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People often recognize they have a low credit score when they are in a time crunch. Bad credit can make it difficult or even nearly impossible to get approved for an auto loan, rent an apartment, or get a new credit card.
If you’re concerned you’ll be denied on an application due to bad credit, you’ll most likely want to know how to increase your score. How fast you’ll be able to boost your credit will depend on a number of factors, such as how many items and what kinds of items are on your credit reports. So, we can’t promise you a specific score increase within a specific time frame, but we can provide these 10 tips to help you work to improve your credit score that you can start applying in your life today.
Before you can learn how to build credit, the best thing you can do is understand the factors that comprise your credit score. Understanding how credit scores work allows you to avoid harming your score and know which factors to focus on. Most companies looking at your credit report use the FICO® scoring model, which uses the following five factors. Each one is weighted differently:
Impact: High. Knowing how your score is weighted lets you focus on the most important factors, like payment history and credit utilization, first.
Potential speed for results: Average to fast. This is the foundation for boosting your score and will help you incorporate the other tips faster.
If your score is low due to debt, picking one or more debt payment strategies can be beneficial because it can compound the positive effects. Below are some of the strategies to give a try:
Impact: Medium to high. Whatever strategy will help you lower your credit utilization and make all of your minimum payments on time will likely benefit you the most.
Potential speed for results: Average to fast. Strategies that lower your utilization ratio may work fastest.
Negative items are like an anchor weighing down your credit, and they can decrease the impact of the other tips. If you have any derogatory marks like collection accounts, paying them off can improve your score, if you can negotiate such an agreement with the collection agency. Other negative items include bankruptcies, missed or late payments, and foreclosures.
Sometimes, these negative items are reported in error, too, so make sure the marks are legitimate before paying them off. If there’s an error, you can dispute a negative item and possibly get it removed from your credit report. And if you can’t get negative items removed from your reports, they should drop off on their own after seven to 10 years have passed (the exact time limit will depend on the item).
Impact: High. Depending on where your credit score starts, a derogatory mark can make it drop by a significant number of points, so you may see a big increase if any of these items are removed.
Potential speed for results: Too variable to say. If a negative item is removed, you may see a change in your score within 30 to 45 days, which would be considered a fairly quick result. However, it can take many months to complete the dispute process or negotiate with a creditor to get a negative item removed, so it depends on your specific case.
Becoming an authorized user involves having someone with a credit card add you to their account. This is sort of like piggybacking off of someone else’s line of credit, and it can help lower your utilization ratio and possibly raise your credit age.
For example, if you have a credit card with a $1,000 limit and are using $500 of it, you have a 50 percent utilization ratio, which is high. If you become an authorized user on a credit card with a $5,000 limit that has no balance, you now have a $500 balance with an overall limit of $6,000. This makes your utilization ratio 8 percent, which is great because anything less than 30 percent may help your score more.
Impact: High. Becoming an authorized user helps with your credit utilization ratio, and this is one of the ideal ways to build credit quickly.
Potential speed for results: Fast. The decrease to your utilization should be apparent the next time your credit report is updated.
Similar to becoming an authorized user, a credit limit increase is another way to lower your credit utilization ratio and, therefore, improve your credit. If you have a credit card already, you can call your card issuer to request an increase. These requests aren’t always approved, so here are some tips that may help with an approval:
Impact: High. Again, your credit utilization ratio is a major part of your credit score, so this is a very influential factor.
Potential speed for results: Fast. As long as you don’t increase your credit usage before the next update to your credit report, this may have an effect pretty quickly.
Finally, to decrease your utilization ratio the old-fashioned way, you’ll need to start using cash or your debit card as much as possible. Each time you use your credit card, you’re raising your balance closer to the max limit, which means you’re raising your utilization ratio. To decrease your utilization, you not only have to use cash or debit as much as possible but also need to pay off your card balances regularly.
Impact: High. By decreasing your utilization ratio, you’re taking care of the two biggest factors: utilization and payment history.
Potential speed for results: Fast. Note, though, that the impact and speed of any action that affects your utilization will depend on how high your utilization ratio is and how much you lower it. For example, if your utilization is at 50 or 60 percent, and you manage to lower it below 30 percent, you may see a noticeable increase to your score quickly.
Applying for too many new credit cards and lines of credit can halt any hard work you’ve done to improve your credit score. Each time you apply for credit, the application involves checking your credit report, which temporarily hurts your score. This happens because applying for credit may indicate that you’re low on funds and can’t make all of your payments.
Getting a new card can help decrease your utilization ratio, but that’s after it initially drops your score. Overall, a new card can improve your score, but consider opening new accounts sparingly. Veteran financial planner Lee Huffman recommends waiting six months between applying for new lines of credit.
Impact: Low. This method won’t boost your score, but it should prevent it from dropping unnecessarily.
Potential speed for results: Fast. You won’t see the negative effect of a hard inquiry if you don’t apply for new credit.
If you’re in a position to make additional payments, this is quite helpful because it lowers your outstanding debt, which can also lower your utilization ratio. If you have collection accounts, the extra payments should go toward those, and sometimes, you can settle those debts for less. For regular debts, try to make extra payments whenever you have additional funds. If you don’t have additional funds, here are some ways people bring in extra money to make extra payments:
Impact: High. This will help to reduce your utilization ratio and can also help with your payment history.
Potential speed for results: Average. If your extra payments eventually lower your utilization ratio, this can eventually boost your score.
Interest rates can make it take a lot longer to pay off your debts—and raise the amount you owe over time—so reducing them whenever possible can be pretty helpful. To put it into perspective, let’s say you have $5,000 in outstanding debt at a 10 percent interest rate, and you plan to pay it off in five years. This would cost you $1,374.11 in interest, which will take you longer to pay. By negotiating the interest rate to 6 percent, interest would cost you just less than $800.
Your credit card company makes money through interest, so they don’t want you to transfer your balance to a new bank. You can use this as leverage to negotiate a lower rate with your original card issuer.
Impact: Low, though doing this is very helpful for your finances in the long run.
Potential speed for results: Average. If lowering your interest rate helps you pay off your debts faster, this can shorten the amount of time until you see a boost in your score.
Sometimes, derogatory marks show up on your credit report and lower your score without you even realizing it. One way to get notified is to set up credit monitoring. This will alert you to negative items and even let you know if you may be a victim of identity theft or fraud. Credit monitoring will alert you to:
Impact: High. In the case that you’re a victim of fraudulent activity or you acquire some derogatory marks on your credit reports, it can be very beneficial to your credit if you notice and address these issues.
Potential speed for results: Fast. When you’re alerted to errors on your reports, you can immediately get to work addressing them and making sure they don’t affect your credit for long.
Here are some of the most commonly asked questions when it comes to improving your credit score fast.
The two best ways to build credit are to make all of your payments on time and in full and to lower your utilization ratio. If you can do both of those things, you’ll be setting yourself up for success, whether now or in the future.
Here are a few ways you can use your credit card to increase your score:
An “excellent” FICO credit score is between 800 and 850. If you want to know how to increase your score to 800 or higher, the simple answer is that it takes time and patience. Credit age is the one factor you can’t increase quickly.
If you’re trying to improve your credit, you now have 10 simple tips that can help, but errors may be holding you back. As we mentioned before, creditors and the credit bureaus sometimes report missed payments, late payments, and other derogatory marks in error, and it takes a process to have them removed. You can dispute these errors yourself, but it’s often best to use professionals who have experience in this realm.
Lexington Law offers credit repair services, and we challenge errors on your behalf. During your free credit report consultation, we’ll take a look at your credit situation and see if our services are a good fit for you. Not only do we help our clients work to have fair, accurate, and substantiated credit reports, but we also offer a wide range of other services like identity theft protection and financial education tools to help you maintain great credit. To learn how we can help, contact us today for more information.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
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