All the Ways You Didn’t Know You Can Improve Your Credit Score
Credit score , which has a surprisingly long history dating back to the 19th century , is primarily used to assess how much risk you pose to lenders. It makes sense: if you have a bad habit of not paying back your loans or not paying off your credit cards, why should anyone trust you with new debts? But credit scores are increasingly being used to evaluate you in a broader sense—credit scores are checked when you try to rent an apartment or car, or when you buy life insurance. And while potential employers can’t actually see your credit score , they can get a modified version of your credit report , which can have a huge impact on your candidacy.
But we live in a world where credit is an absolute must, so even if the impact of your credit score is limited by your finances, it’s huge . If your FICO credit score is below 670, you are in trouble. If it is below 580, you will have a lot of problems. There are several obvious ways to improve this score: review your credit reports and challenge mistakes, reduce your debt and pay off old or past due debts. But there are some less obvious things you can do to improve your credit score.
Rental reporting
Your credit score is your overall financial strength rating, so it makes sense that paying any bill could make a difference here – if the credit bureaus find out about it. If you can get your landlord to sign up with a rental reporting service like Piñata (which is free to use), your rent payments will be reported to all three credit reporting agencies (Experian, TransUnion and Equifax). All three bureaus will take these payments into account, as paying your rent on time and in full will clearly improve your financial management skills. In fact, Piñata claims that using it can raise your score by 60 points, all at the expense of a monthly payment that you have to pay anyway.
Credit enhancement services
The same mechanism that boosts your credit score by reporting rent payments can be extended to other accounts with a credit enhancement service like Experian Boost . These are typically free services that link to your bank account and track utility bills, streaming services, and phone rates, boosting your credit score as you show a history of timely payments with each one.
Request limit
Whenever you apply for a loan, credit card, or other type of new debt, your credit reports are subject to a so-called “hard scrutiny.” Every tough request, no matter the context, will negatively impact your credit score, at least temporarily. This means that if you’re already struggling with debt and a low credit score, you could be caught in an endless loop: you apply for more credit, which lowers your credit score, making it harder to get a loan.
Thus, one strategy for improving your credit score is to simply stop applying for a loan, which goes against the conventional wisdom that using credit responsibly will improve your credit score. The longer you can go without new loans or credit cards in your account, the better your score will be.
Consolidation loan
If you have a lot of debt from various credit cards, banks, or companies, consider a debt consolidation loan . It’s just a loan that covers all your outstanding debts, turning them into one big debt. This has several advantages: you cut your payments down to one, you have less to track, and you can probably get a higher interest rate overall. Plus, every payment you make has a greater impact: as your debt decreases, your debt-to-credit ratio improves, and with it, your credit score.
Increasing the request limit
One of the weirdest ways to improve your credit score is to ask for a higher line of credit from your credit card. This usually just involves calling your credit card issuer and making a request, and this can be done on the spot. The reason this works is that increasing the loan amount improves the debt-to-credit ratio. Because you are now using less available credit, your score goes up. Hopefully, it goes without saying that it’s crucial that you don’t use your new credit – you just want your ratio to improve.
Loan developer loan
If you want to improve your credit score, you can do so by lending yourself money. Called a Credit-Builder Loan , this involves opening an account (usually a certificate of deposit [CD] or savings account) and then paying principal and interest (yes, interest is charged) on it for a fixed period. These payments are reported to the credit bureaus, which improves your credit score. At the end of the term, you receive the invested funds. (The amount of interest you pay and get back will vary – as with any financial product, it’s good to look for the best deal.) This is a low-risk move for both you and the financial institution, so even if your credit score is in the toilet, you should be lucky.
Improving your credit score is important, but it doesn’t have to be difficult. Sometimes just paying the bills is all you need to do as long as someone is paying attention.