Like many of you I’ve been thinking about my credit score lately. Nothing as draconian as losing sleep at night about it, but just the same, wondering if it’s good enough to make some of the purchases that I’d like to make. Some will tell you that it doesn’t matter, and not to worry. Those aren’t the people who are thinking of giving you a loan, mortgage, credit card, etc. They care very deeply. Probably even more than you. Credit is a necessary evil if you want to grow and don’t have the equity, or just want to use the leverage. Either way, it’s got us coming or going. If you want to buy a home, the pinnacle of credit necessity, and are like 95% of Americans who can’t pay cash, then your credit score really matters.
If you’re like 60% of America, you don’t have an extra $1,000 to cover an emergency if it happened. It would be nice if you could pull out a credit card and make that expense go away. At least for now. Earning a good credit score, typically 670 or higher, in the popular FICO model that most lenders use can take work. So how does one get there, and fast? There may be ways to build your credit fast if your score is lower than you’d like. Depending on what’s holding it down, you may be able to tack on as many as 100 points relatively quickly.
It may seem counterintuitive, but raising a lower score can be easier than pushing a higher score even higher. According to Rod Griffin, senior director of public education and advocacy for credit bureau Experian, “The lower a person’s score, the more likely they are to achieve a 100-point increase. That’s simply because there is much more upside, and small changes can result in greater score increases.”
So how exactly do you go about either lowering your credit score or keeping it from spiraling out of control higher? The following will guide you through the fast lane to better credit.
- Pay Credit Card Balances Strategically
One of the most impactful ways to improve your credit score is by managing your credit card balances wisely. Consider the following tactics:
- Credit Utilization Ratio
Maintain a low credit utilization ratio. Ideally, use no more than 30% of your available credit limit on any given card. High scorers often keep their utilization in the single digits. Regularly monitor your balances and adjust your spending accordingly.
- Timing Matters
Pay down your credit card balance before the billing cycle ends. Alternatively, make multiple payments throughout the month to keep your balance low when the card issuer reports it to the credit bureaus. This proactive approach demonstrates responsible credit management.
- Ask for Higher Credit Limits
Increasing your credit limits can positively impact your credit utilization ratio. However, exercise caution: A higher limit doesn’t mean you should increase your spending. Use the additional credit responsibly.
- Become an Authorized User
Consider becoming an authorized user on someone else’s credit card account. If a family member or friend with good credit adds you, it can enhance your credit history. Ensure that the primary cardholder maintains a positive payment history.
- Timely Bill Payments
Paying your bills on time is non-negotiable. Set reminders or automate payments to avoid late payments. Timeliness significantly influences your credit score.
- Dispute Credit Report Errors
Regularly review your credit reports from the major credit bureaus (Equifax, Experian, and TransUnion). If you spot inaccuracies, such as accounts you didn’t open or incorrect payment information, dispute them promptly. Correcting errors can give your score a meaningful boost.
- Deal with Collections Accounts
Address any outstanding collections accounts. Negotiate payment plans or settlements if needed. Even partial payments can help improve your credit standing.
- Secured Credit Cards
If you’re rebuilding credit, consider a secured credit card. These cards require a deposit as collateral, but allow you to establish a positive payment history. Over time, responsible use can lead to an improved credit score.
- Report Rent and Utility Payments
Some services allow you to report rent and utility payments to credit bureaus. If you consistently pay your rent and utility bills on time, this can enhance your credit profile.
- Diversify Your Credit Mix
Having a mix of different types of credit, such as credit cards, installment loans, and mortgages, can positively impact your score. Lenders appreciate borrowers who can manage various credit responsibilities effectively.
Improving your credit score is usually a gradual process. Be patient, stay informed, and implement these strategies consistently. Over time, your creditworthiness will strengthen, opening doors to better financial opportunities.
Remember that each individual’s credit journey is unique, so tailor these strategies to your specific circumstances. By following these guidelines, you’ll be well on your way to achieving a healthier credit score!
