How to Improve Your Credit Score
Your credit score and credit reports can affect how much you pay in interest for cars, homes, and other items. Landlords and employers can scrutinize your score. So keeping it high is crucial.
There are three credit bureaus: Experian, Equifax, and TransUnion. They each collect financial data and generate two pieces of information about you: your credit SCORE and your credit REPORT.
You are entitled to one free report annually free each of the three credit bureaus, but you usually must pay for your score. Below, I show you how you can find your credit score for FREE, which is 100% legitimate (I’ve used it myself).
NOTE: DON’T FALL FOR THE ADS THAT PROMISE YOU A FREE CREDIT SCORE. Most of the time, they try to sell you a credit monitoring service.
Here’s how to improve your credit score:
- Go to AnnualCreditReport.com (this is the ONLY 100% free credit reporting service authorized under Federal law and is the hub for all three bureaus: Experian, Equifax, and TransUnion)
- Check just ONE of your reports from one of the bureaus. You will do this once each four months, so create a schedule for each year and mark it in a planner: January (check Experian), May (check Equifax), and September (check TransUnion).
- Go to CreditKarma.com and get your free credit score. If you want to find out your score from all three bureaus, you can pay for them at annualcreditreport.com.
- CreditKarma also shows you how well you “graded” each category that makes up your score. Review these areas and look at their suggestions for improving your score.
- Keep your credit card balances to between 25-30% of your total available credit. The number on your statement as the ending balance is what they care about (not the fluctuations during the month where you may charge a big purchase but pay it off with cash before the end of the billing cycle).
- Do not close old credit cards. Have no more than three credit cards total. I suggest getting a Visa/Mastercard and one other (Discover, Amex, etc.). This will give you the maximum flexibility in case a business doesn’t accept Discover, for example.
- Keep all your long-term debts within your income range, say 30-40%. This gives you a cushion against future job loss or business decline.
- Freeze your credit. You can freeze your credit with each of the bureaus so that no company can look at your report – other than the institutions you already do business with. This limits a thief from trying to open an account.