3 Signs You’re Serious About Raising Your Credit Score
When you have bad credit or no credit, building your score back up can be a daunting task.
So, if you’re like many people, you put it off. Until next month. Until next year. Until the next time you apply for a loan, and you’re reminded just how much your low score is costing you.
The most maddening part? You know you’re a responsible borrower, but it’s so darn hard to prove it.
Building your score to where you want it will take time and effort. But it starts with you getting serious about making some changes.
Here’s how to know that you’re on the right path:
You Know Your Credit Score, And You Know What You Want It To Be
Do you know your credit score? If not, your first step is to look it up. Some people worry that checking their score will cause it to go down, but this isn’t the case. There are many services that allow you to check your score using what is known as a “soft inquiry,” which is different from the “hard inquiry” lenders would perform when they’re pulling your credit.
So, where does your score fall? FICO credit scores range from 300 to 850. Here’s a look at the breakdown:
• Below 580 – Poor
• 580-669 – Fair
• 670-739 – Good
• 740-799 – Very Good
• Over 800 – Exceptional
There is no universal score that determines whether you’ll qualify for a loan. You’ll typically need a score of at least 620 to obtain a mortgage, although most home buyers tend to fall in the mid-700s. Remember that a higher score will usually mean you’ll get a lower interest rate.
You Understand What Goes Into Your FICO Score
OK, so you know your credit score. But how did you get that score? Let’s quickly review the factors that go into your FICO score:
Payment history (35%) – You want to build up a track record of making on-time payments.
Amounts owed/Credit utilization (30%) – You don’t want to use too much of your available credit. It’s recommended that you should aim to use only 30% or less of your total available revolving credit.
Length of credit history (15%) – An established credit history typically has a positive impact on your credit score, and the age of your credit accounts will be factored into your score.
Credit mix (10%) – You want to show lenders that you can manage various types of credit. For example, it can help to have installment credit like an auto loan and revolving credit such as a credit card.
New credit (10%) – Opening too many new lines of credit in a short period of time can ding your credit score and make lenders wary.
You Start Using A Credit-Building Tool Designed To Help Raise Your Score
Lessons are over. It’s time to act!
If you’re serious about improving your credit score, one tool that can be especially effective is a credit-builder loan. Two popular options are CreditStrong’s Instal and Revolv products.
Credit-builder loans work like other types of loans, with one main exception. Instead of you receiving money upfront, your loan is kept in a bank account. As you make monthly payments on the loan, those payments get reported to all three credit bureaus, helping to build your credit history. Once the loan is paid off, you receive your savings back minus any interest and fees. You’re essentially making savings deposits that count as on-time credit payments.
While there are several credit-building products out there, we highlight CreditStrong’s tools for two main reasons: First, when used properly, these tools can positively impact 90% of the factors that make up your FICO score. Second, CreditStrong is a division of Austin Capital Bank, so its accounts are FDIC-insured, and your information stays safe.
Let’s Take A Closer Look At The Instal And Revolv Credit-Building Tools:
This option is ideal if you need to add installment credit to your credit mix. When you open an Instal account, you choose a term length and monthly payment amount that fits your budget. Your loan gets placed in a secure bank account. As you make on-time monthly payments, they get reported to all three credit bureaus. At the end of the term, you receive the full principle amount of the loan. The credit activity can give you a boost in key FICO factors including payment history, amount of credit, credit mix and length of credit history. Keep in mind, Instal has monthly payments that can’t be skipped.
This option is best if you need to add revolving credit to your mix. When you open a Revolv account, a $500 revolving credit account is reported to the credit bureaus. You’ll select a savings amount to add to the account each month, and that amount becomes your monthly payment. After you make three consecutive, on-time monthly payments of $20 or more, CreditStrong will increase your credit limit by $100 (up to a maximum of $1,000), which helps lower your credit utilization. This account can boost your payment history, credit utilization, length of credit history and credit mix. If you need to skip a month or more with Revolv, you can change your payment amount or set it to $0 each month.
These tools also come with free monthly access to your FICO score, so you can closely monitor your progress toward your credit score goals.
Building your credit is crucial and it doesn’t have to be difficult. It’s important to start work on this as soon as possible. Some of the most important steps are to know your score, define what you want your score to be, know what goes into your score and start building toward that goal. A credit-building tool will supercharge your progress because you’re tapping into the experts’ resources.
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