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Improve Your Credit Score

Looking for ways to improve your credit score? This guide covers 8 easy steps that will help you get a better score quicker than you think.

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Updated February 10, 2021

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Why does getting a loan seem so stressful? 

We have all been through the anxiety and worry after making a loan or credit card application. Your credit score not only has a strong influence on your financial future, but your life.

Fortunately, a bad credit score is not difficult to fix. Knowing the right steps can help you fix your credit score over time. 

A credit score is an important three-digit number that helps lenders estimate your ability to make the debt repayment on time. The higher your score, the better interest rate you will qualify for. 

However, not everyone has a high credit score. Improving your credit score takes time but the earlier you start, the better it is to handle the issue.

A lot of people are facing financial difficulty due to the coronavirus pandemic. Many have been laid off from their jobs while many others have been forced to take pay cuts or discontinue their businesses. Making payment for essential items has become an all-too-common challenge for many.

In these testing times, a lot of people wonder about the impact of late payments on their credit scores due to COVID-19. However, it is still possible to improve your credit score by following the steps outlined below.

Ready? Let’s jump into it. 

How Are Credit Scores Calculated?

It helps to understand the calculation that goes behind your credit score. In fact, your credit score range can have major implications. The credit score is calculated using a mathematical formula to the information on your credit report.

There is no one algorithm that is used by all companies to calculate the scores. However, the first step in raising your credit score is first understanding how to read a credit report.

It is not necessary for you to have multiple scores because the factors that affect the scores are always similar. The factors that make the score increase or decline is usually the same, only the degree varies. 

A lot of scoring models consider the payment history on credit cards and loans, the amount of revolving credit on the report, and the types of accounts you own. 

Steps to Improve Your Credit Score

Steps to Improve the Credit Score

In order to improve the score, you need to begin by checking the scores online. Once you get the score, you will also get details about the factors that affect the scores. It is important to be patient and give time for the changes you make to be shown in the credit scores. 

There are some credit score factors that are more crucial than others. Credit utilization ratios and payment history are important in most credit scoring models. They represent about 70% of a credit score. In order to improve your credit score over time, you need to take certain actions. 

Here are eight steps to improve the credit score.

  1. Make payments on time
  2. Clear debt and maintain a low balance on the credit card
  3. Do not close an unused credit card
  4. Ask for new credit when you need it
  5. Report any inaccuracies in the credit report
  6. Make payments twice in a month
  7. Raise the credit limit
  8. Seek help from a friend or relative

1. Make Payments on Time

Your credit score reflects how regularly you pay the bills. Lenders are keen to know how reliable you are when it comes to paying the bills. It is because the past performance speaks a lot about your future performance.

It is possible to influence the credit score by making all the bill payments on time and you will be eligible for best loans for excellent credit. When you pay late or settle the account for less than what you agreed to pay, it has a negative impact on credit scores. 

You need to pay all the bills on time. Use tools available to you, like automatic payments to ensure that you make the payment regularly each month. 

If you have delayed any payments, you need to clear them at the earliest. Missed payments will be shown in the form of negative information on the credit report and it can affect the credit score. Older late payments have less effect on the score than most recent ones. 

More than 90% of the lenders use FICO credit scores. The score is made up of five different factors- Payment history (35%), usage of credit (30%), age of the credit accounts (15%), new credit inquiries (10%), and credit mix (10%). 

It can be seen that the payment history has a huge impact on the credit score and it is best to pay debts as soon as you can. If you pay your bills responsibly and on time, it will work in your favor. Avoid late payments by creating a filing system and keep a track of the bills, set due date alerts, and automate bill payments from the account.

2. Clear Debt and Maintain a Low Credit Card Balance

The credit utilization ratio is a crucial number.  It can be calculated by adding all the credit card balances at a point of time and dividing it with the credit limit you have. Look at all the credit card statements for the last year to find out the average credit utilization ratio. 

You need to add the statement balances for each month on all the cards and then divide it by 12. The result is the credit you use each month. 

It is better to have a low ratio of around 30% or less. Those with the highest credit scores have very low ratios. It shows that you have not maxed out the credit cards and can handle credit well.

Looking for a debt solution? Learn about debt relief to see how the process has helped many escape debt — and leave it behind for good.

3. Do Not Close Unused Credit Cards

It is best to keep the unused credit cards open, as long as they are not costing you money. Closing an account can increase the credit utilization ratio. 

4. Ask for New Credit When You Need It

Never open accounts only to have a good credit mix. It will not improve the credit score and can harm the score in different ways. It will create a hard inquiry on the credit report and can also tempt you to spend more and increase debt. 

A lot of hard inquiries can have a negative impact on the credit score as they remain on the credit report for two years. 

5. Report Any Inaccuracies in Your Credit Report

Make it a point to check all the credit reporting bureaus for any errors. Any incorrect information can have an impact on the credit score.

You need to verify that the information on the reports is accurate and if there are any errors, you need to dispute the information. If you find mistakes, it is more than feasible to get errors removed from your credit report.

It’s very important to read your credit report regularly. This will help you spot any inaccuracies before they cause harm. 

💡 Do you have unauthorized inquiries on your credit report? Learn what to include in a credit inquiry removal letter to get such negative items removed.

6. Make Payments Twice in a Month

Let us assume you have had a rough couple of months due to COVID-19 and you need money to make purchases. If you put big items on a credit card to get the rewards, it could throw the credit utilization ratio out of whack. Instead, what you can do is, make a payment two weeks before the closing date and make another payment right before the closing date. 

However, this is only possible if you have the money to pay for the big expenses by the end of the month. Do not use a credit card for a large bill if you want to carry a balance.

It will create an ugly pile of debt in no time. Do not use a credit card as a long term loan and be mindful of the balance on the card. Make the payments before the intro period concludes. 

7. Raise Your Credit Limit

Individuals who often tend to overspend, skip this point. The purpose is to increase the credit limit on your cards so that the utilization ratio declines.

It will only work in your favor if you are not compelled to use the newly available credit. Do not try this if you have a downward trending score. 

The card issuer might see that you are about to have a financial crisis and require additional credit. And it can lead to a decrease in the credit limit. Ensure that your financial situation looks stable and then ask for an increase.

You simply need to call the credit card company and ask for an increase in the credit limit. The higher the limit, the lower your ratio will be and it will help the score. 

8. Seek Help From a Friend or Relative

The length of the credit history will play a role in the credit score. The older the credit history, the better it is for you. In most cases, you only need to sit back and wait for the credit score to improve but if you have a friend with a good credit card account, you can seek their help. 

When a relative or friend adds you to an existing credit card as an authorized user, it will help lengthen your credit history. When the account is in good shape, it is possible to improve the score by being an authorized user. 

How Long Will It Take to Rebuild a Credit Score?

Individuals with negative information on the credit report should pay the bills and give it some time. You cannot rebuild the credit score overnight.

There are several top credit repair companies that can help you improve the score. There is no instant fix to improve the credit score. 

Some changes in the credit score continue to have an impact on the score until they reach a specific age like delinquency. It remains on the credit report for seven years. Inquiries remain on the report for two years and a lot of public record items remain on the report for seven to ten years. 

You can start improving the credit score by checking the score from time to time and identifying the factors that affect the scores. 

COVID-19’s Impact on Credit Scores

The spread of COVID-19 has not only affected the health of many but has also disrupted the finances of several households. There is turmoil in the global markets due to COVID-19 and lenders have become extra cautious about lending money.

You can protect your credit score amidst the pandemic in a number of ways. For example, avoid withdrawing cash from the credit card and maintain a low credit utilization ratio. 

While there is a growing demand for credit to make bill payments, lenders are trying to minimize their risks and they are likely to prefer applicants with a good credit score. It is possible to maintain good credit even during testing times. There are several government programs available to those who are struggling with unemployment and credit. 

Difference Between a Credit Score and Credit Report

A credit score is a number that lenders use to decide how safe or risky you are as a borrower. Top credit monitoring services can give you an insight into the score. The credit report is a list of your lines of credit and payment history but it does not contain the credit score.

It can run into many pages as they detail the accounts and show how diligently you have paid off the outstanding balances. Credit reports also have negative information like bankruptcies or repossessions. 

What Are Soft and Hard Credit Checks?

You might have come across the term hard inquiry and a soft inquiry. It is an inquiry carried out by the lender before approving your application for funds. A hard credit check takes place when you apply for something like a credit card application or a loan application. It has an impact on your credit score. 

In contrast, a soft credit check has no impact on the credit score. A soft credit inquiry will not show up at all. It includes personal credit checks, employment applications, insurance applications, and pre-approved credit offers. 

Building a Credit Score

If you have no credit score due to minimal history with regards to credit, you will have a thin credit file. It means that there are only a few accounts on the credit report, ranging from one to four.

Having a thin credit file means that the lender is not able to get a credit score due to a lack of information in your credit history. You can fatten up the thin credit file by applying for a credit card or becoming an authorized user of someone else’s card.

Improve Your Credit Score Fast FAQs

  • How quick can I raise my credit score?

    It is important to note that there is no specific period of time that can guarantee a rise in your credit score. There is no quick fix or overnight solution for it.

    It is possible to improve the credit score by a few points in a couple of weeks but significant improvement will take months and sometimes years. How long it will take will depend on where you start from. It is possible to build a credit score from scratch in a month.

  • Is 650 a good credit score?

    650 is a credit score that is not really bad and is not good either. It lies somewhere in the middle.

    You can apply for personal loans for fair credit with a score of 650. It is a fair score and is also an average US credit score.

  • What is the way to raise my credit score fastest?

    Regular payment of dues can help increase your credit score fast. You can also become an authorized user of a friend or relative’s card and increase the score.

  • What credit score do I need to buy a $250000 house?

    If you want to buy a $250000 house, you need a good credit score of 700 or above.

  • Can I get a mortgage with bad credit?

    Yes, you can still be eligible for a mortgage even if you have bad credit. Luckily, there are a number of bad credit mortgage loans that offer guaranteed approval.

    Such loans will have less requirements for approval, but you’ll be forced to pay higher interest rates as a result. Therefore, it is highly recommended you do everything you can to build credit prior to going with a bad credit mortgage loan — even if it has guaranteed approval.

  • Which bills will help build a strong credit?

    If you want to build your credit, simply paying the utility bills will not help. Utility bills will appear on the credit report only when they are delinquent. However, your internet, gas, phone and cable bills can help build a strong credit score when you get credit for the same.

  • How do I wipe my credit clean?

    In order to clean up your credit report, you need to monitor the credit score from time to time. Report any inaccuracies you see in the credit report and lower the credit utilization ratio.

    The best way to wipe your credit clean is by making payments on time. If you have unpaid loans on the credit report, it could be driving your score down.

  • I paid off debt, why did my credit drop?

    There are times when the credit score drops after you pay off debt. There are several factors behind this. A huge impact on the credit score is the credit utilization ratio.

    When you pay off debt, you reduce the credit utilization and a very low credit utilization could be harmful to the score. Another reason could be inquiries on the credit report. Whenever you apply for new credit, there will be an inquiry and it will lead to a drop in the credit score. 

  • Is it possible for a hacker to fix credit?

    A hacker cannot fix your credit because the algorithm is based on what the credit report has on it. A hacker can only get the score to change if he is reporting a tradeline to the report or reporting a collection.

    Credit reports do not contain scores. You should never use a hacker to fix your credit score. 

  • What’s the worst credit score to have?

    FICO is a very popular scoring model and the credit scores range from 300 to 850. 300 being the lowest and 850 being the highest. The lowest credit score is 300 but in reality, nobody has a score that low.

    Any score below 580 is considered bad. You can consider debt consolidation loans for bad credit. It will help consolidate the debt atlow interest rate.

  • Can I get a collection removed?

    If you want to get a collection removed from your credit report, you can request a goodwill adjustment from the agency, dispute the collection using an advanced dispute method or demand that the agency validate the debt.

  • Can I get a collection removed without paying?

    The only way you can get a collection removed without paying is by requesting the agency for a goodwill adjustment. This can be possible only one or two times.

  • How can I ask for goodwill deletion?

    A goodwill deletion letter is a practice of admitting a mistake to your lender and requesting them not to penalize you for it. It only works one time for low level items like a delay of 30 days in a payment. You can send the request to the original creditor in an appropriate format.

    It should include details about the reason behind the mistake. It is an ideal option for those who have one or two minor mistakes on the account.

  • How do I stop my credit from falling?

    The best way to keep your credit from dropping is by making payments on time. Monitor the credit report and report any inaccuracies. Avoid taking unnecessary credit and never default in making payments.

  • What credit score do I start at?

    Starting with no credit does not mean you start with a zero credit score. It means that no score exists. Once you start to establish a credit history, the score will start at 300.

    It is the lowest score and it is highly unlikely that it will start this low, unless you start with poor credit habits. You might not have a very high score but it will be somewhere around 400-450 to start with.

  • How to build credit once you turn 18?

    The best way to build credit is to understand how it works. Understand the factors that have an impact on the credit score and then borrow money. Become an authorized user for a friend or relative and get a starter credit card. Lastly, it goes without saying, make payments on time. 

    A good credit score can help you qualify for the best interest rates. It can make it possible for you to borrow money and can open doors you might have never thought of. Understanding the impact of credit scores on your financial well being will ensure that you make the right decisions at the right time.

    The first crucial step is to check the credit scores and credit reports from time to time. Focus on factors that have an impact on your credit score and start improving the scores.

All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on tokenist.com. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.

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