Are you looking for ways to boost or rebuild your credit in the new year?
You’re in the right place.
In this post, we will go over some of the best tools you can use to boost your credit and improve your credit score so you can rent that place or buy that car.
But first, make sure you read why it's important to raise your credit score and why it matters.
Let’s delve right into it and check out the best tools for your credit.
But First . . .
The first step to rebuilding your credit is to find out what your credit score is in the first place.
In the United States, we have three major credit reporting agencies — all of which look at slightly different metrics.
To get a look at your score from all three agencies, you can check your credit history for free at AnnualCreditReport.com once a year.
You can also get a free report and credit score check on CreditKarma.com.
When you check on your credit score and your credit history, you will be able to report any errors that might be there.
This can help improve your credit score.
Pay Attention to Your Credit Card’s Message Center
R.J. Weiss, a Certified Financial Planner™ professional and founder of the website The Ways to Wealth, had this to say: “My favorite credit boosting tool is each credit card provider’s message center. Once a quarter, I have a calendar alert that reminds me to send a quick message to one of my own or my wife’s credit card providers asking for a credit limit increase. You used to have to do this over the phone, but I’ve now had success asking for rate increases through a live chat or contact forms. In turn, this helps lower my credit utilization rate, which improves my overall credit score.”
If you have been good with paying off the balance on your card each month but other areas of your financial history are keeping your credit score lower than you want, this can be a great way to increase how much available credit you have.
When your available credit is high compared to how much credit you’ve used, this improves your credit utilization rate or percentage.
So for instance, if you have $1,000 available on your credit card but you’ve only used $250, you will have a 25% credit utilization percentage.
When the number gets higher, your credit score takes a hit.
Credit experts usually recommend that you stay below a 30% credit utilization. Asking for a credit limit increase will adjust these numbers for you.
Credit Karma is one of the best free tools to help you improve your credit score. Here's why: it gives you a solid look at your total credit picture.
One of the most important factors in improving your credit score is simply knowing what's going on - and that's what Credit Karma does.
Plus, it has a variety of ways it monitors your credit, so that you can stay informed of late payments, missed payments, and other items that can hurt your credit score.
Credit Sesame is the leading competitor to Credit Karma, and honestly, it's hard to tell their services apart (except that Credit Karma has a lot more tools such as tax software and savings accounts).
Credit Sesame has continued to focus on their core product - making credit monitoring easy and free. Plus, they offer identity theft insurance for just signing up.
If you want a simple product that keeps an eye on your accounts, then Credit Sesame may be your preferred tool for improving your credit.
If you don’t have much of a borrowing history, you’ve never taken out a credit card, and basically have nothing to show for your credit, Experian Boost is an excellent tool for you.
Here’s what Jeff Rose, the founder of Good Financial Cents, had to say about Experian Boost:
“Experian Boost™ is a free tool that works great for those who don’t have much of a borrowing history. In order to use this tool, you will need to allow Experian to scan your bank account transactions to gather payment information from your utility bills and mobile phone payments.”
Rose went on to say: “There are 3 groups of consumers in particular who may benefit from this tool.
- Those applying for loans or lines of credit who have incomplete or subprime credit scores.
- Younger adults who don’t have much of a credit history.
- Someone who has good financial habits but may not qualify for a loan or credit product because their credit report doesn’t reflect that they are financially responsible.”
Fred Nonterah used Experian Boost in the past and saw his credit jump by 50 points after the tool determined that he had been paying his cell phone bills on time each month. Based on this improvement, he was able to get approved to get a loan to buy a used car for his business.
So if you have been financially responsible with paying off outstanding utility and service bills at the end of the month, but your credit score/history doesn’t reflect that, check out Experian Boost.
Tally is a tool that helps you save on your existing credit card debt. CNBC recently found that consolidating your credit card debt is a great way to boost your credit score - and Tally helps make it happen.
What Tally does is it analyzes all of your credit cards (that you link to the app), and it will offer your a Tally Line of Credit to consolidate and lower your interest rate on cards where it can help. If you already have a better rate than what Tally offers, it won't change anything.
Tally is free to analyze your account, so you might check it out and see if you can save.
Trim is a tool that analyzes the way you spend money and automates saving money into a high-yield savings account.
Apart from this, Trim also helps you pay off your debt by reducing your APRs (annual percentage rates or interest). If you have a 24% APR, this means over a 12-month period, you will pay 24% interest on outstanding debt on your card.
Reduce that to 12% or 10% and you don’t need to do the math to see how much you’ll save in the process.
And of course, in the process, you will increase your credit score.
Here’s how to use Self to build your credit score:
- You will apply for Credit Builder Account. With a Credit Builder Account, the amount you borrow is held in an interest-bearing certificate of deposit (CD) savings account.
- Pay off your Credit Builder Account in a certain amount of time. You can pick the payment term and how much you would like to pay off each month. According to their website, payments start at $25 per month.
- When you pay your Credit Builder Account each month, it is reported to all three credit reporting agencies.
- Once you’ve paid off your Credit Builder Account, the money in the CD is unlocked and it’s yours for the keeping (minus any fees and interest).
This process helps you save money and build your credit at the same time.
If you need to build your credit from scratch, you may want to consider a Credit Builder Account.
Which one of these ways of improving your credit score did you find helpful? Let us know in the comments below.
The key to improving your credit score will always come down to the basics: on time payments, eliminating your debt, and ensuring that your credit report is accurate.
By focusing on these basics, you can boost your credit score over the long run. These tools can be a great way to help you make it happen.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.