How to Raise Your Credit Score

How the Credit Score Model Works
The credit scoring model was created as a means to evaluate a consumer’s likelihood of repaying debts in a timely manner. Credit scores range from 350 on the low end up to a high score of 850. As you can imagine, the higher the score, the better it will be for you when qualifying for anything we discussed above.
The simple fact is that the higher your credit score, the lower your interest rate and the easier it will be for you to qualify. A lower interest rate can translate into a substantial savings over the life of the loan when you consider the interest and finance charges that you will pay.
If you’re feeling a little dismayed about your current credit score, understanding the statistics might offer a little perspective. Believe it or not, only one out of 1,300 people in the United States maintain a credit score above 800. So the odds are strong that you fall below an 800. If so, there are steps you can take to improve upon your current credit score.
How to Raise Your Credit Score
So, what can you do eliminate the negative impact certain derogatory marks have taken on your credit?

• If you don’t have a credit card, you need one. Maintaining a balance on a credit card will help establish positive credit over time by reporting to the major credit bureaus.
• The follow up to that is DO NOT max out any of your credit cards. While you need to maintain a balance, you must keep your credit balances to less than 30% of your credit limits to improve your credit score. (This means if you have a $5,000 limit your balance should stay below $1,500.)
• If you are in over your head due to credit card debt, begin by paying down those bills. Outstanding credit balances make up 30% of your overall credit score. A high balance can and will have a negative impact on your score. Those high monthly payments will also impact your ability to qualify for a mortgage.
• If you have no credit or past credit issues, apply for a secured credit card. If you are unable to get approved for a standard credit card, the secured version might be your only option. This works similar to a debit card where you will deposit money into an account with a lender and then your credit limit is typically equal to the deposit.

In the meantime, don’t be discouraged with a low score. You can build or reestablish your credit score over time with some work.
The great news is this: If you are able to increase your credit score from a 620 to a 720 or above, you could potentially save $601 per month on mortgage payments or $7,214 per year! That’s an overall savings of $216,000 over the life of the 30−year loan!
That should be inspiration enough to get started improving your credit score today!