Credit score basics and how to raise yours in 2023

Credit scores, as we use them today, are only a couple of decades old but their importance in our financial lives is undeniable. The terms (or potential for) any large purchase (home, car, etc) are determined by your personal credit score.

There are various "models" used by lenders to determine creditworthiness. These include FICO, VantageScore, Plus Score, and others. The most commonly used is the FICO model.

Scores generally range from 300 to 850. Score ranges are 300 to 579 - poor; 580-669 - fair; 670-738 - good; 740-850 - very good. Simply put, the higher your number, the better your terms and lending potential will be. (Lower interest, easier to borrow money).

A good rule of thumb for keeping your score in a "very good" range is to keep your credit utilization low. You should try to never use more than 30% of your credit availability. This is one of the top factors lenders use to determine creditworthiness.

Is it too late and you've maxed out cards and loaded up on installment debt? Work on paying down something - anything - as quickly as possible. Pick one and hit it hard. Every penny spent adds up quickly and so does every penny paid.

On the flip side, increasing available credit may also help widen that gap and raise your score. Consider opening a new credit card to raise your total credit limit - just don't use it. This gives you more available credit vs. debt, which looks good to the credit bureaus.

Keep in mind if you do open a new account, your credit may take a temporary hit by a couple of points. This happens when any hard inquiry (such as a credit application) is submitted. But it will be short term and bounce back relatively quickly.

Other potential ways to raise your score as quickly as possible are: 1) Always pay bills on time. Late payments can be reported to the credit bureaus and send your score downhill. 2) On this note, always communicate with lenders if you can't make payments or...

if you know you are in danger of being late or missing a payment altogether. Most lenders will work with you and make adjustments for temporary delays. You hold a great deal of power over your credit score if you are proactive.

Check your credit report for any discrepancies or errors. If there are errors, dispute them. Resolving these can quickly raise your score. annualcreditreport.com offers a free report yearly from all three credit bureaus. (Equifax, TransUnion, and Experian.)