If your credit score could use a little boost, there are some quick ways to make that happen. When you improve your credit score, you have more access to loans, credit cards, and better terms.
Understandably, not everyone will see their score increase by 100 points but by paying off some credit card debt, it’s possible for FICO scores to increase, on average, about 30-50 points in a few days after a rapid rescore.
Before we dive into some tips, let’s explore some of the terms that we will be using.
What is a credit score?
A credit score which is also called a FICO® score, is a numerical summary of your credit history. FICO is an acronym for Fair Isaac Corporation, the company that developed the FICO® credit scoring models. Lenders look at this score to determine if you are likely to repay any loans they may give you. This score ranges from 300 (poor) to 850 (excellent). The higher the score, the more trustworthy you are deemed. Lower scores indicate that you might pose a risk.
How is a FICO® score determined?
- Payment history. (35%)
- The amount of money you currently owe to lenders, and the portion of available credit you’re using aka credit utilization (30%)
- Length of your credit history. (15%)
- How much new credit you recently applied for (10%)
- A mix of credit accounts (10%)
1. Get copies of your credit report. Your first step should be to get a copy of your credit report and check that all of your information is accurate. There are three national credit reporting companies, that you can get a free report from a year.
2. Pay your bills on time. Your payment history is the most essential factor in your FICO® score, which means that the best way to raise your credit score is to pay your bills on time.
3. Find out when your issuer reports payment history. Call your credit card company and ask when your balance will be reported to the credit bureaus. This date will be different from your payment due date. Try to pay your payment before the closing date so that your reported balance will be low or zero. Lowering your utilization ratio will boost your score.
4. Raise your credit limits. If your credit limit is raised, your utilization ratio will go down. Before you take this step, you should have been making payments on time and not close to maxing out your credit card limit. If you struggle with missing payments or overspending, then skip this step.
5. Pay twice in the same month. Make a payment two weeks before your closing date and then again just before the closing date. This will lower your utilization.
Once you receive your credit report, look for the following:
- Identity issues. If there is information about your identity that is incorrect or accounts that do not belong to you, you should contact the credit reporting company and dispute it. Sometimes data can be mixed up if someone has the same name.
- Incorrect account status. Look for closed accounts that are still showing as open and look for incorrect dates of payments or delinquencies.
- Balance errors. Check the accounts listed and look for incorrect balance or credit limits. Dispute any errors.
Beware of credit card scams and identity theft. If your bills don’t arrive on time or you receive denials of credit that you did not apply for, you should place fraud alerts on your accounts. This will not hurt your credit score. You should go to IdentityTheft.gov to report identity theft. Credit monitoring services will help to alert you of suspicious activity quickly.
It may be time to consult a financial advisor if you are unsure of which step to take first. If you are refinancing your mortgage or applying for credit, you may want to do a quick boost. If you are trying to rebuild your credit, it may take a few months before you start to see a change in your credit score. Be patient and don’t get discouraged; you will see the reward of your efforts soon!
Wondering which credit card is right for you? Check out this blog post.