Whether you want to admit it or not, your credit score dictates almost everything about your financial life. This includes whether or not you will be approved for a credit card, to getting a loan for a car, or even what rate that you will get on your mortgage.
If you are among the more than half of Americans that has a subprime credit score, it is time to learn how to quickly increase credit score. Here are 7 of the fastest ways to increase credit score.
Before you take any other steps you first need to visit annualcreditreport.com and request our free credit report from each of the major credit reporting agencies. These credit reporting agencies are TransUnion, Equifax, and Experian.
Federal law requires these companies to provide you with one free credit report each year. You may choose to receive all three of your credit reports at once or you may get them one at a time throughout the year. You can request your report online. Once you submit your request you will receive your report almost immediately. Be ready to save it to your computer or print it out.
When you have your report you want to make sure that you examine all of the information that is on it. Look for any accounts that show unpaid bills or late payments. If you find any information that is not accurate, you should file a dispute.
According to myFico.com roughly 30 percent of your credit score is based on how much money you owe. However, it is not just how much you actually owe, but it also how much open credit that you have. This ratio of debt to credit is known as your credit utilization.
An example of credit utilization is if you have a credit limit of $5000 on one of your cards and you have a $2500 balance, your credit utilization for that card is 50 percent. Credit utilization looks at all of your credit cards and uses the ratio of how much you debt you have compared to how much credit you still have available to determine your credit utilization percentage.
There are several theories about what percentage your credit utilization should be at, but most experts agree the number is below 30 percent. If you are above this level on any of your cards, paying down your debt as quickly as possible is one of the fastest ways to help improve your credit score.
If you have a credit card that you use regularly and pay off each month you may think that you are doing great because you do not carry over a balance. However, there is a problem with this method.
Creditors only report to credit bureaus once each month. This means that depending on the time that your balance is reported, it may appear that you have a huge balance on your card, even if you are planning to pay it off at the end of the month.
A way to overcome this is to make bi-monthly payments. Instead of paying the balance off at the end of the month, make a payment every 2 weeks or so to keep the balance on the card lower at all times. This will allow you to still get the rewards that you are seeking, but will also show a lower credit utilization when the information is provided to the credit bureaus.
If you are not able to pay down your balances quickly, consider asking for an increased credit limit. Increasing your credit limit is another way to improve your credit utilization rate. For example, let’s say you have a credit card with a $1000 limit and it is maxed out. If you can get your credit limit increased to $2000 you have cut your credit utilization by half.
If you do ask for a credit limit increase it is important to not use any of the new credit as this will defeat the purpose.
If you truly need to increase your credit utilization score and you cannot pay off your current balances and your current credit card company will not increase your credit line, another option is to open up a new line of credit. This can help your score since all of your open lines of credit are lumped together when determining your credit utilization.
It should be mentioned that opening up a new account can also have a negative impact on your credit score as well. This is because of the hard inquiry that will be done in order to obtain any type of new credit. Often times the bump you may see from a better credit utilization is negated because of opening the new account.
Perhaps your credit score is lower because you have some bills in collections. While you cannot wipe off any past mistakes from your credit report, you can do a bit of damage control by settling these accounts.
It is possible to negotiate your debt with these companies. Most of the time you will be able to get the amount that you owe lowered. It is important to make sure that you get any agreement that is made in writing.
If none of the above suggestions help you, there is one more option to consider. If you have a friend or family member that will allow you to become an authorized user on one of their accounts, this can help improve your credit score.
As an authorized user the account will be on your credit report. This only works if the account is in both of your names. Your credit report will show the on time payments made on the account and a better credit utilization rate. This can help boost your credit score.
These 7 tips can help you raise your credit score quickly, but remember quickly is a relative term. In order to see any type of results you are going to need to be patient. Typically, you will see your score increase slightly within three to four months if you use the methods above.