So, you’re credit score sucks and you need to get it up fast. And by suck we mean it’s less than 723. Because 723 is the average credit score in the US. If your credit score is below that, it’s less than average and you are paying for it in more ways than you think.
No worries, we’ll show you the quickest ways to boost your credit score.
What is this score based on? [Begin collapsible section]
If you have ever tried to apply for a car loan, credit card, or even a new phone account, then people have looked up your credit score. But what is this score based on, and how can you improve it?
Today most banks and lenders use the FICO® score model, created by the Fair Isaac Corporation, to determine whether or not they will trust you with their money. The scores range from 300-850, with 850 being the best score achievable. The number is based on a mathematical algorithm that predicts your “credit risk” based on a few simple factors. You can increase your score and learn good money-management practices by knowing these key financial factors.
Because credit reports are confusing, and they have a lot of confidential information, the credit score was invented so average people could use your credit score to quickly determine if you are eligible for credit– without doing the complicated calculations, or interpreting all of the critical financial mumbo-jumbo that goes into it.
Today, any car dealership, mortgage lender, phone company rep, landlord, or average joe schmo can see whether or not you meet their minimum financial requirements.
What are these factors?
Your credit score is based on five major factors including:
- your payment history
- your spending habits and debt
- your overall credit length
- new accounts and
- The variety of loans and credit that you have
FICO gets all of this information from the three credit bureaus: Equifax, Experian and TransUnion. Because the credit scores go directly off of these reports, it is more important than ever for you to make sure that everything that they have on your records is accurate.[End collapsible section]
How fast can I raise my score?
In rare situations, people have gained 100 points in as little as 2 months. Everyone is different.
Think of raising your credit score as losing weight: if you are 200 lbs overweight, those first 30 pounds come off quickly. But the last 20 pounds are usually pretty stubborn. In credit repair, if your score is super low, you can usually make some quick gains, but the higher it goes the more time and work you’ll need to earn each point. Either way, credit repair is the bright light at the end of the tunnel.
47% of Americans have a score below 700, on the other hand that also means that just over half of Americans have a credit score of 700 or more. So, if you think that getting a score of 700 or more is impossible, then you are wrong. You just need to take the right steps to fix your credit.
5 Things that Can Bring your Score Up Fast:
First step in getting your score up is to focus on the biggest chunks of the credit score pie. Payment History and Overall Debt add up to 65% of your score. Focus your energy here first to get the biggest impact on your credit score.
- Get negative items removed from your credit report:
Whether the negative information on your credit report is correct or not, it still impacts your score. This is why it is essential to check your credit report and check for mistakes and inaccuracies, unfair credit reporting, or identity theft. Be proactive and take the necessary steps to get informed about your credit, and stay on top of it.
How do I get my Credit Report? [Begin collapsible section]
Because of the Fair and Accurate Credit Transactions Act, you can check your credit information once a year for free. According to the Federal Trade Commission (FTC), there is only one credit report website available that is backed by the federal government, and it is called AnnualCreditReport.com. You can also call 1-877-322-8228 for more information. You should be able to get a credit report from each of the three bureaus for free, however, they do not give you your credit score.[End collapsible section]
Sometimes it can be difficult to distinguish between what is removable on your credit history, and what is not. So, if you don’t know where to start, you can contact a reliable credit repair professional, like Lexington Law. They provide your credit report summary and credit score during their free credit repair consultations.
- Make sure no one is using your accounts or identity illegally:
In 2013, it was calculated that there was a new victim of identity theft every two seconds. If there is identity theft, confront it and work with the credit bureaus, or work with a reliable credit counselor to get it corrected. Getting identity theft corrected can be a long and hard process, but once it is fixed your score is likely to see a big boost.
- Get current on any outstanding accounts:
If you are struggling to keep up, turn to a legitimate credit counselor before it further impacts your credit. They can help you make arrangements with your creditors, and help you make a plan to get back on track.
- Get your late fees and past-due accounts reversed:
Now that you are caught up with your payments and accounts, its time to address those outstanding accounts. Try calling your bill collector (Sprint, JCPenney, Visa, etc.) and see if they will remove any of those past 30-day late payments.
- Pay down any credit card with a balance of more than 50% and evenly distribute debt among credit cards, so no cards are maxed:
If you have a credit card, or several, make sure you keep your balances low. Lenders pay attention to high balances and maxed out cards. It’s better to spread your balances across several cards than to use one card for all of your debt. For example, if you have three cards, it would be better to use 25% of the balance on each card rather than using 75% of the balance on only one card. When you are going to make a big purchase with a card, try asking your merchant to split it among different cards.
Now that you have taken these 5 important tips on raising your score, we need to focus on preventing the 3 major negative factors that will drag even the highest scores down.
Things that Bring your Score Down:
Now that you have taken your first steps raising your score, we need to focus on preventing the three major negative things that will drag even the highest scores down. Although it only counts for 10% of your score, opening up new accounts– or trying to– can quickly tip your score downwards.
- Avoid applying for new loans or credit cards:
Be careful not to open too many new cards or loans at one time. New credit can affect you in two ways: increasing third-party inquiries, and by reducing the average length of your credit history. Every time you ask for credit an inquiry will be made– and that lender will check your report and see who else has been looking at your credit.
- If you must search for the best loan, do it within a certain timeframe:
FICO® is trying to discourage someone from apply for 20 different loans and then maxing them out at the same time. Every time you apply for a loan, your credit gets dinged. However, FICO® recognizes that sometime people legitimately are need to apply for credit. So they allow a timeframe (typically 30 days) for you to apply for as many loans as you want, and it only counts as one ding. So if you are searching for the best rate on something like your home mortgage, make sure to do it in a timely matter.
- Avoid closing unused credit card or other credit accounts:
Closing your card or account may backfire on you by reducing your available credit. Additionally, getting rid of old cards where you have a long history could impact the average length of your credit history. It’s best to keep those old cards open, and keep them for a rainy day.
Long Term Steps and Habits to Raise your Score Even More:
Now that you have addressed the factors that you can change quickly, it is time to look at those factors that take a lot of time and patience to tackle. The length of your credit history and the quality of your credit mix makes up 25% of your credit score. Unfortunately, these factors can’t be rushed. On the bright-side, once you do master these factors, you will be well on your way to a 700+ credit score.
- Mix it up:
Having a mix of accounts can help your score, but don’t just open different types of accounts to try to manipulate the numbers. Make sure your revolving credit card accounts, installment loans, mortgage accounts, and other types of loans all make sense and fit your needs.
- Keep paying on time every month on every account:
It takes seven years for negative factors (like being more than 30 days late) to be removed from your record. So, if you have some late payments, the only cure is to keep up with your payments, then eventually your score will go upwards.
- Use new accounts to rebuild a tarnished credit history:
Although you can’t wipe the slate clean, opening up new accounts strategically and handling them responsibly will eventually raise your score.
- Don’t be afraid of credit cards:
Getting a credit card does not hurt your credit– it is how you use a credit card that can help or hurt your credit. You can establish positive credit history simply by paying on time and keeping your balances low. If you do not qualify for an unsecured card, you can talk to your bank about getting a secured card. “Secured” essentially means you are putting up money as collateral in case you can’t pay back the balance. You can start off slowly with a low credit line and work your way up.
- Strategically handle any collections on your record– if you have any:
Paying off your collection accounts and getting them reported as paid won’t help immediately, but it will help improve your score overtime. In the past, it would have taken seven years for negative information to fall off your credit report, but recently there has been a change with FICO® that may allow paid collection accounts to drop off sooner than that. Ask a credit repair professional for more information.
Nobody is perfect, so if you have a low score, don’t fret, because credit repair is a great solution for fixing credit mistakes. Once you are out of the dangerzone, be sure to stay in the clear because the only path to impeccable credit is time. Except for that one-in-a-million person that has a credit score of 850, there is always room for improvement.
Don’t forget, you don’t have to do it on your own– if you don’t know where to start, or if you need significant repair, talk to a credit repair professional.