5 Tips to Help Raise Your Credit Score

There are many benefits to having a good credit score. For example, you can often get approved for loans, not to mention getting better terms and interest rates on loans. Furthermore, it can help you pass a pre-employment credit check that a growing number of companies require as a condition of employment. Likewise, a bad credit rating can make it much tougher to qualify for new lines of credit and loans.

Therefore, if your goal is to raise your credit score, here are five important strategies that you should consider.

1. Check your credit reports for free

The first step to raising your credit rating is to identify potential areas for improvement. One way to do that is to check your credit reports from each of the three big credit agencies: 

• Equifax 

• Experian 

• TransUnion 

You should carefully comb over your credit reports for possible mistakes like missing accounts, incorrect reports of late or missing payments, and even signs of identity theft. If you do find any errors, you can dispute them by contacting the credit agency and asking them to fix the mistake.

You are entitled to receive each of your credit reports once a year for free. 

2. Enroll in auto-pay to help improve your payment history

Your payment history accounts for nearly 35 percent of your credit rating, according to data from the website my FICO. Therefore, any derogatory marks - like missed payments - can remain on your credit report for as long as seven years. However, they typically have less of a negative impact as time goes on.

Nonetheless, you want to avoid accidental late payments, because they can hurt your score in the near term. That's why if you have had problems with making on-time payments in the past, you should enroll in auto-pay to pay your bills and loan payments to help boost your credit history by improving your on-time payment history.

3. Reduce your credit utilization ratio

Your credit utilization ratio is another key factor that helps determine your credit score.

For example, let's say that you have a credit card with a $5,000 credit limit. If you owe $1,000 on the card, then your utilization ratio would be 20 percent for that account. Now, let's say that you are carrying a balance of $4,500 on that card. Then, your utilization rate would be 90 percent - nearly three times as high as the credit agencies recommend.

Consumers with high credit card balances tend to have high credit utilization ratios, which often hurts their credit rating. Therefore, if you are carrying a lot of high-interest debt, reducing your credit utilization rate by paying down that debt can help boost your credit score.

4. Consider opening a secured credit card

If you don't have a good credit history, then it can be harder for you to qualify for an unsecured credit card. Unfortunately, without credit lines, it can be difficult to raise your credit score.

However, one option is to open a secured credit card that you secure by paying a lump sum of money upfront. For instance, you might have to put down $500 upfront, and then be able to use the line of credit up to a certain limit.

A secured credit card can help you boost your credit rating by giving you a credit line, as well as by establishing (or improving) your on-time payment history.

5. Leave older credit accounts open

Finally, it can be tempting to close old credit accounts, especially if you aren't really using them. However, leaving older credit accounts open can actually help improve your credit score. That's because credit agencies take the average age of your credit accounts into consideration when calculating your score. Having unused credit available also lowers your utilization ratio.

In short, raising your credit score begins with reviewing your free credit reports to ensure their accuracy. If you have had trouble making payments on time in the past, consider enrolling in auto-pay to improve your on-time payment history. Reducing your utilization ratio can also help boost your credit rating. If you are unable to qualify for a traditional unsecured credit card, see if you can open a secured card to establish a new line of credit. Also, don't close older accounts just because you don't use them that much.

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