Credit scores are a critical factor of financial health. While one mistake can cause your score to take a considerable dip, sometimes, seeing your score spike takes time. Your credit score has many factors that play into boosting it, so let’s look at how to raise your credit score by 200 points.
What makes up your credit score?
First, it’s important to understand the factors that go into your score and who decides on it. Let’s take a closer look at where your credit score comes from.
Your credit score is a report of how you’ve used credit. It lets companies like lenders and credit card issuers predict how much risk they would be taking loaning you money. Your report shows if you’ve ever missed credit card payments, the types of loans you’ve taken out and if you have filed for bankruptcy in the past.
The three major credit reporting bureaus are Experian, Equifax, and TransUnion. These companies collect, store, and organize the data on your credit reports. Then they each issue you a credit score from the information contained in your report. Credit scores are important because they allow creditors to see a snapshot of your credit history without spending hours reading your report.
There are a few different methods that credit reporting bureaus can use to calculate your score. The score that most lenders look at is the FICO model. The factors that go into your credit score include:
- Your payment history (35%): Your payment history is a record of how often you pay your bills on time. Missed or late payments affect your score negatively, while on-time payments result in a higher credit score.
- Your credit utilization (30%): Your credit utilization is the percentage of the total available credit you use every month.
- Length of your credit history (15%): Creditors trust borrowers who have a long history of managing their credit. Keeping your accounts open longer raises your score.
- Your credit mix (10%): Creditors like to see that you have experience managing a few different types of credit. Diversifying your credit types can raise your score.
- New credit inquiries (10%): Borrowing a ton of money at once is a red flag for lenders. When you apply for a new line of credit, your score will temporarily drop so that you don’t apply for too much credit all at once.
Five levels of credit scores
Now that you know what goes into your score, let’s take a look at what lenders consider a good score and a bad score. The FICO scoring ranges are as follows:
- Very poor: 300-500 points. Obtaining a credit card or loan with bad credit is more challenging.
- Fair: 580-669 points. Lenders consider borrowers with a “fair” score to be higher risk. You may be able to find a loan or credit card with a fair score, but you’ll pay more in interest.
- Good: 670-739 points. You’re a much more appealing candidate for loans and cards if you have a credit score in this range.
- Very good: 740-799 points. You’ll get better rates from lenders If you have a “very good” score.
- Exceptional: 800-850 points. Lenders see people with exceptional credit scores as very dependable borrowers. An exceptional score means you’ll get the best interest rates available and exclusive credit card offers.
The maximum credit score that you can have is 850. Perfect scores are very rare but with patience and a plan, it’s not impossible to make it into the perfect credit club with time. However, also keep in mind you might not need a perfect score to achieve your financial goals. In fact, in 2021 the average credit score was 721 according to Experian, so don’t feel too much pressure if you are not in the 800 club.
Why is my score different on different credit bureaus?
Depending on what type of loan you are applying for, the lender can use many companies that access risk. FICO, Experian, TransUnion, and Equifax are some of the most used bureaus.
Each bureau assesses your payment history, credit utilization, credit history, credit mix, and inquiries at a different weight, resulting in a slight deviation in score from each company. You might notice a variation depending on when you look too. Each credit bureau could be on a different rotation when receiving your credit updates. For example, Experian could be updated in 7 days, and TransUnion could be updated in 15 days. All three scores could be different and not in sync, depending on when you look. Lenders also have the choice to report to their preferred credit bureau(s), which can positively or negatively affect your credit score.
How long does it take to build credit?
Building credit takes time; essentially, it is a lifelong process. The amount of time it’ll take to see your score rise depends on what types of items are on your credit report, your current score, how long you’ve had your accounts, and what steps you’re taking to raise your credit.
Your credit score will take at least thirty days to change because credit reporting bureaus usually only collect payment data once a month. However, it’ll take much longer to reach your goal if you’re trying to raise your score by 200 points. Patience is key here! It may take anywhere from six months to a few years to raise your score by 200 points. As long as you stick to your credit-rebuilding plan and stay patient, you’ll be able to increase your credit score before you know it.
Increase your credit score by 200 points in 6 easy steps
Are you ready to start improving your credit score? Use these tips and watch your credit score rise month after month.
1. Use multiple types of credit
Using your credit card and paying it off every month is an excellent way to help boost your score. However, creditors want to see that you have experience managing multiple types of credit.
A credit card is considered a revolving type of credit. Revolving credit “refills” after you pay it down and allows you to use it again and again. As for non-revolving credit lines, you can only use those once. As soon as you pay off a non-revolving account, your lender closes your account. Personal loans, mortgage loans, and student loans are all examples of non-revolving credit types.
2. Get a credit builder loan
Consider a credit builder loan if you want to add a little diversity to your credit portfolio and use a method proven to help build credit. Credit builder loans are small, low-interest personal loans that help you improve your score.
With some lenders, you’ll get a sum in cash and can spend that money on almost anything, from home updates to catching up on bills. Then, you pay back the loan and interest with monthly payments. Your loan provider reports the payments to the credit reporting bureau. As long as you don’t fall behind, your score is likely to go up.
Are you looking for an easy way to boost your credit score? MoneyLion Credit Builder Plus members get access to a loan of up to $1,000 at a low APR, all with no hard credit checks. You’ll be able to build your credit and get the cash you need with just a few clicks. In fact, 70% of Credit Builder Plus users saw an increase of 60 points within 60 days of having their loan. To raise your credit by 200 points, it might take several months of monitoring and building your credit profile.
3. Report bills to the credit bureaus
Did you know you can boost your credit with all types of payments? Our partner LevelCredit will report your rent, utility, and other payments to the major credit bureaus. You’ll also get access to your credit score and key credit insights for just $6.95 per month. LevelCredit is an amazing way to power up your payments by using them to boost your credit score.
4. Use a finance tracking service
Put your extra dollars towards your debt and choose a no-cost finance tracking service. MoneyLion’s personal finance tracker offers you a one-stop shop for staying on top of your debt, credit, and budget.
5. Make consistent payments
Your payment history makes up about 35% of your FICO credit score. This means that the best way to improve your score is to build up a history of positive payments.
Missing payments can lower your score, so prioritize your payments with a new organization strategy. Sit down with all your loan and credit card statements and write down how much you owe on each account, your minimum payments, and your due date.
Then, input the date into your cell phone calendar or write them down on your desk calendar. You may also want to authorize autopay if your creditor allows it. Autopay automatically deducts your minimum payment on your account’s due date so you won’t have to remember it on your own.
MoneyLion does the remembering for you and automatically schedules your Credit Builder Plus payments around your pay dates.
6. Keep your utilization low
On top of keeping your payments low, you should also be mindful of keeping your credit utilization low. Credit utilization refers to how much of your available credit you use. Maxing out your credit cards will lower your score. A good rule of thumb is to keep your credit utilization below 30%. If it’s possible, make it a goal to keep it around 10%.
If this isn’t possible, consider asking your lender for a credit line increase. Increasing your total available credit automatically lowers your utilization rates. Be careful to avoid the “lifestyle creep” of overspending if you do get a credit line increase.
Improvements take time
Now that you understand the basics of credit, you can see that building it isn’t hard; it just takes time. Whether it is 200 points or 20, you won’t see results overnight while working to improve your credit score. Always pay your bills on time, keep your credit mixed and your utilization low, and be patient. Think of improving your score the same way as losing weight. You won’t lose ten pounds after a single day or even a week of eating right and exercising. Your credit score works the same way; it takes a pattern of positive habits to see results. While building your credit, remember that having an above-average score can guarantee you will get better rates on credit cards, mortgages, auto loans, and more.
Want to take action to boost your score? Sign up for the Credit Builder Plus membership today and let MoneyLion help you create a healthy financial footprint. It’s time to take control of your finances, boost your credit score and get the cash you need.
How long will it take to raise my credit score?
70% of Credit Builder Plus users saw an increase of 60 points within 60 days of having their loan. To raise your credit by 200 points, it might take several months of monitoring and building your credit profile. Fifteen percent of your credit score is based on the length of time you have had open lines of credit.
Although building credit can be a slow process, having an above-average credit score can guarantee you will get better rates on credit cards, mortgages, auto loans, and more.
What are the biggest factors to improve my score?
There are 5 key factors that make up your credit score.
1. Payment history (35%)
2. Credit utilization (30%)
3. Length of your credit history (15%)
4. Credit mix (10%)
5. New credit inquiries (10%)
Why is my score different on different credit bureaus?
Depending on what type of loan you are applying for, the lender has the option to use many different companies that access risk. Some of the most used bureaus are FICO, Experian, TransUnion, and Equifax.
Each bureau assesses your payment history, credit utilization, credit history, credit mix, and inquires at a different weight thus a slight deviation in score from each company.
Lenders also have the choice to report to their preferred credit bureau(s) which can affect your credit score either positively or negatively.