5 Hacks to Boost Your Credit Score

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Unless you're Dave Ramsey and don't have a credit score, you know the importance of having a high score. This three-figure score determines if you pay more or less money, and can even determine if you get that dream job as employers can pull your credit score.

Not taking the appropriate actions during this unusual period of our life being restricted from going out and seeing friends, it is a time you can take advantage of by fixing your credit.

Below are 5 hacks you will discover to help you boost up your credit score.

1. Dispute or Report Missing Accounts

2. Setup Bills for Autopay

3. Reduce Your Debt Utilization

4. Prove You're Responsible with a Credit Mix

5. Protect Your Credit

Before we dive in, you must check your credit report and verify its accuracy. In 2012 the Federal Trade Commission (FTC) issued a study per Congressional mandate requiring the FTC to examine consumer errors within the three leading credit reporting agencies (Experian, Equifax, TransUnion).

In 2015 a follow-up study was performed, and as to many surprised consumers, nearly 20% of these consumers had identified errors. 1 It highlights the importance of reviewing and checking for accuracy at least twice per year. Another factor to consider identity theft. Over 41 million consumers had their identity stolen and many were victims of credit card fraud according to a study conducted by Bankrate.com. Now that you understand the importance of checking your credit report, let's dive into learning how you can address and improve your credit score.

1. Dispute or Report Missing Accounts

Time for some investigation work. Print out or save on your computer the most recent credit report you can find. Look at each account and verify if this account is yours and if any late payments have been reported.

Should you find any errors or need items to be corrected, you must contact the company or institution first and address the matter. Another option is to mail the inquiry, but send it via certified mail with return receipt. You'll want proof of your inquiry to handle this matter.

If the issue has been corrected/resolved with the company, yet, it still reflects negatively on your credit report, then contact the credit reporting agencies. Be sure to keep and maintain copies of any disputes and records of such frivolous activity. According to the FTC, both the company and person are responsible for correcting the information. Follow these FTC steps take action further.

2. Setup Bills for Autopay

Autopay is important because as humans we make mistakes. We forget. Your payment history makes up about 35% of your FICO credit score. While it seems obvious to make payments on time, this can be a costly mistake. Your payment history takes time to build up a credit score, so the sooner you can address it, the sooner you can see results.

Another benefit to having autopay is the avoidance in late fees or overdraft charges. Banks will not admit this, but they love overdraft fees. It's free money for them.

Overdraft fees collected by banks in 2016 totaled over $30 billion. Not thousands, not millions, but BILLIONS! That's insane and reflects that people are not managing their money appropriately. While autopay can help to alleviate such overdrafts, there are pros and cons to this topic. Pros of Autopay It avoids late payments. When using autopay for your bills, making online payments will decrease the amount of missed payments while ensuring payments are made on time. Just think about the cost of an overdraft charge or missed payment.

It pushes your bank account even further into the red as financial services will charge an amount referred to as Overdraft Charges, and these can range from $20-$40. A missed payment could be reflected on your credit score, depending on when the next payment is made.

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It avoids late fees. When making auto payments, you avoid receiving late charges that companies love to tack on. These fees, similar to overdraft charges, can range from $20-$50 in some cases. Also, at risk, your interest rate. Some companies will increase your rates for missed payments to receive their missed interest payment. It avoids the added postage expense. How inconvenient is it today to have to run over to the Post Office only to find two people working the counter and a line of 12 people waiting. Avoid the traffic, the waiting, and additional expense by paying online. It saves time. Another pro to using autopay is saving time. It's the sole reason why this tool exists. Fast is better right? Not always, but you see the big picture. It's shorter in so many aspects, from check writing, calculating, driving to bank or post office, etc. Pay it online, and you're done.

Credit Karma: Check your credit score for FREE (affiliate)

Cons of Autopay With every benefit comes a weakness or risk. For autopay, it can have negative impacts. I have listed several of these below for you.

You may lose oversight of your bills. It has become a regular staple to pay bills on payday immediately. We post, and we forget about it. The reason why banks generated over $30 billion in 2016 from overdraft charges is that we neglect to sit down and review our bills. We are offered "paperless billing," which is a great concept, as long as, you still spend the time to manage your accounts.

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You may unintentionally not see unexpected fees. To go along with neglecting bills, just directly paying the bill online, you miss out on an opportunity to see if false charges were billed to you. If these charges were billed and you still paid it, then you gave away free money. This is another concept that people miss out on when it comes to their credit report. By not looking closely, they may perhaps not see charges that they could have gotten removed, which would help reduce their debt faster, which increases their credit utilization, i.e., Higher Score. Nothing is more satisfying than to see the bills go away, and your credit score rocket up. If you aren't managing your bills correctly, then you could potentially be tossing away your money.

3. Reduce Debt Utilization

Also known as Credit Utilization, one of the most common and best ways for any consumer to raise his or her credit score is through paying down debt. Regarding credit cards, the utilization rate is how often and how much money is being generated onto the card. When the card is charged, for example, on an item for $500 with a credit limit of $1,000, that utilization has increased from 0% to 50%. The higher the number, the riskier one is perceived to be when compared to having a lower utilization rate. Generally, strive to keep this percentage under 10% every month.

If you have a $1,000 credit limit, try to keep the balance paid off every month and never charge more than $100 total.

Why is this important? Because your credit utilization rate makes up about 30 percent of your score.

Being that this utilization figure makes up more than a quarter of your score, combining this with your payment history accounts for about 60% of your score. These are the two areas to really address and put most of your effort.  

4. Prove You're Responsible with a Credit Mix

Not all credit is created equal. In my early thirties, I struggled getting my credit score above 760. No matter how clean and responsible my credit usage was, it never surpassed this score until I obtained a mortgage. It was then the score jumped to 801. Why is that?

Credit Karma: Check your credit score for FREE (affiliate)

Your credit score considers different types of credit. With FICO considering your score based on a blended mix of debt, a variety would entail credit cards, retail accounts, installment loans, financial services accounts, and mortgage loans. While you may not need each one, having a blended mix and reflecting subject on-time payments are crucial and the key to having a better credit score. According to myFICO, "Credit mix determines 10% of a FICO score." You must also remember not to close any accounts if possible. Closing credit accounts will not disappear on your credit report but rather reflect "CLOSED" or something along with this repetition.

I bring this up because you if currently have credit card bills past due, credit card companies have the option to close the account without your approval. This will lower your score, and you must still pay the balance. For many companies, once the account is closed and again reflects a balance, these accounts cannot be reopened.  

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5. Protect Your Credit

It's important to note that repairing bad credit or improving your credit score is a bit like losing weight or going on a diet. It takes time, and there is no quick way to fix a credit score. It takes time and effort. Being responsible and striving to improve your score will make the difference in you saving a lot of money over the years.

Protect it with your life and work to improve it consistently.

Final Thoughts

You must strive to boost your score and to do that, understand how it is calculated. Your score is the key to lenders learning how responsible you are and what type of character you are. Everyone makes mistakes, but you can start taking control of it. Be disciplined, motivated, and stay focused on the tools and resources outlined above. These hacks will start your journey in improving credit score.

As of the writing of this article, below are a few ways to obtain a free credit report and/or credit score.

Credit Karma: Check your credit score for FREE

Annual Credit Report: Get your FREE annual credit reports

TransUnion: FREE credit report from TransUnion

Experian: FREE credit report and credit score. (Note: May have limitations)

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