How To Raise Credit Score - How To Raise Credit Score - Rule #1: Borrow Regularly, Rule #2: Borrow Modestly

Credit score measures how likely a borrower is to pay back money. To raise credit score, borrowers must prove that they are creditworthy. In the same way that a person is less likely to lend money to someone who never pays people back, so too do lenders use a credit score to decide what kind of deal to offer to their clients.

Credit scores run from 300 to 850. Past 760, a consumer will be eligible for the most competitive rates available; under 580, then credit will either be denied or given at astronomic rates. Between these two numbers is the standard—though the best deals seem just out of reach, credit remains attainable.

Sites like annualcreditreport.com and freecreditreport.com provide solid estimates of credit score. Though not as exact as the accountant-crafted, $16 credit score available at MyFico.com, these free estimates are enough to set goals and position oneself in relation to other consumers.

To improve a disastrous credit score or tweak an existing one, these four rules can help (re)build lenders’ faith:

Rule #1: Borrow Regularly

A maxed-out credit card is a scary thing. Sometimes, it scares consumers right out of borrowing—they struggle to pay it off, then cut it in half to keep them from ever using it again. However, when borrowing stops, so too does a credit score—the number freezes at the same terrible point, and lenders will continue to assume the worst.

To raise credit score, borrowing must continue in moderation. Responsible borrowers often find one or two tasks which they handle with their credit card—groceries, for example, or filling up the gas tank. Stores and lenders alike often offer little deals for such modest crediting through cash-back offers, as well. Handling only one type of transaction on a card can also help with budgeting, as a consumer need only look at their credit card statement to know how much they are spending on a certain product.

Rule #2: Borrow Modestly

Even though consumers trying to raise their credit score should continue borrowing regularly, debt should not be allowed to fester in credit cards. Multiple credit cards at 30% or less of their spending limit are much better than one maxed out card.

Some consumers get their first credit report and find that they have managed to get a good or excellent credit score without much thought. Tragically, a few of these initially successful borrowers then go on a borrower’s binge, becoming credit geeks for just long enough to make a few investments which they are not used to paying. A few collection notices later, both the borrower and the lender regret the transaction. Meanwhile, the good credit score plummets to the 500s or lower, and the slow crawl back to good credit begins.

Rule #3: Pay Promptly

Make. Payments. On. Time. This is non-negotiable. Late payments destroy credit.

Developing a system makes routine payments much easier. Whether borrowers designate one hour a week to check finances or automatically debit regular payments from a central account, a stable structure is necessary to sustain good credit.

“I’ll get to it” is the maxim of many failing borrowers. Like a lawn which never gets mowed or a puzzle which never gets completed, “getting to it” is never an effective plan, especially when credit is in trouble.

Rule #4: Budget Responsibly

So simple that it’s too-often ignored, a responsible, flexible budget is the ultimate suggestion for how to raise credit score. To be flexible, a budget needs to handle all existing bills with enough room left over for irregular expenses like car repair, gifts, magazine subscriptions, et cetera. The main downfall of balanced budgets, flexibility is what keeps balances low and payments affordability.

Likewise, caution should be used for any purchase. Getting finances under control can feel so liberating that mid-range purchases become a private reward for good behavior, trimming away savings and making it more likely that a payment will be missed.