus and creditor.
This means filing a separate dispute with each credit bureau reporting the incorrect information, as well as providing any available evidence. While you can do this yourself, many consumers prefer to hire an experienced credit repair company like our expert-rated picks below.

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If all of the negative items marring your payment history are accurate and legitimate, your next step is to pay off any outstanding delinquencies. Anything less than 150-days delinquent can be paid off to avoid default, which will save your credit score from even more damage.

Accounts that have been charged off by a creditor should also be paid; while this won’t undo all of the credit damage the charge off caused, it will look better to creditors than an unpaid charge off. Depending on what happened to your charged off debt, you may need to track down the current owner of that debt (which will be listed on your credit report).

Other than paying off what you can, the only real way to fix your payment history is to wait out the remaining negative items. Most negative items can only remain on your credit report for up to seven years, after which time they should fall off of your report automatically. If outdated items fail to fall off, dispute them with the credit bureaus still reporting the information.

Chart Showing Time of Negative Items of Credit Report

On the plus side, most credit scoring models, FICO included, consider older information to be less important. This means that negative items will have less impact on your credit score as they age, particularly if they’re replaced with more recent, positive payment history. Be sure to pay all of your debts on time and as agreed to rebuild a good payment history and boost your credit score.

Improving Your Total Amounts Owed

When it comes to your total amounts owed, the easiest, fastest way to improve your credit score is typically to pay down your existing debt. Attack high-interest revolving credit lines first, then the lower-interest credit lines. In general, paying down long-term debt, such as mortgage and auto loans, will have less positive credit score impact unless you fall behind or your debt-to-income ratio gets too high.

The fastest credit score boost will likely come from paying down credit card debt, particularly if you have cards with high utilization rates. If you can’t afford to pay down the debt directly, one way to improve your utilization rates (though not your total debt) may be to consolidate your credit card debt with a personal loan. Personal loan providers, like our top picks below, can offer loans up to $35,000 for bad credit.

   
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While transferring your credit card debt to an installment loan obviously won’t reduce your overall debt, it basically turns your revolving debt into installment debt, which affects your credit score in a different way. Since your credit cards are effectively paid off by the loan, your utilization rates will fall, increasing your credit score as soon as your new balances are reported to the bureaus (typically when your statement drops).

Ideally, the best consolidation loans are also obtained at a much lower interest rate. With a lower interest rate, you can reduce the fees associated with the debt, making it easier to pay off and helping you become debt-free sooner.

One thing to note is that you shouldn’t start closing credit cards willy-nilly after you pay off the balance. Closing a credit card can raise your overall utilization rate by reducing your available credit. You’re usually better off leaving your credit card accounts open when possible.

The exception to this rule is for credit cards that charge high annual fees; in this case, you’ll need to decide if the annual fee is worth any benefits the card offers. For example, if the card offers significant purchase rewards on purchases you make frequently, it may pay for its own annual fee.

Improving Your Credit Mix

While you likely won’t see tremendous credit score growth simply from improving your credit mix, you can potentially add a few points to your score by increasing the diversity of your credit profile. This can be especially true for those with very limited profiles, such as recent graduates who only have students loans on their credit reports.

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Keep in mind that each new credit application will result in a hard credit inquiry, which can impact your new accounts factor. Many unsecured subprime credit cards will also tend to charge high interest rates, so be sure to maintain low — or $0 — balances to avoid high interest fees (which is a good idea for a happy utilization rate, anyway).

Other than ensuring you have at least one revolving credit line in good standing, the best thing to do for your credit mix will likely be to simply live life. As you need financing over time, perhaps for a new car or your own home, other types of credit products will naturally be added to your profile, diversifying your credit profile along the way.

Improving Your Credit History Length

The length of your credit history is perhaps the most difficult credit score factor to directly improve, as most of the positive growth here will come from time. To jump-start this factor, you can establish credit early, such as with one of the best student credit cards or specifically designed credit cards for people with no credit.

Once your credit history is established, keep your accounts in good standing to ensure they report positive payment histories. The only active thing you can do to secure your credit history length at this point is to limit the number of new accounts you open — each new account will lower your average account age — and to avoid closing old accounts (though the latter can have more impact on your utilization).

In contrast to negative items and accounts on your credit report, accounts that have no negative information are not required by law to be removed from your report. That being said, the credit bureaus themselves will typically remove a (neutral) closed account 10 years from the date of closure. While this is a long time, losing a particularly old account can impact your average account age and overall credit history length.

Improving Your Number of New Credit Applications

As with your credit history length, there’s likely little you can do to affect the number of hard inquiries and new accounts currently showing up on your credit report except wait for them to expire. In general, hard credit inquiries should fall off of your credit report within two years (though, like other negative items, their impact will decrease as they age).

That being said, you may be able to dispute hard credit inquiries made without your consent, such as those that are the result of identity theft or fraud. To do so, you’ll need to file a dispute for each inquiry with each credit bureau that reports the fraudulent item — or hire a credit repair professional to do it for you.

Going forward, limit your new credit inquiries — and new credit accounts — as much as possible. While individual hard inquiries have minimal impact on your credit by themselves, they can do significant damage in large numbers. Spread out applications for new credit cards and other revolving credit lines.

FICO Scores look on your credit report for mortgage, auto, and student loan inquiries older than 30 days…Your scores will consider inquiries that fall in a typical shopping period as just one inquiry. For FICO Scores calculated from older versions of the scoring formula, this shopping period is any 14-day span. For FICO Scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. — myFICO.com

If you need to rate shop for a new auto, home, or student loan, you can limit the number of hard inquiries that count against your credit score by being sure to get your quotes within the rate-shopping window. Depending on the scoring model, this can be anywhere from two weeks to 45 days.

Better Credit May Be Two Steps Away

After months of driving a bog-on-wheels, I (read: my mechanic) finally got to the bottom of the issue — or the side, rather, as that was the source of my air conditioner’s leak. When the flow of water was cut off at the source, my car eventually dried, returning to its proper swamp-free state (though the carpets were never quite the same).

Just the same, once you’ve found the source of your low credit score, you can work to fix the problem once and for all. With that done, you can expect to see not only a better score, but a better credit experience all around. Consumers with good credit scores have the best odds of approval, are offered the best interest rates, and often pay the lowest fees for their financing.