Are you trying to finance a large purchase, but you’re afraid your credit score is too low? There are many ways you can improve your credit score over time.
What Makes up Your Credit Score?
Your credit score, or your FICO score, is made up of five main things:
- Length of your credit history: About 15% of your credit score is dependent on how long you’ve had credit lines open and how long it’s been since you’ve used each of those lines.
- Payment history: The largest percentage of your credit score, 35%, is your payment history. This includes late payments, credit limits, interest fees, and any debt you’ve acquired. If you make late payments often, your score will decrease.
- How much you owe: This makes up 30% of your FICO score. Your score will be affected if how much you owe is close to your credit limit. Maxing out credit cards also affects your score.
- New credit: New credit cards and accounts make up 10% of your credit score. If you apply for credit cards often, you might see a change in your overall score.
- Mix of credit use: This refers to the kinds of credit you use, including auto and home loans, student loans, and credit cards, and makes up 10% of your FICO score.
What Can Make Your Credit Score Go Up?
There’s no single way to make your credit score go up instantly—but there are steps you can take to improve your score over time.
Here are some credit score tips you can follow to improve your credit score:
Avoid Credit Repair Companies
If you’re trying to rebuild your bad credit, our first piece of advice is not to trust credit repair companies. Though these businesses might help you, it’s best to face this journey alone or with a trusted source, as your credit is personal and private.
Track Your Credit Score
You should also check your credit score regularly to see what raises and lowers it. Tracking your progress will help you understand which financial decisions affect your score, and you’ll spot any inaccuracies or mistakes.
There are also free credit monitoring sites that monitor your credit for suspicious activity. Credit card fraud lowers your score instantly, so it’s important to catch any unauthorized transactions.
Become an Authorized User
If you’re new to credit and don’t meet the requirements for a credit card yet, you can become an authorized user on someone else’s card, like a parent or other family member.
Being an authorized user means you have a credit card in your name, but someone else makes the payments. If the account owner completes payments on time, your credit score increases.
Develop a Plan
Create a plan to pay off any existing credit card debt you have. First, figure out how much money you owe on your credit cards. Depending on your financial situation, you can pay off the largest or smallest balances first—whatever works best for your current budget.
Lastly, it’s important to remain consistent. When you create your plan to raise your score—follow it! The best way to get out of credit card debt is to stay on top of it. Remember to be proactive instead of reactive.
Can a Credit Card Improve Your Credit Score?
It depends. If you already have a bad FICO score, opening another line of credit could potentially damage your score even more.
On the other hand, if you open a new line of credit and make payments on time, your score will improve over time. Getting a new card also improves your credit mix, which includes all the lines of credit you have open.
Do I Need a Good Credit Score To Qualify for Financing?
Having a good score makes it easier to qualify for financing for large purchases. If your credit score is above 650, most loan providers accept your application.
At Financial Solution, we close 20% more loan applications than other providers, on average. We look at other factors besides your credit score like how quickly you make payments and your credit mix, so don’t feel discouraged if you have a low credit score.
If you want to finance a big purchase, like a boat or RV, contact Finance Solution to get approved for a loan today.
