Raising Your Credit Score

savings emergency fund

One of my favorite things about being a personal finance blogger is getting to discover and read some great books. This week I want to share some wonderful stories and experiences I read from Clark Howard’s new book, Living Large for the Long Haul.

In it, he shares the stories of over 50 different people from all socio-economic backgrounds who have improved their finances even through The Great Recession.

Raising His Credit Score 300 Points

One of my favorite stories in Living Large is Anthony Earl, who managed to get his credit score by 300 points while earning less than $30,000. Anthony had a horrendous credit score in the very low 500s. After listening to a Clark Howard show on the radio, he decided enough was enough. He came up with a debt payment plan that attacked the debts with the highest interest rates first. He also made many small payments to make sure he avoided late fees.

He also took the time to look at raising his credit score by lowering his credit utilization. All told, he raised his score from 512 to 805 and paid off his debts. He now uses that money to increase his 401(k) contributions and build a emergency fund.

Improving Your Credit Score

Are you looking to raise your credit score? The first step is knowing what’s on your credit reports. If you’re looking for a free option on checking your credit reports, you can use Annual Credit Report. You’re entitled to review all 3 of your reports for free. This is a completely free site – no trial and no membership sign-up.

I want to mention, though, while you can get your credit reports through Annual Credit Report, you can not get your credit score.

finding your fico credit score

You can use free option like Credit Sesame to get a credit score using data from Experian updated monthly. The free membership (no credit card required) allows you to see your credit score and you can also get suggestions on ways you can save money on your finances, like mortgages or credit cards. I wrote a review on Credit Sesame if you’re interested in how it works.

While you are making sure your report is accurate, you can take steps to get your score up.  FICO has shared a few of the factors that they taken into account and how they weigh them which gives you a way to maximize your score in the least amount of time.

  • 35% Payment History
  • 30% Amount Owed
  • 15% Length of Credit History
  • 10% New Credit
  • 10% Types of Credit

Source: MyFico

How Paying Off Debt Increases Your Credit Score

Looking at the chart, you see how powerful paying down debt can be when it comes to your credit score.

  • Debt Payment History: The biggest factor in determining (and improving) your credit score is your debt payment history (35%). Do you pay all your credit card bill and car loan payments on time? Having a  late or missed payment on your credit report  can have a big negative impact on your score. Useonline bill pay to automate your debts and eliminate late payments.
  • Debt to income: Your credit score also consider how much debt you have with your income. This is why eliminating even one small debt this month can be helpful.
  • Amount of available credit: Believe it or not, approximately 30%  of your credit score is based on your available credit. If maxed out or closed to maxed out on your credit cards, you need to quickly get into financial shape.

Raising Your Credit Score and Getting Rid of Debt

I’d love to hear from you about raising your credit score by paying down debt. How many of you are paying down debt? How is it going so far? What has been the biggest challenge?

VINE & LACE

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