How To Improve Your Credit Score: 9 Tips And Tricks
Hanna Kielar6 minute read
PUBLISHED: August 29, 2022
When life gets busy, it’s easy to forget about monitoring your credit score, but it’s one of the most important factors a lender checks when you apply for a loan. Your score shows financial institutions how responsible and creditworthy you are and helps you land a good interest rate.
If you’ve recently checked your credit report and noticed your credit score could stand a boost, you can use the following tips to improve your credit history in short order.
How Quickly Can You Grow Your Credit Score By 100 Points?
While it might sound too good to be true, you may be able to increase your credit score by 100 points in just a few months. Of course, this depends largely on your current credit score and financial situation.
If you have a poor credit score (579 and below), you’ll actually be in a better position to see quick improvements. On the other hand, if you already have fair credit (580 to 669), it might take more time and effort to improve your credit history and see a notable difference in your score.
No matter your credit rating, you can use the following strategies to raise your credit score in the relatively near future.
How To Increase Your Credit Score Over A Few Months
Are you planning to apply for an auto loan, mortgage loan or personal loan later this year? If so, now is the perfect time to start improving your credit score to ensure you can qualify for the best possible loan terms and interest rates.
1. Get A Secured Credit Card
For some people, a secured credit card may be the most effective way to improve their credit score. A secured credit card is backed with a cash deposit and is typically tied to the borrower’s checking or savings account. This line of credit is fairly easy to qualify for, even if you have a less-than-perfect credit history.
You can use a secured credit card just like your debit card, except your credit utilization ratio (the percentage of your available credit that you use) and payment history will be reported to the major credit bureaus: Experian™, TransUnion® and Equifax®. This means you can steadily increase your credit score with little effort, as long as you make on-time monthly payments.
2. Consolidate Your Debt
Making multiple debt payments each month can be challenging to manage. However, you may be able to consolidate your payments with a personal loan or credit card.
Using debt consolidation, you can quickly pay off all your outstanding accounts at once and then make payments to a single creditor. This option not only simplifies your budget but could also get you a lower interest rate and slowly boost your credit score.
You can use the same strategy with a balance transfer, which is the process of moving multiple credit card balances to a new credit account. To maximize your savings, look for a balance transfer card that offers 0% APR during the introductory period. This feature will help you pay down your debt while avoiding additional interest.
3. Request The Removal Of Negative Items
If you have late payments or collection accounts on your credit report, you may be able to have these negative entries removed from your history. This strategy can be time-consuming, but it’s worth the effort since lenders will be hesitant to loan money to you until these entries fall off your report.
For any outstanding accounts, you can contact your creditor and ask if they’ll remove the negative entry if you pay your debt in full. Some lenders may only agree to this exchange if you pay an additional fee.
You can also ask for a goodwill deletion if you’ve already paid off your account. In this case, your creditor would simply remove the negative information from your report due to your good standing.
How To Raise Your Credit Score Over A Few Weeks
Want to improve your credit score without waiting months to see a change? Below are three ways to make this happen. Just keep in mind that building credit is a long-term process that requires continuous monitoring and management.
1. Ask To Be An Authorized User
If you want to build your score without a credit card, you can ask a friend or family member to make you an authorized user on their account. Be sure, however, that they have a good credit score and a high enough limit for your needs.
Being an authorized user lets you piggyback off the primary card holder’s good credit while building a payment history. The card’s utilization can also benefit your credit since it accounts for 30% of your score.
A week or two after the card holder adds you to their account, you’ll see the credit card on your report, and your score should increase quickly – especially if you don’t have an established credit history. If you already have fair credit, you should still see an increase in your credit score, but it won’t be as drastic.
2. Diversify Your Credit Mix
Most lenders prefer a borrower who uses various types of credit. For example, if you only have credit cards, a bank or credit union may decline your application, even if you have a high enough credit score to qualify for a loan.
Thankfully, a straightforward solution is available for this problem. You just need to diversify your credit mix. If you only have credit cards, you should apply for a short-term personal loan. Or, if you only have loans, it’s wise to get a credit card.
Make sure, however, not to spread yourself too thin. Lending institutions also check a borrower’s debt-to-income (DTI) ratio. If you have too many debt payments compared to your monthly income, a lender could still refuse to grant your loan request.
3. Avoid Applying For Multiple New Accounts
If you need to diversify your credit mix or make a large purchase, be careful about how many times you apply for a loan or credit card. For two main reasons, you should avoid opening more accounts than necessary.
First, opening a new account will make the average age of your accounts go down. While this has a limited effect on your credit, it can still drop your score by a few points. And, if your score is already on the low end, this can significantly impact you.
Applying for new credit accounts can also create a “hard inquiry” on your report. Hard credit inquiries make up 10% of your score, so if you apply for multiple loans in one sitting, your score can take a hit quickly.
How To Boost Your Credit Score Immediately
Even though repairing your credit takes time, it’s possible to raise your score without delay. Take the following steps to quickly give your score a little boost before filling out a loan application.
1. Use A Credit-Building Service
When you have a mortgage and make monthly payments, your credit score can increase over the life of the loan due to your payment history. But what if you rent a home or apartment? Fortunately, self-reporting programs allow consumers to boost their credit by paying their rent and utilities on time.
Services like Experian Boost and UltraFICO™ let participants connect their bank accounts to a credit bureau. Then, their payment history will be added to their report as they pay monthly bills. Some programs can immediately affect your credit score by downloading your past transactions.
2. Make On-Time Payments
Late or missed payments can have a negative impact on your credit score. To avoid a sudden dip, you’ll need to ensure you pay all bills on time. You can make this goal easier to achieve by enrolling in autopay.
Automatic payments are more than convenient. Some utility providers and creditors also offer discounts to their account holders who use this option. And if you use your credit card to make payments and keep the balance paid off, you can increase your credit score even more.
3. Raise Your Credit Limit
As noted, credit utilization significantly affects your score. Anything above a 30% credit utilization ratio can hurt your chances of being approved for a loan. To lower your ratio, you can pay off your card’s balance or increase your credit limit. More available credit decreases your utilization without changing your outstanding balance.
Most credit card companies will increase your limit if you’re up to date on payments and haven’t received an increase in the last few months.
Taking the opportunity to improve your credit score can save you money in the long run. The higher your score, the lower your cost of borrowing money. Good credit can help you secure a low rate and reduce the amount of interest you pay over the loan’s term.
If you’re ready to consolidate your debt or diversify your credit mix, submit an application to see what personal loan rates you qualify for.
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