How to Get a Good Credit Score for Free

Learn how to improve your FICO credit score so you can qualify for loans and credit cards at low rates.

What is a credit score?

A credit score is a three-digit number that tells lenders how “creditworthy” you are. It basically tells them how likely you are to repay debt and whether you’re a good candidate for new credit. If you have a bad credit score, you won’t get approved for loans and credit cards easily. When you do get approved, you’ll face higher interest rates and strict repayment terms that aren’t favorable to you.

There are several different scoring models. The most popular is FICO, which is used by creditors in 90% of lending decisions. The second most popular is VantageScore 3.0, which is the score used by the three credit bureaus. Both scores range from 300 to 850. Higher is always better.

What is a good credit score? What is a bad credit score?

Here is the credit score range for FICO:

FICO Range Score Designation
Above 750 Excellent
700-749 Good
650-699 Fair
550-649 Poor
Below 550 Bad

By contrast, here is the VantageScore range:

 

VantageScore 3.0 Range Score Designation
781-850 Super Prime
661-780 Prime
601-660 Near prime
500-600 Subprime
300-499 Deep subprime

How is your credit score calculated?

Every calculation is a little different, but in general, they evaluate your credit based on five factors.

Credit history

Learn how to review your credit report to identify errorsThis is the biggest factor used to calculate credit scores, making up 35% of your score. It looks at your payment history and account statuses. If you have no missed payments and all your accounts are in good standing, you’ll rank well here.

This also means that missed payments have a significant negative impact on your score. You might think missing a payment is no big deal, but it matters greatly for scoring. Collection accounts also have an impact here. So, if you have a bill like a utility or medical expense that goes to collections, it can affect you score, too.

Credit utilization ratio

This measures how much credit you have in use versus your total available credit line. If you have 3 credit cards that each have a limit of $1,000 then your total available credit line is $3,000. If you have $1,500 in debt, then your credit utilization ratio is 50%.

Lower is always better here. There is no credit score penalty for paying off your balances in-full! People often think you need to carry credit card debt to have a good credit score. It’s just not true. A net utilization of 0% (if you pay your balances in-full every month) is the best ratio to have. Anything higher than 30% hurts your credit score.

Credit age

This measures the length of your credit use. People that have used credit longer are considered more creditworthy because they know how to manage debt. So, having more old accounts helps here.

This is also why credit experts recommend that you should keep old accounts open. Even if you don’t use an old account regularly, find a way to use it occasionally. This will keep the account active and prevent unintended damage to your credit score.

Types of credit

This is one of the two smallest scoring factors. It looks at the types of debt that you hold. Basically, lenders want to see a good mix of credit cards and loans. You also want to have traditional loans, like mortgages, auto loans and student debt.

New credit

This factor looks at the number of hard credit inquiries you’ve had in the past six months. Hard credit inquiries happen anytime you authorize a credit check, during a loan or credit application. Too many inquiries means you’re taking on too much debt at once. That’s why it’s bad for your score.

How to Improve Your Credit Score for Free

Taking steps to rebuild your credit puts you on the road to a better credit scoreThere are steps you can take to raise your credit score fast that don’t require any expensive third-party services. In fact, you don’t even need to pay someone to get your score to improve it. As long as you follow these steps, you can build credit effectively and increase your credit score to 800 or higher.

  1. First, review your credit report to see how many negative items appear that could hurt your score.
  2. If you see any negative items that are mistakes, go through credit repair to dispute them.
    1. Winning disputes can immediately improve your credit by removing negative items, like missed payments.
  3. Make all your debt payments on time, since credit history is the biggest scoring factor.
    1. Also avoid letting other obligations, like bills and medical expenses slip into collections.
  4. Keep credit card balances minimized. Never run them up to the limit and try to use no more than 30% of your available credit.
  5. Only apply for new loans or credit cards when you have a strategic need for them.
    1. Try to avoid applying for more than one new account every six months.
  6. Keep all your accounts open and in good standing.
    1. If you have old accounts, find small uses for them, such as paying for tolls or covering a bill.

If you follow these steps diligently, then your score will gradually get better and better over time. It’s the legal, legitimate answer for how to increase credit score to 800. No fancy tricks, no expensive credit monitoring services. Just good, old fashioned legwork.

How long does it take to raise your credit score?

Take the right steps to achieve a good credit scoreIf you’re starting from a bad score, it usually takes about six months to one year to build credit to a fair score. The length of time depends on your past credit profile. Negative items like bankruptcy or foreclosures are harder to offset with positive actions. Still, even with one of these remarkably bad items, you can still build credit effectively within 24 months.

Going from bad to excellent may take as little as three to five years. So, even if you have a score that’s less than 500 now, with a little work you could achieve a 700 credit score or higher in about 36-60 months. And it’s worth the effort! A better credit score can save hundreds and even thousands of dollars when paying off loans and credit card balances.

Consolidated Credit has answered several Ask the Expert questions related to credit scoring. Here are some of the top questions we’ve received: