What Is A Credit Score?
First, let’s look at how a credit score is determined. There are a lot of factors that make up your total score but the biggest are:
- On Time Payments
- Credit Used
- Credit History
- Credit Mix
- New Credit
1) On Time Payments
When someone is considering giving you a loan, the biggest thing that they are concerned about is whether or not you will pay them back. A strong history of doing so will therefore increase your credit rating.
If you have a 30 day, or worse yet a 60 day late payment on your report, your score will drop off dramatically. You can improve this by paying your bills on time moving forward, but it will take some time.
2) Credit Used
The amount of credit you are using or credit utilization is the second biggest factor. If you are using all or almost all of the credit that is available to you, it looks like you are overextended. It could be a sign that you are in financial trouble or are having a hard time managing your finances.
In general, it is a good idea to have your credit utilization under 30 percent with the highest gains coming from getting it under 10 percent. So, if you have 2000 dollars in credit you need 600 dollars or less in usage. If you have high credit usage, stop using the cards and start making higher than the minimum payment. Eventually, you will get it down to the level that you need to be.
3) Credit History
The age of your oldest account has an impact on your credit score as well. All things being equal, a person with 20 years of positive history is a better risk than someone with 5 years of positive history.
There is nothing that you can do to speed up the aging of your credit file. All that you can do is wait and try not to close any old accounts.
4) Credit Mix
Lenders also want to see that you can handle a different mix of credit accounts. In general, they want to see revolving accounts and installment loans.
If you do not have a good mix of accounts, your credit score will not be as high as possible. This is the reason that credit ratings often drop when people pay off their college loans. The mix of credit drops. Try to have a good mix of different accounts.
5) New Credit
A big red flag for a lender is when a person opens many accounts at once. It could mean that they are in financial trouble. Too many new accounts and too may inquiries can have a negative impact on your score.
Increasing Your Credit Score Instantly
As you can see from the list above, a credit rating is made up of a lot of factors and they are not easy to change quickly. That is until now of course. Now you can boost your credit score instantly by as much as 20 points. You can do this with the help of Experian who has recognized one of the problems of credit scoring.
The Problem With Credit Ratings
For many, managing their credit profiles is easy enough. Open a few accounts, keep them payed off and their score stays pretty good. But what if you do not have access to some types of credit or what if you do not want to open accounts just to boost your score?
Experian has stepped in with Experian Boost, a way to increase your credit score instantly by just showing them that you pay your other bills on time.
How Does Experian Boost Work?
You may not have credit accounts but you probably are paying phone and utility bills. If you are paying these bills on time and regularly, why should they not count as part of your credit score? Experian thinks that they should and that is why they introduced Experian Boost.
To take advantage of the program, sign up for a free Experian account. Once you have done that, you will need to give Experian your bank account information. Don’t worry, they know everything else about you, this is not a security risk.
Once Experian has your bank information, they will scan your payments and look for those issued to utility companies They then take this bill payment history and give you a boost on your credit score.
The boost could be as little as a few points or it could be over 20 points. The amount of boost depend on the amount of accounts that you have and the length of payment history that they can see.
Benefits Of Getting Your Experian Boost
The obvious benefit is that you get an almost instant boost to your credit rating. If you are seeking new credit, a 20 point boost can make a huge difference. If your credit is low, it can be the difference between getting a yes or a no. If your credit is average, the extra 20 points can get you a much lower interest rate, saving you hundreds of dollars in interest.
As a side benefit, Experian also serves as a free credit monitoring service like Credit Karma or Credit Sesame. It can help you stay current on your credit status and will alert you about changes.
Credit ratings are not easy to increase and until now, they have not always been fair. Experian Boost helps to level the playing field for those who do not have access to traditional credit. It is something that everyone should take advantage of.