Americans, on a whole, actually have pretty good credit scores. Nearly six in 10 Americans have what’s considered a “good” credit score or better, according to credit bureau Experian.
That’s a 703 FICO score, in case you’re wondering. FICO’s credit scores range from 300 and 850.
That’s good news, since your credit score is essential when you’re considering taking out a mortgage, opening a credit card, renting an apartment and even some job opportunities. But there’s still about 12% of Americans who have a score of less than 550, which is considered fair to poor.
If you’re one of those that do have a lower score, there are ways you can improve your credit, says Tiffany Aliche, personal finance expert and founder of The Budgetnista.
Keep in mind that raising your score typically doesn’t happen overnight. Experts say it is possible to raise your score in one to two months, but it may take longer depending on why your score is low in the first place.
Here’s a look at three easy things Aliche says you can do to get started.
1. Automate your bill pay
The number-one thing you can do to raise your credit score is to improve and maintain your payment history. “That means paying what you owe and paying when you owe,” Aliche says.
An easy way to do that is by automating your payment. Set up bill pay with your bank so you never miss a payment. “When you automate it, you don’t have to think about it— set it and semi-forget it,” she recommends.
Your payment history makes up the biggest portion of how your score is calculated, about 35%, Aliche says. So keeping on top of paying off your bills is crucial. But it’s worth noting that not all bills count toward your credit score. Typically, the accounts that can help or hurt your score include credit cards, store retail cards, car loans and mortgages, according to credit scoring services company FICO. (That’s not to say you shouldn’t pay all your bills on time.)
2. Piggyback on good credit habits
Another easy win when improving your credit: become an authorized user. This is an especially good tip if you’re just starting out and may not have a strong score yet.
If you have a parent or family member with good credit, you can ask them to add you as an authorized user to their credit card. “I’ve got great credit,” Aliche says. “Baby sister Lisa, not so much.”
To help her out, Aliche added her sister as an authorized user. But Aliche did not allow her sister to get a card, so there was no risk that she might overspend. “What it meant was that when I use my card properly, it looked like we used the card properly,” Aliche says. “So she got to inherit good financial behavior.”
Although it can be a helpful strategy, fewer than 1 out of 5 people have been added as authorized users, according to Credit Sesame. The financial site found that getting added as an authorized user helped those with bad credit score of under 550 improve their score by 10% in just a month.
3. Use your credit card to “pay off pennies”
If you’re letting your cards collect dust that may mean you’re not overspending, but it could lead to problems. If you don’t use your credit card, an issuer may deem the account inactive and shut it down. That could lower your overall available credit and increase your utilization rate.
Credit utilization, as it’s called, is the ratio of money you have on your credit cards to the total amount of credit you have available. And it plays a big factor in calculating credit risk and therefore credit scores. When you use more than 30% of your available credit, your credit score is typically going to be lower because it signals to credit card companies that there’s a greater risk you may not pay it all off, or that it may take a while to do so.
To combat this, Aliche recommends paying off your pennies. By that, she means if you have a credit card you don’t use that often and it has a zero balance, use it to pay a very inexpensive bill.
For example, if you have a recurring expense that’s $25 or $30, maybe a gym membership, put it on your credit card and then pay it off. You can, of course, automate your payment so you don’t forget about it. The key is to make sure the payoff happens after you receive the statement via e-mail or mail and before the due date. That way, you keep the card active and paid off, which helps your utilization rate and your overall score.
“You do those three things and your credit score will start jump, jump, jump, jump jumping,” Aliche says.
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