Credit scores play a crucial role in our financial lives, impacting everything from loan approvals to insurance rates. If your credit score is low, you may face challenges in obtaining housing, loans, insurance, and even job opportunities. However, improving your credit score doesn’t have to be a daunting task. In this article, we will explore 15 steps you can take to quickly boost your credit score and qualify for the best deals.
15 Steps to Improve Your Credit Scores
1. Dispute items on your credit report
The Federal Trade Commission found that one out of every four people had a mistake on their credit report that could impact their credit score. Take advantage of your entitlement to one free credit report per year from each of the three major credit bureaus. Review your credit reports and dispute any errors or negative entries you find.
2. Make all payments on time
Your payment history is the most significant factor in determining your credit score, accounting for 35% of it. Late payments can have a negative impact that lasts for seven years. Set up automatic payments for all your debts to ensure you never miss a payment.
3. Avoid unnecessary credit inquiries
Each time you apply for credit, your score may temporarily drop. Avoid unnecessary credit inquiries and only apply for credit when necessary to prevent a negative impact on your score.
4. Apply for a new credit card
Opening a new credit card can actually improve your credit score. By increasing your overall credit limit, your credit utilization ratio decreases. Aim to keep your utilization ratio below 30%, as this accounts for 30% of your credit score.
5. Increase your credit card limit
If you’ve been using your credit responsibly, you may be eligible for a credit limit increase from your bank. This increase will reduce your credit utilization ratio, positively impacting your credit score.
6. Pay down your credit card balances
Contrary to popular belief, carrying a balance on your credit cards does not necessarily improve your credit score. It’s better to pay down your balances and keep your credit utilization ratio below 30%. Aim to reduce your balances to below 10% for even more significant benefits.
7. Consolidate credit card debt with a term loan
Consider consolidating your credit card debt with a term loan. This approach reduces your credit utilization ratio to 0% and demonstrates responsible payment behavior, positively influencing your credit score.
8. Become an authorized user
Ask someone with a good credit history to add you as an authorized user on their credit card account. This can help improve your credit score, provided the account has a positive payment history and low credit utilization.
9. Keep your oldest accounts open
The age of your accounts also affects your credit score. Keeping your oldest accounts open demonstrates a long history of responsible credit usage, positively impacting your score.
10. Open a self-lender loan
Consider opening a self-lender loan to improve your credit score. These loans don’t require borrowing money but report your on-time payments to the credit bureaus, helping build a positive payment history.
11. Apply for a secured loan
Secured loans can be easier to obtain than personal loans because they are backed by collateral. By making on-time payments, you can demonstrate responsible credit usage and improve your credit score.
12. Sign up for Experian Boost
Experian Boost recognizes regular on-time payments for rent, subscriptions, and utilities, and includes them in your credit score calculation. Signing up for Experian Boost can boost your credit score.
13. Have rent payments reported to credit bureaus
If your landlord doesn’t report your rent payments, consider using a third-party company to report them to the credit bureaus. This additional payment history can give your credit score a significant boost.
14. Switch to an all-cash budget
One effective way to avoid accumulating more debt is to switch to an all-cash budget. This allows you to apply extra cash toward reducing your balances, improving your credit utilization ratio, and interest charges.
15. Build credit through a debit card
Although traditional debit card usage doesn’t directly impact your credit score, some FinTech banks now offer debit cards that build credit. Using these cards and maintaining a positive balance can help improve your credit score.
Why does a good credit score matter?
A good credit score is essential in today’s economy. It not only affects your ability to obtain loans and credit cards but also influences your insurance rates, job applications, and more. For example:
- Getting approved for credit often requires a minimum credit score.
- Lower credit scores lead to higher interest rates and fees.
- Landlords and rental companies may require larger security deposits for individuals with bad credit.
- Some job categories and professional licenses require good credit, while bad credit can hinder security clearances.
How long does it take to rebuild a credit score?
The time it takes to rebuild your credit score depends on various factors, such as your previous score, the severity of your current score, and the cause of the low score. Generally, the higher your score before the setback, the longer it takes to fully recover. Here are a few scenarios:
- Missed payment: Your credit score should start recovering within 18 months if you make all other payments on time.
- Maxing out a credit card: By paying off the balance, your score should recover shortly after the card issuer’s next update to the credit bureaus.
- Filing for bankruptcy: While your credit score improves over time with responsible behavior, it can take several years to fully recover.
Conclusion
Improving your credit score is crucial for accessing favorable financial opportunities. By following the 15 steps outlined in this article, you can quickly boost your credit score and qualify for better deals. Remember, even taking one step at a time puts you on the path to a higher credit score.
FAQs
How can I raise my credit score in 30 days?
To raise your credit score quickly, follow the steps mentioned in this article. Dispute errors in your credit report, pay down credit card debt, and consider signing up for Experian Boost.
How do I get a 700 credit score in two months?
To achieve a 700 credit score quickly, dispute errors and negative marks on your credit report, make all payments on time, reduce credit card balances, and keep old credit cards open.
What is the #1 way to improve your credit score?
The number one way to improve your credit score is to reduce your credit utilization. Pay down credit card balances, increase credit limits, or consolidate debt to achieve this.
How do I get a 720 credit score in 6 months?
To improve your credit score to 720 within six months, review your credit report, make all payments on time, lower your utilization ratio, and become an authorized user on an account with a long history of responsible use.