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Ways To Improve Your Credit Score in 2021: It’s Not as Difficult as You Think

What are your credit score goals? Do you want to buy a house, have better interest rates on loans, or simply be able to make payments without wondering if it will go through?

man holding his credit card

Many Americans find themselves in a situation where they are denied a loan because of their credit score. If not flat out denied, they may find themselves paying interest at twice the posted rate due to a low score.

Your credit score is the best measure of your financial health, yet so many people do not know or understand their FICO score.
If your goal is to improve your credit, there are a few simple steps you can take to move the needle on your score.

What is a Credit Score?

The FICO score is a quantifiable way for lenders to assess your risk as a borrower. It is used by 90 of the top 100 largest US lending institutions as part of their approval process.


Credit scores are given largely based on your payment history, debt burden, and the length of credit history. They also factor in what type of credit you have open, as well as any recent searches for credit.

Why Credit Scores Matter

While you may not need a great credit score right now, when you’re ready to apply for a credit card, buy a house, or even lease a car you will realize how important this number really is.

That’s because your credit score represents your likelihood to pay back a debt, and lenders like to know that lending you their cash is a safe bet.  The less risky you are, the more likely you are to get a loan. 

The best credit scores will also buy you the lowest rates and other perks like qualifying for free insurance on balances and credit cards that earn you points.

What’s Your Score?

To begin improving your credit, you should first understand where you are starting from.  Each legal US resident has the right to request a free copy of their credit report from the three reporting agencies – Equifax, Experian, and Transunion.

It’s recommended that you check each of these sites yearly so that you can keep an eye on your score.  Mistakes can happen, so pay close attention to any activity on your report, and dispute anything that doesn’t look right.    The reporting agencies publish information on how to read your report, and how to fix any errors.

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If you are a victim of fraud, you are far more likely to catch the issue quickly and begin rectifying it if you are pulling your credit reports yearly.

What’s a Good Credit Card Score?

FICO scores range from 300 to 850, with anything above 670 being considered “good.”  67% of Americans fall into the “good” range with their FICO score, and that’s generally considered the target you should be aiming for.

  • 781-850 – Excellent
  • 661-780 – Good
  • 601-660 – Fair
  • 500-600 – Poor
  • 300-499 – Very Poor

If your score is above 781, don’t strive for perfection.  A score of 850 is practically impossible to achieve, and does not provide any consequential difference verses a score in the high 700s.

Increase Your Score

If your FICO number is between 300 and 579, lending companies consider your credit score “poor” or worse, and you are less likely to be considered for a loan.  This may be because you have limited credit history, or you have defaulted on a loan in the past. 

Thankfully there are some simple measures you can take to increase your score.  Though these steps may not be quick fixes, you can generally begin to improve your credit within three to six months.

Raise Your Credit Limit

If you already have a credit card or line of credit available to you, one of the fastest ways to improve your credit score is to raise your limit.  Credit scores are calculated using your ratio of used credit to available credit.  Increasing your available credit will immediately raise your score.

When you make the change with your lender, be sure to not fall into the trap of spending that available cash, otherwise your score will plummet even harder.

Limit “Hard Pulls”

Lenders monitor how often you are applying for new credit cards and loans. These inquiries, otherwise known as hard pulls, take place as part of your loan application process, and can hurt your score if they’re happening too often.

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Before you apply for new credit, shop around prior to starting the application process.  Only apply for loans or credit cards that you know in advance that there’s a good chance you qualify for. 

If you have a large purchase coming up, like a car or a house, resist the urge to apply for new credit until the deal has gone through.

It’s important to note that you will never be penalized for obtaining your own credit report yearly.

Get a Secured Credit Card

Improve Your Credit Score
Photo by Negative Space on Pexels.com

Secured Credit Cards are the best way to improve a credit score when no other loans are available.  You will make a deposit with the lender (try starting with $500) that will guarantee your credit limit, and they will offer you a card in return. 

These cards generally have a high interest rate if you carry a balance, so make sure that you are only using the card for what you can pay off.  Try to find a secured credit card with a low fee if possible.

If you use the card regularly and pay your balances, you will eventually receive your cash back and the lender will move you to an unsecured card.  Unsecured cards carry perks like better interest rates, no annual fees, and in some cases reward points.

Diversify Your Debt Load

Lenders prefer if your debt is mixed between revolving debt and installment loans.  Credit cards are revolving debt, meaning you can continually add to the balance.  Installment loans have a set term, like a cellphone payment or car loan. 

The more variety you have in your loan types, the more favourably you will be treated by lenders.

Diligence Pays Off

With a few simple steps, you will find that you can easily improve your FICO score.  Pay attention to your reports, and make smart financial decisions.  These steps will pay off quicker than you think, and you will be on your way to a life of better credit.

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