A solid credit score is a key to many things we may want in life—a home, a car, a job and more. It's also essential to get approved for a mortgage or rental agreement, an auto loan, a job and more.
Your credit score rates how good you are at handling bills and debt, as a way to show lenders how responsible you will be at paying back a loan. The score can range from 300 to 850 and is based on factors such as whether you’ve paid bills on time, how much debt you have and how much experience you have at using credit.
Without a good credit score, you may not be approved for a loan, or you’ll have to pay a higher interest rate, which means you’ll have to spend more money on interest over the life of the loan. Some landlords and employers check your credit score, too, so you wouldn’t want a low score to keep you from getting a job or apartment you want.
Having a good credit score of at least 700 will help you get a lower interest rate, and save you thousands of dollars in the long run. A score closer to 800 is considered excellent and will not only secure low-interest rates on loans, but it can also help you qualify for credit cards with 0% interest rates and cash-back rewards. It can even help secure a lower rate on car insurance.
Whether you want to raise your credit score from “good” or “very good” to “excellent,” or if your credit score has taken a hit and you need to bring it up from a “poor” or “fair” rate category, the good news is it isn’t complicated. Consider these five strategies for boosting your credit score—and keeping it there.
Get a Free Credit Report
Check your score so you know where you stand. Go to AnnualCreditReport.com and get a free credit report from the three biggest three national credit bureaus, Equifax, Experian and TransUnion. These companies track your credit histories. Federal law protects your right to get a free copy of your credit report every 12 months from each of these credit reporting companies.
You can also check and monitor your credit score through Fifth Third Identity Alert®. This will also help you keep tabs on any suspicious activity that may negatively impact your score.
Fix Errors and Pay Debts
Check your credit report for errors, fraud or unpaid debts sent to collections agencies. Review your basic personal information, such as your name, address, social security number, phone number, financial accounts and loans.
Look for things such as whether closed accounts are listed as open if you’re reported as the owner of the account, but you only are an authorized user. Check if one debt is listed multiple times, or if payments on accounts are reported incorrectly as having been late.
Report any errors quickly to the credit reporting company and the creditor that issued wrong information. If you find information that you believe does not belong to you or is not correct, contact the business that issued the account or the credit reporting company that issued the report. Credit reporting companies are required to investigate any substantive issues you question. Pay outstanding debts listed on your report. You may want to consider getting a personal loan or line of credit.
Pay Bills on Time
Establish that you consistently pay your bills on time. This is the most important factor in your score. Improve your track record for payments on auto loans, student loans, rent, mortgage, utilities, phone service and other bills.
Leverage tech tools to help you stay on top of it. Set up automatic payments linked right to your bank account. Use budgeting apps to make it easy to remember to make payments and keep you motivated toward your goal of building up your credit score.
Or, simply set up reminders on digital calendars so you pay bills on time.
Keep Your Credit Use in Check
Using a low percentage of the credit available to you will go a long way in boosting your score. Your credit utilization ratio compares how much credit you’re using with how much you have available. This is the second most important factor in your score.
Aim to keep your total credit utilization rate below 30%. You can see how you’re doing by dividing your credit limit by your revolving balance. For instance, if your credit limit is $15,000, you should keep your revolving balance below $5,000.
Keeping a budget and tracking monthly spending is a great way to be sure you stay within that limit.
Know When to Close or Open Credit Cards
If you already have at least one credit card, avoid opening more. When you apply for a credit card, it creates a hard inquiry on your credit report and that can bring down your score.
If you have credit cards that you don’t use, keeping them open can help your score, because that can help keep your credit utilization ratio low. You may want to cancel unused cards that come with annual fees, however, keep in mind that if you cancel cards, it can increase that credit utilization ratio and bring down your score.
It's important to act sooner rather than later if you want to increase your credit score because the steps you take today can take months to be reflected in a higher score. Remember that ultimately, the goal of improving your credit score is to help you lead your best life, whether it’s consolidating debt to put you on the path to financial freedom, buying a home, investing in your home with a remodel, covering an emergency expense, planning a wedding or making a major purchase.
Find out about how you can pursue those dreams with the help of our personal loans and lines of credit options.