My Credit Score is Low. What Do I Do Now?

Ways to Improve Your Credit Score

BIG Ideas:

  • Credit scores are numerical calculations that predict the likelihood that you’ll pay back loans on time.
  • The factors that influence your score include your history of borrowing and paying back loans and the amount of credit you use that’s available to you.
  • Paying bills on time, keeping balances low, and not applying for new credit can help boost your credit score.

Credit scores are to borrowing what your grades are to college life – the better they are, the greater the opportunity you have for success. That being said, it’s not uncommon for students or recent grads with limited budgets to have scores that aren’t as high as they’d like them to be.

If you find yourself in that category, be assured, there are ways to build your credit score. But before we get into that, it’s critical to understand what a credit score is and the impact it can have on your life.

Quick Credit Score Facts

  • Your credit score is a three-digit number used to determine how likely you are to make on-time payments.
  • It’s a numerical summary of your credit report assigned by each of the three credit bureaus – Equifax, Experian, and TransUnion.
  • A good credit score can help you qualify for a loan, rent an apartment, and get lower rates on loans that could save you thousands of dollars in your lifetime.
  • Your credit score is based on several factors, including your payment history, your credit utilization (the amount of credit available that you use), the average age of your accounts, the types of credit you have, and inquiries made on your behalf, like when you apply for new credit and a lender checks your credit.

Smart Ways to Improve Your Credit Score

Now that you know what a credit score is, let’s get down to the most important part – ways you can raise it:

  1. Pay your bills on time. Every time. To make sure you don’t forget, sign up for automatic payments.
  2. Use credit wisely. Avoid using credit cards to pay for things you can’t afford. Instead, set a monthly budget for your spending and stick to it.
  3. Pay off credit card balances. Credit card debt won’t just cost you a lot of money in interest; it will also increase your credit utilization ratio and raise your credit score.
  4. Keep old accounts open. They can improve your credit score since they can show that you have a history of paying on time and increase your credit history.
  5. Try not to apply for new credit. Each time you apply, a hard inquiry gets made on your credit, which will lower your score. Ouch!
  6. Diversify your credit accounts. Having a mortgage, auto loan, and credit card is better than having all credit card accounts. But, don’t apply for a loan you don’t need just to diversify your credit mix.
  7. Become an authorized user on another account. See if someone who has a strong history of making payments and maintaining low balances (hello Mom, hello Dad) is willing to make you an authorized user on an account.
  8. Stay on top of your credit. Because your credit is so important, it’s wise to regularly monitor your credit reports and scores. You can get free copies of your credit report from each of the three credit bureaus at AnnualCreditReport.com Be sure to look for mistakes and errors as well as fraud – a credit killer!

Brazos is here to help you borrow wisely for college

For more than 40 years, Brazos Higher Education has been helping students get the college loans they need to build brighter futures. As a non-profit, we can offer you low rates on student loans to help you save money. Contact us today!