Review Your Credit Report
The first step is to request a free credit score copy of your free credit report from the three major credit bureaus. If you visit AnnualCreditReport.com, you can request a credit check copy from these credit unions: Experian, Equifax, and TransUnion.
Looking at your credit report will help you identify the factors that are holding you back. For instance, you may see that you have a history of making late payments. But you may also come across errors that you need to dispute with the credit bureaus.
How To Rebuild A Damaged Credit History
So far weve talked about removing negative information and establishing better personal finance habits both of which can improve your credit score significantly beginning today.
But what if youve made several mistakes and have bad credit already? What if youre just starting out in life and dont have any credit history at all?
What can you do to speed up the process of improving your credit file?
Here are some ideas:
Raise Your Credit Limits
If you tend to have problems with overspending, dont try this.
The goal is to raise your credit limit on one or more cards so that your utilization ratio goes down. But again, this works in your favor only if you dont use the newly available credit.
I dont recommend trying this if you have missed payments with the issuer or have a downward-trending score. The issuer could see your request for a credit limit increase as a sign that youre about to have a financial crisis and need the extra credit. Ive actually seen this result in a in credit limits. So be sure your situation looks stable before you ask for an increase.
That said, as long as youve been a great customer and your score is reasonably healthy, this is a good strategy to try.
All you have to do is call your credit card company and ask for an increase to your credit limit. Have an amount in mind before you call. Make that amount a little higher than what you want in case they feel the need to negotiate.
Remember the example in #1? Card A has a $6,000 limit and you have a $2,500 balance on it. Thats a 42% utilization ratio .
If your limit goes up to $8,500, then your new ratio is a more pleasing 29% . The higher the limit, the lower your ratio will be and this helps your score.
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How Long Does It Take To Improve Your Credit Score
There’s no set amount of time for how long it will take to improve your credit score by a certain number of points. There are several factors that go into calculating your credit scoresome more influential than others. What you can do to improve these factors will depend on what’s in your unique credit history.
Improving your score is a feat that will take time and require patience and discipline. The sooner you start the process, though, the earlier you’ll achieve your goal.
If your credit score is low, there are a couple major factors that may influence how long it takes to build your score:
- You’re new to credit. When you’re just starting out building credit, it’ll take at least six months of using credit to meet the criteria to receive a FICO® Score. As long as you start out on a positive note, developing good credit habits will help you build your credit history and score in the coming months and years.
- You have negative information on your reports. If you’ve experienced bankruptcy, foreclosure, repossession or another significant negative credit event, it can take more work to improve your credit score. Establishing positive credit relationships going forward can eventually outweigh the negative, but those items will remain on your credit reports for up to seven or more years, so it may take more time.
How To Improve Your Credit Score Quickly
The major contributing factor to improving my credit score in just 30 days was decreasing my ratio. I lowered my credit utilization ratio by 19%!
This took two different steps.
First, I paid more than the minimum amount due on my credit cards. I do that anyway, but I bumped up the amount by about $25.
Second, I increased my available credit on one of my credit cards by accepting a credit line increase offer on my account. I would definitely suggest that you accept any credit line increase offer. Just be smart enough not to use it!
Its suggested that you request a credit line increase once every 6-12 months. Why? It helps with your credit utilization ratio, and that helps your credit score.
Your credit utilization ratio is the amount of debt you have divided by the total amount of credit youve been extended. Sign in to your credit card account online to see if a credit limit request is waiting for you, or call the number on the back of your card to find out about your options. The suggested utilization ratio is 30% or less on each individual account and all accounts combined.
Another major contributing factor is my perfect track record of on-time payments. According to Credit Karma, I have a 100% record of consistent, on-time payments. I manage to never miss a payment by maintaining my own personal bills calendar, which tells me when all of my bills are due. I even set reminders one week early to allow room for any mistakes.
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Work On Paying Down High Credit Card Balances
Your credit card balances play a huge role in your credit score. In particular, it’s important to have a low . That ratio is your current card balances compared to your credit limits.
The ideal credit utilization ratio is 20% or less. If you have $5,000 in total credit limits, you should aim for a total balance of $1,000 at most.
For an example of how much credit utilization matters, one personal finance writer’s by 32 points when she went over 50% credit utilization.
If your credit utilization is higher than 20%, put as much of your extra cash as possible toward your credit card debt. Once you pay down those balances, you should see your credit score go up in one or two months.
Consolidate Credit Card Debt
Paying down balances is the simplest way to lower your credit utilization. There are a couple other options, though. You could consolidate credit card debt with either of the following financial products:
- Balance transfer credit cards: These cards offer a 0% intro APR on balances you transfer over from other credit cards. The benefits of opening a balance transfer card are two-fold. You’ll have time to pay down debt with no interest charges, and that new card’s credit limit will add to your total credit. More total credit means your credit utilization will decrease.
- Debt consolidation loans: These are loans you can use to pay off your credit cards. Your loan will likely have a lower interest rate than your credit cards, and you’ll be able to pay it off in fixed monthly payments. This also lowers your credit utilization, because installment loans dont count toward your credit utilization ratio.
Whichever method you choose, your credit utilization will decrease, which should increase your credit score.
Keep in mind that you still need to work hard on paying off debt even after a balance transfer or loan. Don’t make the all-too-common mistake of relaxing and spending more just because you’ve gotten a lower interest rate for your debt.
Know How Your Credit Score Is Calculated
Once you have your score, know what that number means so you can take the steps to raise it.
“Your payment history accounts for about 35 percent of your score,” said Carrie Schwab-Pomerantz, a certified financial planner at Charles Schwab. “Increase the length of your credit history. This accounts for about 15 percent of your score.”
She advises an easy solution: Keep your credit card balances low.
“Ideally, you should keep the amount you borrow below 25 percent of your available credit limit,” she added. “This accounts for about 30 percent of your credit score. Minimize the frequency of new card requests. This accounts for 10 percent of your score. Keep a combination of different types of installment debt — such as car loans and mortgages — and revolving debt — like credit cards. This makes up the remaining 10 percent.”
Why Do You Want To Raise Your Credit Score By 100 Points
Anytime youre working to improve your credit, it can be helpful to identify why you want a better credit score in the first place. In other words, what is your goal?
Working to increase your credit score isnt always an easy journey. But if you focus on why youre trying to improve your credit, it might keep you motivated if the process doesnt go as smoothly or as quickly as youd hoped.
Limiting Credit Inquiries And Other Good Habits
Together, payment history and credit utilization rate comprise the bulk of your credit score. The rest of your score comes from a few other matters you can also try to control:
- Length of Credit History : A longer credit history seven years, for example provides a good sample size for creditors and can help build credit. This is another good reason to keep some old revolving accounts open even if you dont use them. A credit card or line of credit that youve had for years can help raise the average age of your accounts.
- : Only hard inquiries hurt your credit, and one hard inquiry by itself wont be a problem. Hard inquiries occur when you apply for a new credit card, mortgage, or personal loan. When you spread three or more hard inquiries across a 12-month period, you could see a credit score decrease. Soft inquiries which occur when you get pre-approved for a personal loan or get a free credit score from your monitoring service do not hurt your credit score.
- : Keeping a variety of accounts can help you maintain a good credit score. A good credit mix may include a mortgage, a home equity line of credit, a few credit card accounts, and a personal loan or two. Having all credit cards and no installment loans could pull down your credit rating a little.
Be Strategic About Your Payments When Youre Coming Up Short
As far as your credit score is concerned, the credit bureaus view a $25 overdue debt the same way they would view a $2,000 overdue debt. This means that if you only have enough money to pay off two small debts or one large debt, you should pay off the two smaller ones first.
You should also avoid making partial payments. Those wont help youyour creditor will still report them as missing payments.
Revolving credit accounts typically carry more weight than installment loans when it comes to your credit score. If you have the opportunity to put extra money towards your debts, its best to pay down your revolving accounts. However, you should still make the minimum monthly payments for all of your accounts to avoid incurring penalties.
How To Raise Your Credit Score 100 Points
If you want to build a solid financial future, then having a good credit score is necessary. A low credit score will make it harder for you to take out a personal loan or mortgage. And even if youre able to qualify, youll have to pay higher interest rates.
Its understandable that many people are looking for ways to raise their credit score quickly. Unfortunately, there is no foolproof plan for raising your credit score.
Some people wonder if you can raise your credit score 100 points overnight. Its highly unlikely that youll raise your credit score by 100 points overnight. So how quickly can you expect to see a change in your credit score?
After looking at 50,000 Credit Strong credit builder accounts, we found that, on average, account holders improved their FICO score by more than 25 points within three months. After nine months, the average account holder had increased their credit score by more than 40 points.
Credit Strong account holders that made all their payments on time for 12 months almost doubled that improvement, increasing their scores on average by almost 70 points.
This blog post wont teach you how to raise your credit score 100 points overnight, but it will show actionable steps you can take to improve your credit score over time.
How To Obtain Your Free Credit Score And Report
While you can obtain a credit score for about $20 from Equifax and TransUnion, theres no need to do so. You can now obtain your free score and report from companies like:
Borrowell: Get a free credit score and report . It is updated weekly.
: They give you a free credit score and report .
Checking your credit score does not impact it in any way.
If you prefer, you are entitled to one free credit report every year from TransUnion and Equifax. You can obtain them as follows:
TransUnion: Online, via mail, in-person, or by phone at 1-800-663-9980
Equifax: In person, via mail, or by phone at 1-800-465-7166
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Pay Your Bills On Time Every Time
Why is paying on time such a big deal? Your credit card payment history accounts for a whopping 35 percent of your total credit score. Miss a payment for 30 days or more, and you could get penalized anywhere between 60 and 110 points, depending on your credit score.
If you have missed a payment, start making on-time payments immediately. That late payment will stay on your credit report for up to seven years, but its negative impact will fade with every subsequent on-time payment.
The easiest way to avoid missing payments? Set everything to autopayand be sure to update your information if you switch banks.
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Get A Credit Builder Loan
A Credit Builder Loan from MoneyLion is an ideal way to improve your payment history and credit mix. Theres no credit check to apply for a loan if you have a steady source of income and an account thats at least 60 days and is in good standing, you could be approved for up to $1,000.
More than half of people who take the loan improve their credit score by over 60 points within the first 60 days!
This loan product features a competitive APR, and the affordable payments are automatically deducted from your account. Its easy to build credit since positive payment history is reported to the 3 credit bureaus Equifax, Experian and TransUnion on your behalf.
Theres no credit check to apply. Just link your checking account, and you could get same-day funding. If your finances need some work, MoneyLion may hold a portion of your loan funds in a Credit Reserve account in your name until you pay your loan in full. Once you do, the money is all yours!
Increase Your Credit Limits
This tip goes hand-in-hand with the previous one. You can reach out to your creditors every six months and request a credit limit increase. If you have a solid history of making your payments on time, this shouldnt be a problem. Once approved for a higher credit limit, youll automatically lower your debt-to-credit ratio and credit utilization talk about two birds, one stone!
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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!
Report Rent And Utility Payments
Did you know that lenders arent required to report your payments to credit bureaus? Like lenders, landlords and utility companies are also not required to report your successful payments. While lenders almost always report your payments, landlords and utility companies dont. Paying utilities and paying rent can build your credit score.
Simply call your utility company and landlord and ask kindly that they begin reporting your payments. If they agree, keep making payments and over time your score will go up. While this wont boost your credit score overnight, it will allow you to build your credit history without taking on more debt. Keep in mind that just as a successful rent or utility payment can help you, so too can a late payment hurt you.
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