The big three credit reporting agencies are Equifax, Trans Union, and Experian. They all use the same formula to calculate your score, but each one bases the calculation on slightly different information about your credit history. Hence, your score from each agency is a bit different. These agencies make millions of dollars each year by collecting this credit-related information about you and then selling it to businesses and creditors who request it.



If your credit score is lower than 720, you have either a fair or a poor credit score. This means you will not qualify for the best rates on credit cards and loans. Luckily, there are proven ways to improve your credit score.

Here are 5 ways to raise your credit score.

First, you must check your scores regularly from all three agencies. You can actually get your credit score for free online once every 12 months from each of the big three reporting agencies. It is also advisable to subscribe to any number of monthly online credit reporting services that give you regular updates each month. They will also inform you of any changes to your score.

The second step to raising your score is to be sure to correct any obvious errors in your credit report. There may be errors related to your current mailing address, glitches indicating you missed payments that you actually made, or erroneous charges attributed to you that you never actually made. You must fight and then correct each of these errors, one-by-one, by contacting each of the big three agencies separately. Note: when you contact an agency, they may ask you to show evidence of the error. At this time, they may also require that you send copies of documents that prove your own identity, such as a valid driver's license or a passport.

Third, make sure you are paying all of your bills on time. If for some reason you are behind on your payments, contact each of your creditors and ask them for an extension on your payment due dates. You may also sometimes be able to negotiate a lower minimum payment for certain credit cards or other accounts.

Fourth, you can actually improve your credit score by opening new credit cards or store accounts. While this sounds like financial suicide for someone who already has a low credit score, having more credit extended to you actually improves something called your credit-to-debt ratio. In other words, the more credit you have, the better. Of course, the trick is that you must not borrow against the newly-acquired debt instruments. Hint: try to open new accounts one at a time every 3 months or so, and be sure to watch out for cards with high annual fees.

The fifth way to raise your score is to transfer all of your existing credit card balances to your lowest-interest cards. This could save you $100s per month in lower debt payments, which will help you pay down your existing debt faster and thereby help raise your credit score. Watch out for high balance transfer fees, but sometimes even paying these might be worth it if it means saving more money in debt payments.

Raising your credit score can be one of the smartest financial moves you make. Spend the necessary time and effort improving your credit score now and enjoy the long-term benefits of lower debt payments and the ability to qualify for more types of lower-interest loans.