When you apply for a credit card, auto loan, personal loan, or line of credit, the lender will first run a credit report on you. Your application is dependent on your credit score, a three-digit figure; “excellent” credit typically results in approval, while “poor” credit frequently results in rejection.
Although credit scores as we know them now have only existed since 1989, the average consumer cannot overstate the significance of credit ratings. That’s because if you’re approved for premium credit cards, a good credit score can translate into better loan conditions, reduced interest rates, and even prizes. When you have bad credit, you sometimes have to pay high interest rates at best and frequently cannot get credit at all.
Is a 200-point increase in your credit score possible?
The good news is that the weather and your credit history are similar. Even if it changes just a tiny amount at a time, it does so regularly. But if your credit score is less than ideal, you may take action about it, unlike that dreary and windy Saturday morning.
Even if you have never used credit before or have a credit score below 580, which Fair Isaac Corporation (FICO) describes as “bad,” things don’t have to stay that way permanently. Although it might take longer to raise your FICO score by 200 points as a result of prior mistakes like bankruptcy or foreclosure, you’re already on the right track if you include wise borrowing, spending, and repayment behaviors into your regular financial routine.
While you can begin forming wise habits right away to start raising your score, it’s impossible to provide a clear timeframe outlining how to boost your credit score by 200 points. Keep in mind that your score may alter significantly depending on which of the three major credit bureaus you’re looking at because each of them considers elements like your payment history, credit utilization, and credit mix slightly differently.
The good news is that there are several surefire steps you may take to raise your credit score in the upcoming months. And even though you won’t see a 200-point improvement in your score in a single month, you can absolutely get a head start by taking a few crucial steps immediately.
Six significant things you can do to improve your credit score
Here are some important actions you can start immediately to take to raise your credit score.
Say it again with us: “No more late payments.”
Did you know that 35% of your FICO score is based on your track record of timely payments? Lenders are interested in your payment history because they want to know they will be paid on time. Even one or two missed payment dates can lower your score, and information about late payments is recorded on your credit report for years. Therefore, be sure to pay every invoice on time, even if you can only pay the minimum amount required. It is, without a doubt, the most crucial thing you can do.
Stop what you’re doing right now and check your accounts to see if you’re current if you have trouble meeting deadlines or can’t recall when you last paid your credit card bill. If you’re past due, pay the bare minimum right away. Seriously. Let’s wait.
And last, it’s acceptable if you’re current currently but have made a few late payments in the past. The good news is that your score will be less negatively impacted by “poor” information that is more recent.
ASAP pay off revolving debt
While paying your bills on time is crucial, how much you charge on your credit cards is a close second. That’s because the second-largest factor determining your score is the difference between the amount you really owe on your credit card debt and the maximum amount you may acquire. Your credit usage ratio is this.
If you owe a lot on your credit cards, you should concentrate on reducing the sums as rapidly as you can. Many experts advise keeping balances owed to no more than 30% of your available credit, but you might want to think about spending even less if you truly want to impress the credit reporting companies.
Why? Because, according to LendingTree, persons with credit scores of 800 or higher typically only use 5% of their available credit. For instance, if you have $20,000 in total credit availability distributed across two or three different credit cards, spending just 5% of that amount would result in a balance of about $1,000 every month.
Apply for a new credit card or request an increase in your credit limit.
If you can’t reduce how much of your revolving credit you use, think about expanding your available credit. This will reduce your credit utilization, which can increase your score.
To increase the credit limit on an existing credit card or to open a new credit card account, try contacting your card’s provider. Remember that when you apply for a new card, your credit will likely be hard-inquired into. Your score may temporarily drop by a few points due to difficult enquiries. Additionally, be careful not to use all of the extra credit because if it isn’t kept in reserve, your usage percentage won’t improve.
Look over your credit report.
How well-versed are you in reading credit reports? Due to the frequent occurrence of errors on credit reports, this should be done very away. In fact, the Consumer Financial Protection Bureau reported that just in 2018, it received over 125,000 complaints regarding mistakes in credit reports. Correcting any errors you detect on your reports will enable you to quickly and dramatically raise your grade.
Here’s what you should do: Use AnnualCreditReport.com to request a free credit report from each of the three credit bureaus once a year. Additionally, don’t just read one and toss the others because they might not all gather the same data. Look over every page, confirm the current balances, and keep an eye out for any negative items, suspicious accounts, or other personal details.
You can challenge discrepancies in credit reports if you uncover any. If you’re right, the organization will take the information out of your report.
Even if you don’t use old credit cards, keep them open.
An unused credit card not only improves your credit usage rate, but it also establishes a track record of stable partnerships with credit card issuers. Avoid the urge to cancel old credit cards if at all feasible because the length of your credit relationships accounts for 15% of your FICO credit score.
Think of different strategies to improve your score.
If you’re like most customers, you try your best to pay your utility and cell phone bills on time. Because without payment, there will be no service (and worse, no electricity). Experian created Experian Boost because it believes you should be credited for your on-time payments. This is how it goes.