For many of us, there are few numbers more important than the three little digits that make up our credit score. Higher credit scores can lead to being more likely to qualify for loans, a greater likelihood for acceptance into housing, and more favorable terms for credit cards and other lending options. With such an important bearing on our financial health, many people worry about improving low credit scores in order to set themselves up for a better financial future. Fortunately, it is possible to learn how to boost your credit score fast. Here are 9 things you can start doing now to have a positive impact on your credit:
1) Examine Your Credit Report
There are numerous ways to calculate your credit score and various institutions will use different algorithms to generate your specific credit scores. These algorithms use information generated by one of the three large national credit reporting companies:
- Equifax
- TransUnion
- Experian
Though it can be hard to know exactly what scoring system is being used by a particular financial institution, it doesn’t matter too much as the various scoring models are relatively similar and some, such as the FICO score which ranges from 300 to 850, being widely employed. Legally, you are entitled to one free credit report per year. After requesting, be sure to save a copy on your computer and save a physical copy as well. From here, you will be able to see the factors affecting your credit and create a plan to improve it moving forward.
2) Find and Dispute Errors
Credit report companies are not immune to the kind of human errors that plague any industry. Oftentimes, an overlooked mistake on your credit report can drag down your entire score through no fault of your own. Sometimes the fastest way to improve your credit score is making sure it is accurate to begin with.
Some common credit report errors to look for include payments erroneously marked as late, incorrect balances, or negative marks on your report that are too old to be included still.
All these things can be needlessly bringing down your credit score and you can dispute them in order to have them removed. After you dispute something on your report, the credit bureaus will have 30 days to check into the veracity of your claims and respond to them allowing you to move forward in the process from there.
3) Pay Bills on Time
Although it may seem self-intuitive, one of the most important things you can do to increase your credit score is to pay all your bills on time. On-time payments is one of the most important things lenders look for when analyzing your credit report and it is nearly always one of the most heavily weighted categories when calculating your credit score.
If you’re already behind on some payments, try to catch up on them as long as possible. Late and missed payments can linger on your credit report for as long as seven years but their impact becomes exponentially lessened over time so, the more time you put between yourself and missed payments, the higher your credit score will climb.
4) Make Multiple Monthly Payments
One of the best ways you can learn how to improve your credit score fast is by making more than just the single minimum payment you have to make each month. There are multiple ways in which you can do this no matter your financial situation so that it can maximize the positive effect on your credit:
- If you have extra money, try using it to make extra payments throughout the month. Not only will this help pay down your overall debt faster, but you’ll also end up paying less as you save on the interest.
- For those who aren’t able to pay extra towards their overall payments each month, they can still benefit from making small payments – commonly referred to as micropayments – by using your credit card like a debit card and paying online as soon as a purchase is posted in order to help your overall credit utilization.
- Even if you are unable to make frequent micropayments and are only able to make the minimum payment each month it can be helpful to break that up into multiple small payments. Since most credit bureaus only report once a month, if you are constantly running up your credit limit each month it can appear you have a higher than normal credit utilization rate even if you pay off the balance each month if you make a singular payment. Breaking up your monthly payments helps keep your running balance lower, therefore, making your credit utilization appear better to lenders.
5) Increase Your Credit Limit
Another way to positively affect your credit score via your credit utilization rate is by increasing your credit limit. This can be a great tool if you are currently unable to pay down your overall balances. Say you’ve maxed out a credit card with a credit limit of $500, if you call your creditor and ask for an increase of your credit limit to $1000 then you’ve immediately cut your credit utilization rate in half without ever having to pay down a single cent.
It is important to note that this is only effective if you ensure that you do not use the increased credit limit to then take on more debt. If you increase your credit limit and then max out the card again you’ll find yourself in an even worse situation than before.
6) Limit New Credit Accounts & Inquiries
Some people may believe that open more accounts will lead to a better mix of credit but this approach is rarely effective and there are a number of ways that unnecessary lines of credit can end up hurting your credit score. Even too many inquiries can ding your credit so it is best to limit any new accounts to those that are absolutely necessary.
7) Don’t Cancel Unused Credit Cards
While you don’t want to open any new lines of credit, it can actually be useful to keeps the ones you have open even if they don’t have an outstanding balance. The reason for this goes back to the credit utilization ratio. If you close an account but then have the same amount of debt, then your credit utilization ratio will inadvertently go up which could slow your progress on how to improve your credit score fast.
There is, however, a caveat to this tip to improve credit – if the card or account is costing you money in annual fees of some kind or require a minimum monthly expenditure, it may be better to close the account and use that money to pay off existing balances instead.
8) Negotiate Outstanding Balances
Another way to help improve your credit score is by settling your debts. Oftentimes, especially if you have bills that have gone to debt collections, you may be able to re-negotiate your debt down to a lower overall payment. This won’t eliminate past mistakes from your credit report but can go a long way towards mitigating the overall damage caused.
If possible, getting professional help to manage your debt settlement can be an invaluable resource. If that isn’t an option, there are numerous tools online that can be found in order to learn how best to negotiate your debt. When negotiating, it is important to remember to make sure to get every agreement in writing to ensure that it is legally binding.
9) Become an Authorized User
One of the last ways to improve your credit score is fantastic because it’s actually a relatively passive way to improve your credit score. This will require the help of someone else who will have to add you to their credit account as an authorized user.
It is important that the person to who’s account you are added is an individual who manages their money and payments very well. If they end up not being able to make their payments, your own credit score may suffer as well. As an authorized user on this account, it is also significant to note that this does not mean that you have to have access to the account or even the account information.
Essentially, even without using the card or account yourself, the account will be listed on your credit report and the (hopefully) on-time payments and favorable credit utilization will help lift your own credit score.
There are a lot of reasons to increase your credit score and, hopefully, you’ve learned a little about how you can increase your credit score fast. It is important to note that fast can be a relative term, however, and you should give it several months before the changes you’ve made are positively reflected in your credit report. If you are looking for a couple of more ideas on how to increase your credit score you might try buying a tradeline. Making sound financial decisions and using these tips on how you can improve your credit score fast, hopefully you’ll be on your way to a better financial future in no time!
