How to Legitimately Improve Your Credit Score Without Getting Scammed

So, your credit score isn't great.

Guess what? You're not alone.

A whopping third of Americans have a credit score below 600.

For reference, that's over 100 million people.

Do you feel a little better? Good.

Unfortunately, we live in a society where your credit score matters.

Like, really matters.

It's used to rent an apartment, buy and lease a car, get auto insurance, sign up for utilities, apply for credit cards, apply for mortgages and more.

If you're struggling with a low credit score, I'm sure you know all of this already.

You're probably asking yourself the question, “How do I improve my credit score?”

We have good news.

There are many steps you can take to get your credit standing back to a good place.

But first, a little background.

Great question!

In regular people speak, a credit score is a numerical evaluation of a person's credit history.

It's essentially a grade on the big test determining how responsible you are with money.
But not everything goes into a credit score.

The key players that matter are loans, lines of credit or other large financial obligations.

A credit score doesn't look at your spending —

Well, not all of it at least. It looks at your debt.

It's a pretty general term though.

Besides the two big ones like FICO and Vantage where you can check your score, there are hundreds more that lenders use to evaluate applications.

And because each different credit score rating has a different way of calculating your score, there's a lot.

Here's the FICO score breakdown to give you an idea:

The higher the percentage, the more weight it carries on your credit score.

Let's explore what goes into each part.

Depending on the rating, payment history can account for as much as 40 percent of your score.

If you have a bad payment history but perfect or near perfect everything else, your credit will still struggle.

The factors that determine your credit ratings are the number of credit accounts and loans you've paid on time, as well as the number of accounts for which you're behind on payments.

Also, if you've filed for bankruptcy, have past due accounts sent to collections or are more than 30 days behind on a line of credit or loan determines your score.

Even the amount of days you're past due on delinquent accounts or the dollar amount you owe on delinquent accounts and/or accounts in collections.

Since a credit score essentially “scores” your financial responsibility, this kind of makes sense.

The higher the percentage, the more weight it carries on your credit score.

Let's explore what goes into each part.

Depending on the rating, payment history can account for as much as 40 percent of your score.

If you have a bad payment history but perfect or near perfect everything else, your credit will still struggle.

The factors that determine your credit ratings are the number of credit accounts and loans you've paid on time, as well as the number of accounts for which you're behind on payments.

Also, if you've filed for bankruptcy, have past due accounts sent to collections or are more than 30 days behind on a line of credit or loan determines your score.

Even the amount of days you're past due on delinquent accounts or the dollar amount you owe on delinquent accounts and/or accounts in collections.

Since a credit score essentially “scores” your financial responsibility, this kind of makes sense.

This is the next biggest factor of your credit, weighing in at 30 percent of your score.

This indicates whether your spending habits reflect financial responsibility or if you're likely to experience financial problems in the future.

This part of your credit score is based on the following:

• The number of accounts you owe on
• Your credit utilization ratio
• How much of your credit card has been used

With each bullet point, the lower the number, the better.

Depending on the credit score, these are grouped together or separated for scoring.

As a general rule of thumb, the longer you've been using credit, the better.

The credit companies like it because it can better predict risk, and it's good for you because if you slip up, it won't hit your score as much.

What you should know about this part of the credit score is that it's not how long you've been using credit, but the length of time your oldest account has been open.

Similar to a stock portfolio, this category looks at the variety of credit you've taken out through the years.

This includes everything from credit cards and retail lines of credit to auto loans, mortgages and personal loans.

Generally, lenders like to see different credit types because it shows you're a responsible and well-rounded borrower.

So, you've made mistakes in the past but are working hard to improve your credit now.

Although this is the smallest part of the scoring categories, it's still important.

Sometimes lenders will be a little more forgiving if this part of your history shows you're on your best behavior and have been for a while.

This part includes how many loans and lines of credit you've recently opened and the number of times you've applied for credit in the last 12 months--also known as hard inquiries.

It also includes how long it's been since your last credit inquiry and the length of time that has passed since you opened your last account.

If you've opened many new accounts in the past year, this could be an indication to lenders that you're in desperate need of additional dollars.

Another great question. Keep them coming!

A FICO score is one of the many credit reporting agencies lenders use that to...drumroll...check your credit!

When we say one of many, we mean it.

There are hundreds of credit reporting agencies that different lenders can use to pull your information.

Luckily, there are three main national credit bureaus used by almost everyone.

It's a bit more complicated than that.

Essentially, the different types of credit scores will have different scoring methods.

They aren't too unlike one another, but both weigh the parts of your credit score differently.

This can leave a large gap in your scores, depending on what your credit history looks like.

For the FICO (Fair Isaac Corporation) score, the scale typically ranges from 300 to 850.

Most credit scores fall between 600 and 750. If your credit score is above 800, you're a near perfect person with near perfect credit. Congratulations!

As we said before, the higher the score, the more your score shows that you make good financial decisions. It's also the more likely a lender will give you credit or a loan.

If your score falls in the “fair” category, you may still get that loan or credit line, but your interest will be more because you're slightly more of a risk.

Does that make sense?

Here's a breakdown of what the American population's FICO scores look like.

This is where things might get a little confusing.

Luckily, we've broken it down to help you understand.

Each type of credit reporting weighs the various parts of your credit score differently.

For FICO Score factors, these are the ones that matter the most:

• Biggest influence: payment history
• Very influential: total debt and amounts owed
• Moderately influential: credit history age
• Least influential: new credit and types of credit

For VantageScore, this is how they break it down:

• Biggest influence: payment history
• Very influential: credit history age and percentage of credit card limit used
• Moderately influential: total balance of debt
• Least influential: recent credit actions, hard inquiries, and available credit

Now, onto the fun part —

Now that we've covered what a credit score is, how it's weighed and the factors that go into determining it, you probably have a good idea of what it takes to better it.

The good news is credit scores do get better with responsible spending and lending.

The other side of that story is it'll just take time to build it up again.

Depending on the different categories of your credit score, the information stays for a certain amount of time.

If it's something like a hard inquiry, you can expect to see a negative impact on your account for up to 12 months after it happened.

If we're talking about some missed payments on a credit card, they stay on your account for up to seven years.

Plus, the longer a negative remark is on your credit score, the less impact it has over time.

That's probably not what you wanted to hear, BUT there are things you can do to help it right now.

"A budget is telling your money where to go instead of wondering where it went."

~ Dave Ramsey

It's time to tell your money where it's supposed to go.

Here's what we recommend:

Easier said than done, right?

We know debt can seem like a big, fat elephant hanging over your head just waiting to drop.

The best you can do is the best you can do. Even if it's only a few more bucks every month toward your debt.

Plus, those few bucks will add up over time and become hundreds or even thousands of dollars.

Whether it's a mortgage, credit card or car loan, you should always pay a little more than your minimum payment.

If you consider how much that adds up over time, you'll end up saving yourself a lot of money in interest rates.

This is a big one.

It doesn't matter what you have to do: set up payment reminders, schedule monthly deductions and make sure your bills get paid on time.

Life is busy and chaotic, and it's easy to forget one here and there.

But forgetting one or two or four can wreak some serious havoc on your credit rating. It's just not worth it!

If there is a debt you are struggling to pay, contact the lender and see if there's a way they can bring down or pause your payments for a set amount of time.

Most of the time, they understand (we're all human!) and will grant you leniency for a certain amount of months or a set amount of money.

It's always worth a try.

If your lender doesn't temporarily help you out with payments, you can always try to borrow a small sum of money to help cover your bills until you get back on your feet.

A word to the wise: do not borrow more than you can pay back.

The interest rates for the loan can be 100x worse than what you'd pay for a credit card or even a car payment.

Because nearly everything is technologically driven these days, there's bound to be occasional errors.

When it comes to credit reports, often that's much of the time.

One of the best ways you can improve your credit score is by staying on top of your report.

If something doesn't look right or if a mistake has been made by a lender, you can dispute it.

It usually only takes a couple days to get a response, and that response usually is — 

"Yeah, we messed up. We're removing it."

It's a nifty little trick of the trade that can get your credit score soaring in no time.

There are some hits that your credit score may take that will be there for a long while though.

If you have missed payments on your report from a big lender like a bank or credit card company, you can expect them to stay for up to seven years.

No matter how much you dispute it, they just will not budge.

Happy disputing!

If you have a credit card you've paid off, delete the number from your memory, cut it up and leave it open.

The fact your card is at a zero balance not only helps the age of your credit history but also balances out the amounts you owe on other credit cards.

The more credit you have open = a lower debt ratio.

This may seem small but can make a big impact down the road.

Remember, credit scores take time to bounce back.

If you play your cards right, your credit score will soar faster than you can say "zoom."

It can be very tempting to charge to your credit cards as you pay them off.

Whatever the incentive might be: more miles, points or that jet ski you always wanted, remember the impact this charging has on your credit score.

If you have the cash to pay it off again, just put more money towards your credit card debt.

The same goes for car payments, mortgages or other types of loans.

Don't go back to paying minimum amounts! We know you can get there someday.

"The most important thing you can do if you find yourself in a hole is to stop digging."

~ Warren Buffet 

Well said, Mr. Billionaire. Very well said indeed.

This is often a final resort for people struggling with debt.

The fact of the matter is, bankruptcy laws were made in favor of consumers. It's really easy to take on more financial responsibility than you can handle.

The agencies know that.

Whereas this may have a negative impact on your credit score, if yours is already in bad shape because of your debt, the bankruptcy probably won't do much more damage.

For many people, this can be the only option for starting with a clean slate.

It does, however, come at a price. 

If you're seriously considering declaring, it's best to speak with an attorney that specializes in bankruptcy law to go through the pros and cons of the process.

Secured credit cards, also known as credit-building credit cards, are a great option for people who are looking to (you guessed it) build credit.

Essentially how they work is you put down a security deposit, and that is the amount of money you are able to spend with the card.

You are not borrowing anything from a lender.

The money is your own and, therefore, your responsibility.

If you are consistent about putting money on the card, using it and so on, it will reflect positively on your credit report.

Plus, you can have multiple secured credit cards, so the odds work in your favor.

Most of the major credit card companies offer a secured credit card option.

Like with most things credit, we don't have a hard answer. Honestly, it varies quite a bit!

The first part of repairing credit is to dispute any errors or inaccurate information within your report.

Many times, there's misinformation about closed accounts or unpaid balances.

You can file a dispute with websites like Credit Karma, and they will have a response within a couple days, sometimes a couple of weeks.

Usually, the error will be removed from your report without hesitation.

Some people see their credit scores increase 100 points when they do this.

There is often a lot of old information lingering on credit reports that are doing more harm than good.

But like we said before; unfortunately there are instances when negative remarks are there to stay.

That is, at least for a little while. Everything recycles every so many years.

We can't say this enough: the best way to improve your credit score is to pay down your debt and make your payments on time.

As the bad notations become less impactful as time goes on, the good you're doing by being financially responsible will soon outweigh it.

You know what that means!

A good credit score is coming your way.

Identity theft is a very serious issue that affects thousands of Americans every year.

One of the most important advantages to constantly checking your credit report is that you can catch fraudulent activity immediately.

Sometimes, if you catch it too late, it can take a very long time for your score to bounce back.

Identity theft and credit fraud are very sensitive issues that are not taken lightly by the bureaus, lenders or banks.

The most common signs of identity theft are:

• Checks or transactions are out of order on your bank statement
• Unreasonable denial of credit
• Unexpected charges on your account
• Unfamiliar accounts or inaccurate information on your credit report
• Bank freezes your account with zero warning
• You stop receiving mail in the post
• Receiving credit cards without applying for them
• Debt collectors contacting you about things you didn't buy

Do you ever get credit card statements in the mail and don't open them up?

How about phone calls you just let go straight to voicemail.

These days, our banks and credit cards do a great job of helping protect us from theft and fraud.

But there are a lot of extra steps we can take to make sure we have every bit of our backs covered.

Think of the tragedy it would be if you worked hard over the years to improve your credit score only to have someone knock it down again.

Yeah, no fun.

Check out the following tips we have for staying protected.

This is one of the easiest and fastest ways you can catch sketchy behavior on your credit report.

Usually, if something is up, one of your lenders will let you know immediately and freeze your accounts.

In order to stay proactive, try and check your credit report once per week to make sure everything is kosher.

Most credit cards will include credit monitoring as part of its package. If you get emails, set them at priority.

If you don't have a credit card, you can sign up for credit monitoring and fraud protection through one of the credit reporting bureaus like Experian or Equifax.

There are people trying to scam you out of money every day.

Luckily, our phones have gotten pretty good at blocking bad numbers, and spam filters on email are better than ever.

In the case that someone gets through, make sure you're staying smart.

If you suspect that it may be fraudulent, you can hang up and call the number back.

 Dropped phone calls happen ALL the time.

Most of the time they will call and say they are collecting an unpaid amount on a utility bill or something along those lines.

Remember, your utility company would never ask for certain personal information over the phone, and you can tell them that it makes you uncomfortable.

If all else fails, hang up and do a quick Google search on the phone number.

If it's a scam, it will most likely show up amongst tons of website dedicated to tracking people who do this.

It's never a bad idea to be extra careful about what you're buying and where or whom you're buying it from when it comes to the internet.

From grocery shopping to plane tickets and vacation packages, most of what we do these days is online. And some of these purchases aren't something to scoff at.

Before you put in those debit card digits, make sure you're purchasing from a safe, secure and reputable website.

Often times, your browser will warn you if something seems a little off.

Your best bet for staying safe in those situations is to close out and try again.

Sometimes mirrored websites of popular or well-visited ones are created to deceive people into giving their financial information.

It's a crazy world we're living in!

We just have to be smart about it.

The first step in learning how to improve credit scores is wanting to improve your credit score.

The fact that you're researching means you care about it and understand it has a very large impact on how we move through our lives.

Financial responsibility is not easy, and it may not be that much fun, but it is the best way you can guarantee a good quality of life.

Buying a beautiful home, owning the car you always wanted, or taking a trip somewhere fun and exotic.

These are all things that are possible for anyone's future.

They certainly are for yours too.

It may be easy to hurt your credit.

It may be difficult to build it back up. But once you're at the top again, so long as you stay on top, you'll be looking good for many credit report checks to come.

Remember, over 100 million Americans are in the same exact position as you.

Credit scores are a big part of life. But they don't need to be the biggest part of your life.