How to Improve Your Credit Score Fast
Your credit score is the foundation of your financial future, at least in some ways. This objective metric is designed to estimate your financial trustworthiness and dependability, and it has a massive impact on your ability to take out loans and participate in the economy more broadly.
If your credit score is less than stellar, you may want to improve it as quickly as possible. This is a slow process, typically, but there are a few ways you can accelerate it.
What Is a Credit Score?
In case you aren’t familiar, a personal credit score is a number between 350 and 850 that approximates your creditworthiness; in other words, it’s a measure of how likely you are to pay back your debts. The higher your score is, the more financially trustworthy you are, and the more likely lenders are to lend to you.
Having a good credit score is important for several reasons. It enables you to take out loans. It makes it easier to get new credit cards. It entitles you to lower interest rates and better terms. And it gives you more economic flexibility overall.
Get Your Credit Report (and Correct Any Errors)
Under the Fair Credit Reporting Act (FCRA), credit reporting agencies are required to report information accurately, fairly, and privately. While there are sometimes errors with this process, it has historically been quite reliable.
Low credit scores are sometimes the result of a reporting issue or an error in the report. That’s why your first step should always be running a credit report; you’re entitled to one free credit report annually from each of the three major credit bureaus: Equifax, Experian, and TransUnion.
Be sure to thoroughly review every line item and take note of any errors or issues. You can file a dispute for any piece of information that is inaccurate and unfairly bringing your score down. If all goes well, you might be able to boost your credit score in just a few weeks.
If you have any issues during this process, consider contacting an FCRA lawyer. FCRA lawyers are intimately familiar with credit reports and the credit management system, and they can help you understand your legal rights as a consumer, so you can take the actions necessary to restore your good financial standing.
Deal With Your Collections Amounts
If you have any collections amounts, prioritize dealing with those. If you’re able to pay these off, it should help boost your score considerably. If you don’t have the means to pay these amounts off, consider negotiating with collectors to settle the matter.
Pay Off Your Credit Card Debt
Your debt to income (DTI) ratio is a measurement of how much debt you have, compared to how much money you’re bringing in. It’s one of the most important factors in calculating your credit score, and if it’s too high, it can make it very challenging to improve your credit standing.
Paying off your debt can decrease your DTI ratio, thereby increasing your credit score. Credit card debt is arguably the best debt to pay off first, since it’s considered differently than installment debt and is typically associated with high interest rates. Take inventory of your existing credit card debt, consolidate it if it makes sense for you and your financial situation, and put together a plan for how you’re going to pay it off.
For many people, the right approach is a combination of cutting existing expenses and increasing income. Simple lifestyle changes, like cooking at home instead of eating out, can add up quickly to save you significant money. Add even a modest side gig, and you could have several hundred dollars a month extra to pay down your debts.
Request Higher Credit Limits
You can also improve your credit score relatively quickly by requesting higher credit limits. Reach out to your credit card providers and see if they would be willing to increase your overall credit limits. There’s a chance you’ll be rejected, but it doesn’t take much time or effort to try.
Pay Your Bills on Time
Paying your bills on time (including mundane, standard bills like utility bills) is arguably the best and most reliable way to increase your credit score. Automate payments wherever you can, so you don’t run the risk of a late payment, and make a concentrated effort to pay every bill in full and on time, every time. The only real drawback to this strategy is that it takes a long time to manifest. If you already have a low credit score, it could take many months to a few years before you see the payoff of your efforts.
Diversify Your Credit Mix (Gradually)
Though it’s a minor factor in the grand scheme of things, you should consider diversifying your credit mix. In other words, you should secure credit and loans from a variety of different sources, like a mortgage, student loans, a car loan, and credit cards. Obviously, more debt isn’t necessarily a good thing, and it could even hurt your credit score if you go overboard. But if you gradually and methodically diversify your credit mix without interfering with your DTI ratio, you can boost your credit score.
There are some strategies that can help you increase your credit score relatively quickly, sometimes in a matter of just a few weeks. But it’s important to remember that credit scores attempt to evaluate many years of financial activity, so it could take many years for your credit score to normalize.
Remain patient as you work to put yourself in a better financial position – and don’t hesitate to talk to a lawyer if you need help dealing with credit reporting agencies.
