Your credit score is like a report card for grown ups. A low credit score can affect your ability to get low-cost loans, credit cards, and housing. A high score can help you qualify for the best rates on a wide range of financial products. Ready to give your score a boost? Try these 10 simple ways to improve your credit score fast.
- Why Improve Your Credit Score?
- 10 Simple Ways to Improve Your Credit Score Fast
- 1. Pay bills on time
- 2. Make sure all your accounts are current and not overdue
- 3. Be an authorized user
- 4. Lower your credit utilization and ask for a credit limit increase
- 5. Ask for a lower interest rate
- 6. Use a credit card that reports to all three credit bureaus
- 7. Look for errors on your credit report
- 8. Try Experian Boost
- 9. Don’t close a credit card account after paying it off
- 10. Have a mix of credit accounts (but don’t open an account solely for this purpose)
- Credit Score vs. Credit Report
- Final Thoughts
Why Improve Your Credit Score?
A good credit score can open doors to loans with lower interest rates and credit cards with great perks and rewards. A good credit score can also save borrowers tons of money.
For example, check out the image below from myFico’s Loan Savings Calculator. For a $250,000 30-year mortgage, going from a score of 639 to a score of 700 can save you $79,430.
That’s a lot of cash and a great incentive to start working on increasing your credit score.
Learn more: What is a Good Credit Score?
Below are ten steps you can take to get started on improving your credit score fast.
10 Simple Ways to Improve Your Credit Score Fast
1. Pay bills on time
According to myFico, payment history makes up 35% of your credit score. You want to pay your bills on time every month. To make sure you don’t miss a due date, you can set up bill reminders and autopay. Learn how to do this in our Simple Guide to Automating Your Finances.
It’s also best to pay your entire balance each month. But making the minimum payment by the due date still counts as an on-time payment.
If you’re in a bind and can’t make a payment, call your creditor. They may be able to extend your due date or modify your payments.
2. Make sure all your accounts are current and not overdue
Paying bills late can impact your score But missing payments altogether can significantly drop your credit score. For example, according to myFico, missing a payment by 90 days can tank your credit score by as much as 180 points.
If your account is overdue, again, call your creditor and ask if they can help you bring your account current.
3. Be an authorized user
This move is also called piggybacking. It means that you become an authorized user on someone else’s credit card. Ideally, it’s a credit card with a long history of on-time payments, plenty of credit, and a low balance.
Make sure the creditor reports authorized users to the credit bureaus. Otherwise it won’t help your score. You can do this by contacting the credit card company directly or reading their terms.
Keep in mind, that if the primary user misses payments or uses too much credit, then your credit may suffer, too.
4. Lower your credit utilization and ask for a credit limit increase
Credit utilization refers to the percentage of available credit you are using. According to myFico, people with excellent credit scores use about 7% of their credit limit. And credit utilization accounts for 30% of your credit score.
To figure out your credit utilization, take the sum your total debt and divide by the sum of your credit limit. For example let’s say you owe a $500 on one credit card with a credit limit of $1,000. And $200 on another card with a credit limit of $800. Your total debt of $700 divided by your total credit limit of $1,800 equals 38% credit utilization.
You want to pay down your credit card debts to lower your utilization. You can also ask for a credit increase. Remember, it’s not the total amount of credit you have but the percentage of credit you’re using. Getting a credit limit increase, raises the denominator and thus lowers your credit utilization.
5. Ask for a lower interest rate
Talk to your creditors and ask if it’s possible to lower your interest rate. Getting a lower interest rate can indirectly increase your credit score. Here’s how it works.
If you’re trying to pay down a credit card balance, a lower interest rate can help. Every month you carry a balance and don’t pay off the card, you’ll see interest added to that balance. Lowering your interest rate means less money added to your balance each month. This should help you pay down your credit card quicker.
As we mentioned above, paying down your credit card debt also lowers your credit utilization. And that’s good for your credit score.
6. Use a credit card that reports to all three credit bureaus
Most credit cards report to all three credit bureaus (Experian, TransUnion, and Equifax). But some may only report to one or two. Read the terms to make sure you get the best value from your card.
This is especially important if your credit score is poor or if you’re trying to build credit from scratch. You want to make sure all three bureaus are tracking your progress as you work to build up your credit score.
If you have poor credit or no credit, check out our list of the Best Secured Credit Cards to Build Your Credit.
7. Look for errors on your credit report
You can get a free copy of your credit report from every year from www.annualcreditreport.com. It’s good practice to carefully review your credit report once a year.
A Consumer Reports Study found more than a third out of 6,000 volunteers found mistakes in their credit report. As indicated in the image below, unrecognized accounts and wrong addresses were the two most likely errors to find.
Fixing errors may vary in difficulty, but can also be worth the effort. For example, when applying for a loan to refinance my home, I found a delinquent debt of less than $200. The agency had sent the bills to the wrong address (misspelled). I was able to easily pay off the original debt (minus the interest) and clear the charge off of my report.
If you need more guidance on disputing an error on your report, check out this advice from the Federal Trade Commission.
8. Try Experian Boost
Experian Boost allows consumers to connect their bank accounts to Experian. Experian Boost looks for your utility bills, phone bills and even subscription accounts. Then reports your on-time payments on those accounts to boost your credit score.
According to Experian, 75% of users with scores under 680 saw an increase in their FICO scores. Experian Boost is free to use and the signup process only takes a few minutes.
9. Don’t close a credit card account after paying it off
Keeping credit cards open can help your credit utilization rate. Epecially if you don’t use them. Remember this rate makes up 30% of your credit score. Additionally, older accounts increase your credit history. According to myFico, your credit history accounts for 15% of your score.
There are times when you may still want to close a credit card, for instance if it has a high annual fee. If this is the case, call the credit card company and see if they can move your account to another card with no annual fee. Then just chop up the card and never use it.
10. Have a mix of credit accounts (but don’t open an account solely for this purpose)
Credit mix determines about 10% of a FICO® Score. A healthy credit mix shows creditors that you can juggle various types of credit. For example, having two or three credit cards, a car loan, and a mortgage. However, trying to add to your credit mix is not a reason to apply for new credit.
Instead, as we discussed in the previous section, think twice about closing an account like a credit card. Even if you pay off all your credit cards, keeping them open and part of your credit mix can help your credit score.
Credit Score vs. Credit Report
Credit bureaus give you a credit score based on the information in your credit report. Your credit report allows you to see what potential creditors see when evaluating you. It’s a detailed history of your credit. That’s why it’s important to review your report often so you can identify and correct mistakes.
Your payment history and credit utilization are the two biggest factors influencing your credit score. So pay your bills on time every month and work on paying down your debt.
Also, keeping an eye on your credit score is important but remember not to neglect your credit report. You want to check it every year and make sure there are no errors. Increasing your credit score might take some work but it will pay off in the long run.