A 550 credit score falls under the “poor” range for both the FICO® Score (300-579) and VantageScore® (500-600) models. If you want to understand how to raise your credit score, you first need to understand why it’s low. What are the factors causing your score to drop? Once you identify those, you can change your credit habits accordingly and improve your score.
Some of the major reasons for a low credit score are late or missed payments, a high credit utilization rate, and a lack of diversity in your credit accounts. Your credit mix is an important factor to consider especially if you are looking at VantageScore because it is a highly influential factor in this scoring model.
A few tips:
- Pay all your bills on time, or early. A missed or late payment can reduce your score by as much as 100 points.
- Don’t use more than 30% of your available credit. That means, if you have a $1,000 credit limit you should keep your spending on that card to $300 or less each month. Keeping your credit utilization rate low (up to 30%) immediately boosts your credit score.
- Do not open too many credit accounts at once. If you do, make sure the accounts are diverse, like a credit card, auto loan, mortgage, or personal loan.
Check your credit reports from all three bureaus – Experian®, Equifax®, and TransUnion® – to confirm whether all your credit activity has been reported, and that it’s accurate. You can dispute information in your credit reports if there is an error. Removing an inaccurate negative mark can improve your credit score since it is calculated using the information that is in the credit reports.
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