Raising your credit score by 100 points can mean a better mortgage interest rate or a great credit card offer, however, it’s not going to happen overnight. That is because, your credit score takes time to be built.
A low credit score can only mean bad interest rates, or worse, a loan rejection.
If you find yourself getting rejected due to a bad credit score, do not despair just yest. We’ll go over ways to improve your credit score by 100 points.
Here are some ways you can raise your credit score by 100 points in 3 months or less.
Related: Get Approved for a Home Loan Here
What goes into your credit score?
Before we learn how to raise your credit score by 100 points, it makes sense to know what goes into a credit score. In other what makes a good credit score.
Credit Sesame (click here to read my reviews of Credit Sesame) outlines what factors into a credit score calculation.
Your Payment history (35%): Your payment history accounts for 35% of your credit score. It is the most important factor in your total credit score. So, if you want to raise your credit score by 200 points, avoid late or missed payments.
Credit utilization (30%). The second most important aspect of your credit score is your credit usage. It accounts for 30% of your credit score. Credit utilization is how much of your credit limit you’re using versus how much you have in your balance. So keeping your credit card balance under 30% can help boost your credit score. For example, if your credit card has a credit limit of $5000. You have used $2500 of that credit. Then your credit utilization is 50%. To keep it below 30%, you should only use $1500 of that credit.
Credit age (15%): Your credit age accounts for 15% of your credit score; it is the third most important factor in computing your total credit score. That means how long you have had the credit. Lenders like to see a longer credit age.
Account mix (10%): Lenders like to see a good mix of credits that include, credit cards, student loans, car loans, and home loans, etc. It accounts for 10% of your credit score.
Credit Inquiry (10%): Keep your credit inquiry to a minimum. Although it only accounts for 10% of your credit score, a high credit inquiry can lower your credit score. Anytime you apply for a loan or a credit card or when a landlord checks your credit, it can cause a small dip in your credit score. So multiple credit inquiries can hurt your credit score rather than improving it.
Now let’s take a look of lender considers a good score and bad score
Know what your credit score means
Your credit score represents your credit history. Before offering you a loan or new credit, lenders rely on your score to see how risky you are or responsible you are with managing money .
With a good credit score, they are more inclined to do business with you by offering you competitive rates. Now, you see how raising your credit score by 100 points can be financially rewarding.
The three credit bureau (Experian, Equifax, Transunion) use a numbering system from 300 to 850, from bad to excellent. Your credit score will fall somewhere within the following range:
Credit score range: from lowest to highest credit score
Excellent Credit Score. The highest credit score you can get is 850. But being in the 720 to 850 credit score range means you have an excellent credit score. An excellent credit score means that your payment history, your credit card utilization, your credit age, and inquiry are at a perfect level. Having an excellent credit score open several doors to the best loan rates, credit card offers, etc..
Good Credit Score (680 to 720). If you are in this credit score range, you can expect good deals from your lender. According to Credit Sesame, if you have a good credit score, several perks are available when applying for credit. However, that does not mean you should stop paying your bills on time and start applying for new credit. It means that you to keep doing what you’re doing and try to raise your credit by adding 30 or even 100 points .
Fair Credit Score (640 to 680). With this credit score range, you still have a chance of getting approved for credit, but your interest rate might not be competitive. You’re a little bit better off than those with a bad or poor credit score. You can start applying for loans and credit cards. But you still need to try to improve your credit score to 750 at the very least, so that more options can become available to you.
Poor Credit score (300 to 640). This is where you really need to raise your credit score by 200 points. A poor or bad credit score ranges from 300 to 640. Having a bad score can really lower your chance to get approved for any credit. You may be able to get a home loan, like an FHA loan (where the minimum credit score is 580), but that’s about it. Getting anything from applying for a credit card to getting a mortgage, Credit Sesame explains, will be very difficult. And if you do get approved for credit, you’ll get hit with very high interest rates.
How to raise your credit score by 100 points?
1. Check your existing debts
To raise your credit score to at least 100 points or more, check your existing debts and see which ones you should pay off first. Pay off the smaller debt first, and move on to the next one.
To do this, go to CreditSesame.com to get a free credit report. Your credit report will list your debts.
2. Use a personal loan
Using a personal loan to pay off your debts is an excellent way to boost your credit score quickly.
Not only that, a personal loan adds a little diversity to your overall credit portfolio.
3. Keep tabs on your credit commitment
You have to keep tabs on your credit commitment if you’re looking to raise your credit score by 100 points. That means you have to start paying your bills on time. You have to review your credit report regularly. If you have any mistakes or inaccuracies, file a credit dispute immediately. Do not waste time and contact the credit bureaus right away.
4. Set up automatic payments
You should not rely on your memory to keep track of your bills due date. Automate your payments so your bills can be paid on time can help you in your journey to raise your credit score by 100 points.
You credit providers should allow you set up an automatic payment so that money can be taken automatically from your checking account when your bills are due.
Since payment history makes up 35% of your credit score, paying on time is extremely important in your quest of raising your credit score to 100 points.
5. Don’t close your credit cards
Don’t close your credit cards even if you’ve paid them off.
Once you’ve paid off all of your credit card debts, a logic thing to do would be to close them. But that can hurt you more than it helps you. Keeping unused credit card accounts will ensure that the amount of credit available to you is large enough, therefore keeping your credit utilization ratio low.
Remember, a low credit utilization rate means a better credit score.
6. Check your credit score regularly
If you truly want to raise your credit score with 100 points, you should start checking your credit report regularly. Doing so will allow you to keep yourself updated on your file and avoid any errors.
Monitoring your credit report is free of charge. So why not take advantage of it. To get a copy of your credit report or to start monitoring it, go to CreditSesame.com.
In sum, you will not be able to raise your credit score overnight. Adding 100 points or 200 points to your credit score will take time. Raising your credit score is just losing weight. You won’t lose 20 pounds after a single day. So just as losing weight, your credit score will improve by keeping a pattern of these positive habits mentioned above.
- How to Raise Your Credit Score to 850
- 3 Things Mortgage Lenders Hate On Your Credit Report
- When Should You Pay Your Credit Card Bills
- Why Did My credit Score Drop?
Work with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). So, find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.