If you have a low credit score, you may experience difficulty getting approved for financial products and services like loans and credit cards. It can even affect things like renting an apartment or leasing a car. The higher your credit score, the easier it will be to get credit lines, and you'll usually walk away with the best rates possible as well.
If your credit score is on the low end, it's possible to improve your score by as much as 100 points quickly, oftentimes within 30 days or less. If you're in serious trouble, or need to raise your score quickly, credit improvement tools or credit repair companies could be something to consider.
But if you're looking for DIY options to raise your credit score through your own time and effort, here are the best and fastest ways to increase your credit score.
First step: Check your credit score
Before you do anything else, check your credit score first. You can check it for free using a service like Credit Karma and doing a full diagnostics on your current situation.
What you want to look for:
- Your current score.
- Any accounts you have open that you weren't aware of.
- Any unpaid balances that you didn't know about.
- Harmful items on your account that are hurting your score.
Resolving items that have gone into collections, paying off accounts with late payments, and even checking for fraudulent activity is the first step to increasing your score. Much like the way that debt works, these types of items on your account will drastically decrease your credit score improvement progress if you ignore them. In fact, even if you're doing everything else well, even a single collection item on your account can drop your score considerably.
Dispute errors on your report
Errors on your credit report happen more frequently than people think. The most common errors are payments on accounts marked as late when you made them on time. Sometimes, though, you may even find large collection items that belong to someone else. These are errors from either the credit bureaus or the creditor, and because you never knew they existed, you never pay them and they end up in collections. If you have a lot of items on your credit report that need to be disputed, you may want to use a credit repair company, who will handle all of the investigation, disputes, and negotiations for you.
Make payments promptly
Making payments on time is the #1 factor in increasing your credit score. It factors for 35% of your overall score because it shows creditors that you're responsible when it comes to borrowing money. Not paying back a loan is the worst thing that can be shown on somebody's credit report.
Avoid late payments, pay off debt, and make sure that nothing ever goes into collections. If you're in a situation where you can only make small monthly payments, give them a call. They will always be happy to negotiate a lower monthly payment until you're in a situation to pay off more.
Get a higher credit limit on your credit cards
Many people aren't aware that credit usage accounts for up to 30% of how your credit score is calculated. This is separate from credit card payments history.
Credit usage means how much of your credit you are using up per month. The lower the percentage, the better. For instance, if you have a $1000 credit limit on your card, and you are spending $900 on your card each month before paying it off, that's a 90% credit usage and that negatively impacts your score.
The best credit usage percentage is 10%. Up to 30% is okay, but 10% credit usage would be best case scenario. This is why it's almost always recommended to accept credit limit increases if your bank issues you one (as long as you're disciplined enough to not overspend). It allows you to spend more (if necessary) without negatively affecting your credit usage. If you increased your credit limit to $10,000 and kept your usage the same, your credit usage drops to 9%, which is excellent.
Keep old accounts active
The age of your credit accounts makes up for 15% of your credit score. How long you've had a credit account open plays a large part in how you look to creditors.
Many people close down their older accounts, like their first credit cards, when they get a new one. It may seem like its the sensible thing to do, since you're not going to be using it anymore and it's just sitting there. But unless that card comes with steep annual fees, it doesn't make sense to close down the account. And even when you do have annual feels, these may even be able to be negotiated down if you've been a member for a long time.
Become an authorized user of someone else's credit card
If you know somebody who has an excellent credit score, they can help you out by adding you as an authorized user on their credit card. Their card limit, credit usage, and payment history then become a part of your own credit report, which can help increase your score drastically. In fact, this is one of the fastest ways to improve your credit score by 100 points or more.
Get a credit builder loan
A credit builder loan is a loan created specifically to improve the borrower's credit score. These companies offer people with bad credit scores loans of up to $25,000 with a fair interest rate of 19.99%. You can use this to make consistent payments to pay off your principle. They will then report your payments to the major credit bureaus in the US.
Treat every late payment as an emergency
Every late payment can be a negative hit to your credit score if they report it. If you miss the payment deadline of any payment, the first thing you should do is call the creditor. Ask them not to report the missed payment to credit bureaus. Once it's reported, that's when the countdown begins. Each month you don't pay it off is recorded into your report. If you can pay the payment right then during the call, they'll almost always agree to work things out with you. And even if you can't make the payment right away, if you show them you're willing to pay it off asap through a payment plan, they likely won't report it either.
How to improve your score by 100 points in 30 days or less
Although having a low credit score isn't the best situation to be in, people with low scores have an easier time making more drastic increases to their scores quickly. If you have a high score, you likely won't even need to raise it by 100 points, at least not quickly. You can simply make slow and steady increases by following the methods and best practices listed above.
Regardless of your current score, taking the steps to improve your credit score now, even if it's not urgent, can pay dividends for your future. You can enjoy peace of mind with access to higher lines of credit if you need it, get approved for loans, and get access to the best rates and terms as possible. Being in a position where you have to urgently increase your score quickly is never good. Take the first step of analyzing your current score, and start taking steps to improve your score today.