The coronavirus pandemic has taken a toll on many Americans' financial health but surprisingly, consumer credit scores are trending higher. The average FICO credit rating has become 711 • up five points from the average score one year ago.
5 ways to increase your credit score
If you've seen your FICO scores climb, these tips can help you keep enhancing your credit.
- Consolidate debts
- Continue to pay bills on time
- Increase credit limits
- Don't close credit cards
- Be selective in trying to get new credit
1. Consolidate debts
While People's credit reports are up, debt levels take presctiption the decline. If you're centered on paying off credit card, such as charge cards, that could help with enhancing your score.
With rates of interest near historic lows, now's an opportune time for you to consider getting a personal loan for debt consolidation.
If you need to gauge your potential savings on interest, you can visit PayPasser to check rates from multiple lenders and use a loan calculator to estimate monthly loan payments.
"Paying down multiple debts having a single, larger loan with a lower interest rate and maybe longer repayment period can reduce the payment per month amount," said Rod Griffin, senior director consumer education and advocacy at Experian. "Consequently, you might be better able to manage payments and ensure they're on time, protecting your credit report."
And the more your balances decline, the more you could improve your credit rating utilization ratio. This refers back to the number of your available credit limits you're using at any given time.
2. Still pay bills on time
FICO scores are composed of 5 factors:
- Payment history
- Credit Utilization
- Credit history length
- New credit
- Credit mix
The most significant of these is payment history. A credit rating that's characterized by on-time payments could mean a greater credit score.
If you've got a strong good reputation for paying off charge cards on time but are missing a good credit mix or new credit, consider opening a new charge card. You can browse various types of charge cards using PayPasser's free online tools. Get started doing your card research today.
According to FICO, just 7.3% of Americans had a 90+ day past due missed payment over the last 6 months, which is almost a 1% decline in the pre-pandemic era. If you've been making payments on time already, then stick to that strategy.
If you think you might have difficulty making payments, speak to your lenders before you're late, said Griffin. "They've tools and resources under the current circumstances that may help you stay on time or delay payments before you go through the rough financial stretch."
3. Increase credit limits
After payment history, credit utilization may be the second-most essential aspect affecting FICO scores. Paying down revolving debt can help improve your credit utilization ratio but that's only some of the way to do it. Requesting a credit limit increase for just one or even more of your credit cards is another strategy.
Find out whether requesting a borrowing limit increase will trigger a tough inquiry versus a soft credit assessment. Hard inquiries can display on your credit history and take off points out of your credit, while a soft pull doesn't.
Avoid the temptation to create new purchases that would increase your total balance. If you're increasing credit limits but simultaneously increasing your balances, that may result in negative, instead of positive, score changes.
4. Don't close credit cards
Closing charge cards down might appear to be the logical choice if you're not with them, especially if you're paying a yearly fee. But doing so can negatively affect your credit utilization ratio if it reduces your general borrowing limit.
If you've got a card you aren't by using their comes with an annual fee, you may be in a position to have your account downgraded to a different card. This really is something you could ask your card provider about.
You can check out PayPasser to explore different credit card offers to find one that's right for you.
5. Be selective in applying for new credit
Applying for brand new charge cards, a personal loan or an installment loan can reduce your credit score if a hard inquiry arrives at your credit score. For that reason, it's important to limit how frequently you apply for loans or charge cards when you're centered on enhancing your credit.
If you do have to make an application for credit, look around first. Remember, you are able to compare credit cards and private loan rates at PayPasser.com without impacting your credit ratings.
Credit scoring models don't include loans in forbearance
If you've student education loans or a mortgage that's in forbearance under federal CARES Act guidelines those won't count inside your credit rating calculations, Griffin said. But consider how you'll manage them when forbearance ends to maintain your credit score intact.
Refinancing, for example, could help you secure lower interest rates and streamline monthly obligations. Using an online tool like PayPasser can help you compare student loan refinancing rates in one location. Even though you're there, you may also compare mortgage refinance rates and lenders.