6 Fast Solutions to Increase Your Credit Score
Learn how to increase your credit score quickly by focusing on the items that have the highest impact on your score today!
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Credit scores may seem complicated.
In this post, I break down what goes into calculating your score, and what you need to focus on to increase your credit score quickly.
Your credit score is made up of several different factors, and each carries a different weight.
So how do you know which ones you need to focus on?
Here’s the different factors that into figuring out your credit score, listed in order of impact.
If you focus your efforts on the first three metrics, you’ll be able to increase your credit score fast!
Credit Utilization
This calculates how much credit you have used versus the credit you have available.
If you owe $200 on a $1,000 limit credit card, your credit utilization is 20%.
Focus on keeping this percentage consistently as low as possible.
It will make your score fluctuate from month to month. To improve this metric fast, pay off as much as you can on your credit cards each month.
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Payment History
This measures how many times you have paid on time.
This metric is a high impact one!
It’s also technically the easiest one to “get right”. It doesn’t really require you to do anything, other than pay your bills – on time.
Easier said than done?
Check out my Save Money section for ideas on how to get extra income and save money that can go towards making the minimum monthly payments.
Also, if you have several bills that are past due, focus on paying the oldest ones first.
A payment that’s late by 90 days tends to hurt you more than a 30-day late payment.
Derogatory Marks
This metric measures how many of your accounts have been marked as in collections, late or written off.
The best way to avoid a derogatory mark is to work with your creditors.
Most of them will show leniency if you show them you are willing to pay your bill.
When working with your creditors, Make payment arrangements if possible.
If not, at least answer the phone and let them know you’re working on it.
Better yet, take back control of your debt:
- Make a plan – Write a script of what you’d like to say and rehearse it a couple of times
- Prepare yourself – Call your creditor at a time that you’re relaxed and have some time. Don’t wait for them to call you when you’re in the middle of dealing with the kids, a work emergency and making dinner.
- Be persistent – If you get a no the first time, don’t give up! Call back the following day and ask for some leniency again. Remain calm and pleasant, and ask to speak with the manager if the rep cannot help you. Persistence can go a long way with creditors.
As you continue to show you are willing to pay your bills, even if you can’t do it right now, it can buy you some time to gather some money, and keep you out of collections.
The Age of Your Credit
This metric takes the average of all your open accounts.
Say you have two open accounts.
One is 8 years old and the other one is two years old.
The age of your credit will be calculated as being 5 years old, which is the average of the two.
As you pay off your debt, make sure you zero out the accounts but keep them open. That way this metric is not affected.
Otherwise, the accounts you close will not count any longer towards this calculation.
On a personal note, when I paid off my last student loan, my credit dropped by 50 points!
Why? The loan was one of the oldest accounts I had!
When I closed it, the age of my credit dropped significantly.
Turns out, it’s not possible to keep student loan accounts open after you zero them out.
However, you can keep credit cards and other lines of credit open, even when they have a zero balance.
If your credit does drop when you pay off an account, don’t lose heart!
The drop is often temporary. In my case, it took about 3 months to get back those 50 points.
Hard Inquiries
This measures how many times you have applied for a credit line, like a credit card or a car loan.
The inquiries fall off after two years, and each can deduct an average of 5 points off your credit score if you have decent credit.
Ironically, they may have a greater impact if your credit score is less than stellar.
As a best practice, make sure to keep this to a maximum of 4 at any given time by spacing out your credit applications.
It’s important to note that when you check your credit yourself, this metric is not affected as these instances are considered a “soft inquiry”.
Other soft inquiries include when a current creditor checks your credit score for updates, and in some cases, when an employer checks your financial records as part of a background check.
To check your credit score, you can go to each of the three credit bureaus directly.
You can also visit www.AnnualCreditReport.com to get your credit report for free once a year (note that this only gives you your credit report or history – not your credit score).
To get your credit score and report from the three credit bureaus at once, check out myFICO.
Total Accounts
The “Total Accounts” metric in itself does not have much impact on your credit score.
Before opening a new credit card, remember to take into account how will this affect your credit score’s age.
If your credit is relatively new, you may want to refrain from opening multiple accounts at once, as this may look to lenders as a high risk move.
Additionally, remember to either keep a small balance on the accounts that you do open or have, or leave them on zero but don’t close them.
This way, they can still be considered into your overall available credit, which affects your credit utilization ratio.
When you consider the kinds of accounts you have, aim for variety.
If all your accounts are credit lines with department stores, obtaining a car loan will probably be difficult.
As best practice, try to limit the amount of accounts you have in a particular category.
Also, although account variety is good for your score, don’t open a line of credit you don’t need.
Lastly, before applying for a new line of credit though, check with the lender to make sure you do qualify according to your credit score, before you submit the application.
That way, you don’t get dinged with an inquiry and end up being declined in the end.
For a more in-depth look at how to improve your credit, be sure to check out my FREE Quick Start Guide to Improving Your Credit Score.
In it, you’ll learn what specific actions you can take to start repairing and improving your credit score today!
As you begin focusing your efforts on the metrics that have a higher impact on your score, you will be able to increase your credit score in only a matter of weeks.
Be persistent, be focused, and you’ll succeed.
What else have you done to improve your credit score fast? Comment below!
