Sneaky Ways To Improve Your Credit Score
There are certain times when it pays to have the highest credit score possible. Maybe youre about to refinance your mortgage. Or maybe youre recovering from a bad credit history, and you want to get approved for a credit card.
Its always good to have a healthy score, of course.
But if youre in a place where you really need to up that score as soon as possible, there are a few under-the-radar ways to speed up the process.
Avoid Credit Repair Scams
Some for-profit companies claim to be able to remove negative information from your credit report for a fee. But the truth is that no company can legally erase information from your file if it’s accurate. Avoid spending money on and take tried-and-true steps to improve your score instead, like lowering debt balances and paying your bills on time.
Pay Down Debt Strategically
OK, lets build on what you just learned about utilization ratios.
In the above example, you have balances on more than one card. Note that Card A has a 42% ratio, which is high, and Card B has a wonderfully low 10% ratio.
Since the FICO score also looks at each cards ratio, you can bump up your score by paying down the card with the higher balance. In the example above, pay down the balance on Card A to about $1,500 and your new ratio for Card A is 25% . Much better!
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Other Options For Building Credit
If you have money in the bank, you may have another option for an installment loan: a share- or certificate-backed loan. In that case, a deposit you already have at the financial institution is the collateral, and that money is frozen until the loan is repaid . So if you have funds on deposit at a small bank or credit union, it may be worth asking if you can borrow against them to help reestablish your standing. Other lenders may allow you to borrow against the value of your car.
If it is an option, you could also ask a friend or relative who has excellent credit to add you as an on a credit card. As an authorized user, the account history of that card will be added to your credit report. They don’t have to actually give you the card, and you don’t need to make charges just being associated with their stellar credit reputation helps yours.
Secured credit cards are another good option to build credit, but they require an upfront deposit, typically starting at $200. You can also explore alternative credit card products that do not require a deposit.
If you are trying to build credit and need the proceeds of a loan immediately , you will probably need to take an unsecured personal loan. That means the lender has no collateral, just the strength of your credit history, to rely on. If your credit is damaged or thin, youll pay higher interest rates, sometimes as much as 36%, which tends to be the ceiling with most personal loan lenders that check credit.
Check Your Credit Score For Free
Knowing where you stand and watching your progress can be important. With Experian, you can check your FICO® Score for free. Your account gives you a breakdown of which factors are impacting your score the most, so you can take a focused approach to improving your score. Your credit score will also automatically be tracked and updated each month.
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Improve Your Payment History
Your payment history is the most important component of FICO® scoring models. Late and missed payments will reduce your credit scores, and bankruptcies and collections can cause significant damage. This negative information will remain on your credit report and impact your credit scores for seven to 10 years.
Your scores often take into account the size of your debt and the timing of your missed payments. The bigger your debt is, and the more recent your missed payments are, the worse your score will be, typically. Bringing accounts current and continuing to pay on time will almost always have a positive impact on your credit scores.
Check And Understand Your Credit Score
Its important to know that not all credit scores are the same, and that they fluctuate from month to month, depending on which credit bureaus lenders use and how often lenders report account activity. So, while you shouldnt worry if you see your scores rise or fall by a few points, you should take note when a big change occurs.
The two main consumer credit scoring models are the FICO Score and VantageScore. Here are the factors that comprise your FICO Score and how much each factor is weighed:
- Payment history
- Amounts owed
- Length of credit history
- New credit
Here are the factors influencing your VantageScore:
- Total credit usage, balance and available credit
- Payment history
- Age of credit history
- New accounts
There are a variety of options for checking your credit score for free.
For example, consumers can get a free FICO Score from the Discover Credit Scorecard even without having a Discover credit card, and a free VantageScore by creating a LendingTree account. American Express and Capital One also offer free credit scores to both card account holders and the general public, though many other card issuers offer free access only to their cardholders.
Here are the tiers that credit scores can fall into, according to FICO:
|FICO Score tiers
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How Does Experian Boost Work
Consumers who want to use Boost must allow the product to scan their bank account transactions to identify streaming, utility and cell phone payments. Information about payments will appear in their Experian credit report and be used when certain credit scores are calculated from that data.
Boost counts only positive payment history, Experian says, so missed streaming, utility or cell phone payments will not hurt your score. Thats different from how credit scores usually work, where missed or late payments are recorded in your credit report and can reduce your score.
To use Boost, consumers sign up for a free membership on Experians website and grant permission to connect their online bank accounts. Boost then identifies streaming, utility and cell phone payments. Once a consumer verifies the data and confirms they want it added to their Experian credit file, an updated FICO score is delivered in real time.
The Truth About Raising Your Credit Scores Fast
While a lucky few may be in a situation where they can raise their credit scores quickly, the bottom line for most of us is that building credit takes time and discipline, especially if youre trying to rebuild bad credit. Thats because your credit scores are complex and made up of several interconnected factors .
So trust us: While some credit repair agencies may promise to raise your credit scores fast, theres no secret that will help boost your credit scores quickly.
But if you start developing healthy habits now, you can build credit over time all by yourself.
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Increase Your Credit Limits
If you cant pay down your credit card balance and dont want a personal loan, there is a third way that you can lower your credit utilization: Requesting a credit limit increase.
Because this will raise the amount of credit that you have available while keeping your balance the same, your credit utilization will instantly decreaseso long as you dont charge more expenses to your card. All you need to do is call your credit card issuer and ask if it is possible to increase your limit.
How much a credit limit increase will affect your credit score will depend on a number of factors, including the size of the increase and the amount of debt you already carry on your card. For example:
If you currently have a credit card with a credit limit of $250, and you carry a $150 balance on it, then you have a credit utilization rate of 60 percent. If your credit card company increases your credit limit by $250, your new credit limit would be $500. This would bring your credit utilization down to 30 percent.
On the other hand, if you currently have a credit card with a credit limit of $10,000, and you carry a $7,000 balance on it, then you have a credit utilization rate of 70 percent. If your credit card company increases your credit limit by $2,500, your new credit limit would be $12,500. This would bring your utilization rate down to 56 percentwhich is better than it was, but still higher than the recommended high of 30 percent.
Fastest Ways To Raise Your Credit Score
It takes time to improve your credit score, especially if you have lots of negative items on your credit report. Fortunately, there are a few things you can do to raise your credit score quickly. Paying down a large credit card balance or getting a credit limit increase, especially before your account statement closing date, can impact your credit score relatively quickly. Both of these improves your credit utilization rate, which is 30 percent of your credit score.
Disputing a negative error from your credit report can also raise your credit score, especially if you talk to the creditor over the phone and have them remove the error from your credit report right away. To enforce your rights under the Fair Credit Reporting Act , you have to dispute credit report errors in writing. However, some creditors are willing to remove legitimate errors with just a phone call. The update can appear on your credit report and impact your credit score in just a few days if the creditor is willing to work with you.
If you’re unable to dispute an error over the phone, disputing in writing is still effective, particularly if you have proof of the error. The dispute process can take 30 to 45 days while the credit bureau investigates then updates your credit report. Once the error is removed from your credit report, it will factor into your credit score right away.
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Keep Credit Cards Open
If you’re racing to improve your credit profile, be aware that closing credit cards can make the job harder. Closing a credit card means you lose that cards credit limit when your overall credit utilization is calculated, which can lead to a lower score. Keep the card open and use it occasionally so the issuer wont close it.
How To Check Your Credit Report
You can get a free copy of your report at annualcreditreport.com.
Under normal circumstances, you would be able to get one free report from each of the three major credit reporting bureaus per year. However, in response to COVID-19 you can access a free weekly report from any of the bureaus through April 2022.
Check your which could be dragging your score down. If you find mistakes, such as payments that havent been recorded, you can have them removed by disputing the information directly with the credit bureau. They are obligated to investigate any dispute and resolve it within a reasonable amount of time. Keep in mind, however, that only incorrect information can be removed from your report.
According to Richardson, each credit report will have the information you need to improve your score. There are four or five bulleted statements about your credit profile that can help you make a road map of what to do if youre really in a position where you need to improve your score, he says.
You may also find a numerical or text code in your report, but no additional information as to what it represents. These are factor codes and represent items that may be dragging your score down. VantageScore has a free website, ReasonCode.org where you can enter the code from any credit report and get an explanation of what it stands for and advice on how to resolve the issue.
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How Long Does It Take To Rebuild A Credit Score
There’s no set timeline for rebuilding your credit. How long it takes to increase your credit scores depends on what’s hurting your credit and the steps you’re taking to rebuild it.
For instance, if your score takes a hit after a single missed payment, it might not take too long to rebuild it by bringing your account current and continuing to make on-time payments. However, if you miss payments on multiple accounts and you fall over 90 days behind before catching up, it will likely take longer to recover. This effect can be even more exaggerated if your late payments result in repossession or foreclosure.
In either case, the impact of negative marks will diminish over time. Most negative marks will also fall off your credit reports after seven years and stop impacting your scores at that point if not sooner. Chapter 7 bankruptcies can stay for up to 10 years, however.
In addition to letting time help you rebuild your scores, you can follow the steps above to proactively add positive information to your credit reports.
Only Apply For Credit You Need
Every time you apply for a new line of credit, a hard inquiry is pulled on your report. This type of inquiry lowers your score temporarily. Applying just to see if you get approved or because you received a pre-qualified offer of credit is not a good idea.
If its a single hard credit pull, the drop will be slight. However, a string of hard inquiries could signal to lenders that you are taking on too much debt. The effects of a hard credit pull on your score, according to a representative of TransUnion, can last up to 12 months.
If you do need to apply for new credit, research your likelihood of approval to ensure youre a good candidate before applying. If possible, get a pre-approval or pre-qualification, as in many instances these result in a soft rather than hard credit pull. Soft pulls dont affect your credit score You dont want to risk lowering your score for a denied application.
You should also refrain from applying for several credit cards within a short time frame, or before taking out a large loan like a mortgage.
When you shop for a mortgage, auto, or personal loan, you can keep hard inquiries to a minimum by making rate comparisons within a short time period. Applications for the same type of loan within a designated time frame will only appear as a single hard inquiry. According to FICO, this span can vary from 14 to 45 days.
Estimating Credit Score Changes
While youre waiting for your credit report and score to update, you can use a credit score simulator to estimate how your credit score might change. Credit Karma and myFICO both offer credit score simulators that can show how your credit score might change if the information on your credit report changes, like if you pay off an account or open a new loan, for example.
How To Control The Number Of Credit Checks
To control the number of credit checks in your report:
- limit the number of times you apply for credit
- get your quotes from different lenders within a two-week period when shopping around for a car or a mortgage. Your inquiries will be combined and treated as a single inquiry for your credit score.
- apply for credit only when you really need it
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Ask To Have Negative Entries That Are Paid Off Removed From Your Credit Report
You may have a series of late payments on your credit report, or perhaps an old collection account that’s since been paid off still shows up. If this is the case, ask to have them removed.
This step may take more time and effort on your end, but it could be worth it. Triggs suggests speaking to the collections agency, debt buyer or original creditor to remove a paid-off account from your credit report.
“You’d most likely have better results using this method with collection agencies or debt buyers versus the original creditor,” he says.
Try to convince them to not only show the account as paid, but to remove the account altogether, which could have a much bigger impact on your credit score. “Having even a paid collection account or paid charge-off on your credit report could deter creditors in issuing you future credit at all,” Triggs says.
Keep Old Accounts Open And Deal With Delinquencies
The age of credit portion of your credit score looks at how long you’ve had your credit accounts. The older your average credit age, the more favorably you appear to lenders.
If you have old credit accounts youre not using, dont close them down. Though the credit history for those accounts would remain on your credit report, closing credit cards while you have a balance on other cards would lower your available credit and increase your credit utilization ratio. That could knock a few points off your score.
And if you have delinquent accounts, charge-offs, or collection accounts, take action to resolve them. If you have an account with multiple late or missed payments, for instance, get caught up on the past due amount, then work out a plan for making future payments on time. That wont erase the late payments, but it can improve your payment history going forward.
If you have charge-offs or collection accounts, decide whether it makes sense to pay off those accounts in full or to offer the creditor a settlement. Newer FICO and VantageScore credit-scoring models assign less negative impact to paid collection accounts. Paying off collections or charge-offs might offer a modest score boost. Remember, negative account information can remain on your credit history for up to seven yearsbankruptcies for 10.
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