Low credit scores can make it difficult for you to enjoy the perks of financial freedom, but there are ways to tackle it depending on what’s keeping your score down.
How to improve your credit score
Credit scores are three-digit numbers calculated by different companies. Landlords, phone companies, lenders, and other creditors use your credit score to determine whether you’re a safe candidate to do business with or not.
They can also use your credit score to determine whether you can rent an apartment, lease a car, take out an education loan, or purchase anything else you want in life.
FICO (Fair Isaac Corporation) and Vantage Score are the two most commonly used credit scoring models. These scores are calculated by the three nationally recognized credit bureaus Experian, TransUnion, and Equifax. They look at a host of factors to ascertain your credit scores, such as your payment history and management of credit.
How long does it take to improve your credit score?
The truth is, that it takes time to develop a strong credit score. A FICO credit score ranges somewhere between 300 and 850. A score of 670 or above falls under the range of good to exceptional, while anything below 670 is considered fair to poor. By paying your bills on time and using your credit judiciously, you can maintain a good credit history, which is what the credit bureaus scrutinize.
Is it possible to raise your credit score in 30 days?
Your responsible behavior can impact your credit score quickly. By following the steps mentioned below, you can push your credit into a new range and place yourself in a better position.
1. Retrieve a copy of your credit report and remove negative items.
Studies by the Federal Trade Commission show that 5% of consumers have errors on at least one of their three credit reports. This is the reason you should evaluate your credit report periodically. Under federal law, you are entitled to get a free copy of your credit report from the three main bureaus once a year.
2. Pay down your credit card balances.
Credit scoring companies value borrowers who keep their credit balances under 30% of their total available credit.
Your credit utilization ratio shows how much you owe on all of your revolving accounts compared to your total available credit. This outlines how well you can manage your credit. For instance, if you have a $1000 credit limit on your card, try to maintain the total balance under $300.
3. Take your old cards out and activate them.
Let your old credit cards come to your rescue. Activate your old cards and keep a small balance on them, which will help lengthen your credit history. It is a good idea to put these cards on automatic payment so that you don’t offset your lengthened credit history with late payments.
4. Become an authorized user.
You might want to become an authorized user on someone else’s account if you don’t have a long history of credit card ownership. Ask your family and friends with a good credit score if they are willing to make you an authorized user of their card.
Their good credit can help you build yours. It is entirely up to the primary cardholder whether to allow you to use the card.
5. Always pay your bills on time.
The best way to make sure that you pay your bills on time is by setting your recurring accounts on autopay in your online banking accounts. Loan providers, credit card companies, and utilities can offer you automatic payment options to automatically make deductions from your checking account when your bill is due.
6. Reduce the amount of debt you owe.
One great way to start your debt reduction plan is by clearing your finances so that your credit score can improve. You should ensure to pay off your high-interest rate cards first while maintaining the payments for the rest of your cards by putting them on autopay.
After you’ve made the payments, don’t cancel your cards or use them. Rather, you should keep the accounts open to boost your credit utilization.
7. Start with a new credit history.
One great strategy a few people use is to take out a credit card that is easier to qualify for, such as a gas station or a store card. Remember, it is important to consistently keep paying off your balances each month, which can help you to improve your credit history.
This good habit and behavior can put you in a much better financial position, however, be cautious. You may rack up more debt by taking out new cards if you can’t handle your payments well.
8. Avoid taking out too many cards.
It may seem like a good idea to open a new credit card with a merchant to get a discount on an item, but it is better to not go overboard by taking advantage of too many discounts over a short period.
Since each new card comes with a hard inquiry from the card issuer, it can hurt your credit score.
9. Don’t close your account.
It can be tempting to cut up cards once you have paid off all the dues on them. But don’t close your accounts yet. Open but unused credit cards help create a long and established credit history and improve your credit utilization ratio.
What you can do is stick your credit cards in a drawer, which can help you maintain a low balance and favorable credit utilization ratio. You could also request a credit card freeze.
10. Try to diversify your credit mix.
Various credit scoring models like to see you using a diversified mix of credit, which means that you can take out a personal loan instead of depending solely on your credit cards.
It is good to remember that consistency is key when improving and maintaining your credit health. You can try out the useful tips shared above that can boost the speed of improving your credit score.
If you are still unsure, it is best to get a free consultation with Cool Credit, a leading credit restoration service provider that can easily boost your credit score without you even worrying about it.
Visit coolcredit.com to learn more.