Many people suffer from low credit scores. A credit score is a financial metric that determines what sort of financial options you qualify for. FICO scores, which are the most widely used, ranging from 300 to 850. A higher score means that you will easily be eligible for high-quality loans and credit cards.
Fortunately, the lower your score, the easier it is to raise credit score fast. Someone with a very high score isn’t going to see their score increase much since there’s not much else they can do.
If you are one of the millions of people suffering from low credit, then continue reading for a guide to raising your credit as fast as possible.
View your score
First and foremost, you’ll need to find a way to generate a credit report so that you can review where the weak points are. Generating a credit report can be done directly through one of the three main credit bureaus. Equifax, Experian, and TransUnion. Experian offers a free credit report tool (Experian Boost) to monitor your score and a feature to raise credit score fast.
Free credit reports can be acquired through apps like Credit Karma. These scores are more of an approximation of your true score, but they can be tremendously helpful in providing insight into your credit activities. Furthermore, some budgeting apps like Mint offer a free credit score estimate as well.
Once you’ve obtained a credit report, review it to see where you can improve. For instance, your report should show you important metrics such as your credit utilization, payment history, average account age, and more. All these pieces of information are vital in raising your credit score.
Also, you will want to search carefully for any inaccuracies on your credit report. Examples can be accounts that were improperly opened under your name, potentially caused by human error at a credit-issuing company. If you identify any errors like this, make a dispute immediately.
Important factors on a credit report
There are two extremely important metrics on your credit report that account for about 70% of your credit score.
Payment history. This is a percentage of your on-time payments versus missed payments. Any time you fail to pay a loan or credit card balance on time, this score gradually goes down. If your payment history degrades to less than 98%, you will start to see a significant decrease in your overall credit score.
The good thing about payment history is that it can quickly increase by merely continuing to make on-time payments going forward. Additionally, missed payment occurrences will no longer impact your account after seven years.
A fundamental rule with credit cards is to make sure your monthly statement balance is zeroed out before each new billing cycle. Not only does this prevent interest fees from incurring, but it also counts as a successful monthly payment. Likewise, make sure monthly installments on any other type of loan are made on time.
Whenever you think that you will not be able to make a payment on time, contact your credit or loan issuer, and discuss options. Sometimes they will allow for a grace period before reporting your missed payment to the credit bureaus. For more information, refer to our other post on proper credit card use.
Credit Utilization. Another extremely important metric on your credit report is credit utilization. This is a ratio between the credit limit on all of your credit accounts combined and the total amount you’ve spent on them. For example, if you have a total limit of $10,000 between all of your credit cards, and you have $5,000 that still needs to be paid off, then your credit utilization is 50%.
Ideally, you want to make sure your credit utilization is 30% or lower. Anything above that amount begins to impact your score negatively. Again, this is an easy metric to fix, and it can be done in a few ways.
- Credit limit increase: It’s possible to have an existing account’s credit limit increased. Most account platforms have a way to request this online, or you can contact your credit issuer by phone.
- Pay down balances: The best way to optimize your credit utilization is to pay down balances.
- Keep existing cards open: Closing an existing credit account may result in a lower combined credit limit, which may negatively impact your credit utilization ratio.
Note: Keeping existing cards open is also a way to ensure your average account age is high. On average, it’s best to have an average account age of five years. The average account age has a low impact on your credit score, but it is still a metric that can help you repair your credit. Don’t close existing credit cards unless you are avoiding annual fees, or if you are sure it will positively affect your credit score.
Avoid additional hard inquiries
Hard inquiries occur when a credit issuer immediately requests the most up-to-date info on your credit history. Any time you apply for a new credit card, mortgage, or car loan, the issuer will perform a hard inquiry.
While they don’t have too high of an impact on your credit score and are temporary, hard inquiries can quickly add up over time. Having seven or more hard inquiries on your account will begin to impact your credit score negatively.
The good news is that hard inquiries only stay on your account for two years. Still, if you intend on quickly repairing your credit score, you will want to avoid any unnecessary hard inquiries. Only apply for a new credit card or loan if you think it will increase your credit score, such as to optimize credit card utilization or to create a mix of accounts.
Other ways to increase your credit score
Mix accounts. In general, there are two types of accounts that appear on your credit history:
- Installment accounts are those that require a fixed payment schedule to pay off the account in full eventually. Examples are mortgages, personal loans, and car loans.
- Revolving accounts are those that allow the use of a line of credit while also paying down the balance monthly. Credit cards are the most obvious example of this.
Frequently, credit issuers want to see that you can handle both types of accounts. Therefore, if you only have credit cards, consider adding an installment account to mix up your account types. Do not pull out a loan just to increase your credit score, however, unless there is a specific use, and you can manage the payment installments.
Authorized user. Another crafty way to increase your credit score is to become an authorized user on another person’s credit account. Typically, the best candidate is someone who has a long history of responsible credit card use, preferably a trusted family member.
The primary account holder doesn’t even need to give you their credit card information. In other words, you don’t even need to use the primary account holder’s credit card to reap the benefits of their responsible credit use.
Experian Boost. This feature works by connecting to your banks to find any qualifying on-time bill payments, and with your permission, adds them to your credit file. This process takes only a few minutes but can raise credit score fast.
How long will it take to raise your credit score?
Increasing your credit score as quickly as possible is the goal; in reality, it may take anywhere from a few weeks to a few years to get anticipated results. Timing how long it will take to improve your score depends on factors like your average account age and how long ago your last hard inquiry or missed payment occurred. You will also be at the mercy of how often credit issuers report your finances to the major credit bureaus, which is usually every 45 days. As a result, any changes to your credit accounts won’t appear on reports until then. With third-party tools such as Experian Boost, it’s possible to raise credit score fast and requires minimum effort. To grow and maintain a high credit score, watch your credit carefully, and avoid high credit utilization and late payments. Follow these tips, and you will see an increase in your credit score.