Improving your credit score is a bit like losing weight; while it’s easy to make mistakes that do serious damage to your credit, fixing the problem can take time and there is no instant fix.
Still, there are some things you can do to boost your score relatively quickly, especially if you want to get approved for a loan in the next few months.
In this post, I won’t cover over long-term strategies (many of which are included in our free ebook which is available for CreditForums members) but rather things you can do today to make a difference.
Here are some effective tweaks you can make to boost your credit score and help you qualify for the best rates.
1. Pay Down Your Debt
While this is easier said than done, reducing your debt can go a long way to improving your score as soon as your new balance is reported.
Use the information from your credit report to make a full list of your accounts then check recent statements to find out exactly how much you owe. Start by paying down any extra money you can toward your credit cards with the highest balance.
Why start here? Because your credit utilization ratio will be improved by avoiding any maxed out cards. Ideally, you want all of your credit cards to have no more than 30% of the limit utilized.
Work to get all of your credit cards below this point by starting with the card with the highest balance to see the most benefit the soonest.
2. Try to Get Credit Limit Increases
If you want to boost your score to qualify for a new loan or a good interest rate, avoid opening a new credit line.
While this does increase your available credit, it also decreases the average age of your accounts and it may make you seem desperate if you already carry high balances.
Instead, call up your credit card companies and request credit limit increases. This way, you still enjoy higher available credit without the potential damage of opening a new card.
Before requesting a credit limit increase (CLI), check out the following guides:
- How To Get a Credit Limit Increase With Capital One
- How To Get a Credit Limit Increase With Chase
- How To Get a Credit Limit Increase with Discover
3. Correct Errors on Your Credit Report
As we discussed, make sure you report any inaccuracies to the credit bureaus after reviewing your credit report. If you have a common name, mistakes are actually pretty likely.
Other errors to look for include accounts listed as unpaid if they were included in a bankruptcy or accounts listed as “settled,” “paid charge-off” or anything but “paid as agreed” or “current” if you know you paid them in full and on time.
Also look for any outdated information that is still reported to your credit file.
All credit, both good and bad, stays on your credit report for 7 years (or 10 years in the case of bankruptcy) past the Date of Delinquency (DOLD) or Date of Last Activity (DOLA).
If you find bad marks on your credit report that should have dropped off, report them to the credit bureau to have them removed.
Depending on the bureau, it may take 10-30 days to have information updated or removed.
A word of caution: Sometimes having bad marks removed can actually hurt you, which is just a strange part of the FICO software. There are also some items you don’t need to correct, and a few that you really shouldn’t.
Accounts you closed that are still reported as open, as well as accounts you closed that don’t state “closed by consumer,” should not be corrected as they are actually helping your score.
4. Open a new credit card
If you already have existing credit, this won’t necessarily help you, as we discussed above.
Opening a credit card can help your credit score a great deal, however, if you’re recovering from bankruptcy or just beginning to build credit. If you don’t yet qualify for a regular, unsecured card, open a secured card.
If you’re having trouble getting approved you will want to read this post.
Secured cards can have high fees so make sure you compare offers. One of the best secured cards on the market now is the Capital One Secured card, with an annual fee of $29 and a credit limit of at least $200 with an initial refundable deposit of $49 to $200.
5. Add a new type of loan to your profile
Having a variety of credit types can help your credit. If you only have credit cards, consider adding a new type of loan, like an installment loan, to the mix.
Credit mix accounts for 10% of your credit score and creditors want to see you can handle many types of loans.
Examples of installment loans include car loans, student loans and even purchasing furniture on credit. However don’t run out and take on new debt just to improve your credit score!
6. Use your credit cards sparingly
Even if you pay your bills in full every month, big spending with your credit cards can still hurt your credit. That’s because the balance reported to the bureaus is usually the balance reported on your last statement.
If you’re planning to apply for a new loan in the coming months, make sure you limit your spending to no more than 30% of your credit card’s limit, or even 10% if possible.
I’ve mentioned it before but bringing down your credit utilization ratio is one of the quickest ways to improve your credit score.
7. Try checking your card limits
Sometimes, credit card issuers do not report your actual card limit to the credit bureaus, which artificially lowers your credit score. If you notice your limit is reported as lower than it actually is, contact your card issuer right away to update it.
Some lenders also have a policy not to report card limits, particularly if you have no preset spending limit. In this case, the credit bureau may just use your highest balance in place of a credit limit. As you can imagine, this gives the impression that you regularly max out your credit card.
With American Express charge cards, you may not have to worry about this as these cards usually aren’t included in the utilization portion of the credit score formula. If your card is categorized as a revolving credit card instead of a charge card, though, this could be a problem. To improve your score, you’ll need to pay the balance down before your statement period closes and the balance is reported.
8. Use your older cards
Do you have older cards sitting around unused? Watch out, because your card issuers may choose to close your account due to inactivity or even stop updating them to the bureaus.
In this case, the accounts could still appear on your credit score but they won’t be given much weight when your credit score is calculated.
A good way to avoid this is simply using your credit cards from time to time, whether it’s a small purchase that you pay off right away or a recurring bill you set up to one of these rarely used credit cards.
9. Ask to have a late fee removed
If your credit report shows a past late payment, you may have luck contacting your card issuer or lender in writing to request a goodwill adjustment.
If you have a good track record with the company and fairly good credit, you may get lucky and get them to agree to remove the late payment from your account.
10. Try disputing a bad mark
Finally, some consumers have success by disputing a collections account, even if it is theirs. This strategy may work for you if the collection account is very small or very old, as the collection agency may simply not verify it when the bureau investigates.
Some people have also had luck with this strategy if the item is old and the lender has merged with another company, which usually leaves records a disaster.
The best way to see your credit score increase is demonstrating a long history of on-time payments and cultivating a diverse selection of credit accounts.
Still, if you want to boost your credit score within 1-2 months, these quick tweaks will help you get your score as high as possible without long-term effort on your part.