How to Raise Your Credit Score Faster
A strong credit score can be essential to getting the loan you may want. It can make it easier for you to qualify for loans, potentially improved financing terms and rates, rent apartments or buy phones, and even land-specific jobs. Banks, lenders, and other financial organizations utilize scores to assess your creditworthiness.
What is Credit Score and How is It Calculated?
A credit score is a three-digit number that generally is viewed as representing how likely you are to pay back a loan or other financial obligation. A variety of factors, including your payment history, amount of debt, length of credit history, types of accounts, and new applications, determine your score. Although, the algorithm is unknown, and has many more factors involved.
It ranges from about 300 to 850, and above 680 should be the general goal or whatever the national average is. As the better your score is the better it can help you qualify for loans with improved terms and lower interest rates. A score below 580 may be unfavorable and may prevent you from getting loans or other forms of credit.
The three major reporting bureaus are Experian, Equifax, and TransUnion.
The two major scoring models used are FICO and VantageScore. Both models use similar factors to calculate your score but may give different results.
Experian also produces its scoring using a system called Experian Credit Score. Agencies use all three approaches when evaluating your creditworthiness.
What Not To Do To Raise Your Credit Score
There are potentially many "quick fixes'' to boost your credit score, but most aren’t ideal. Credit repair and debt settlement companies may claim to erase negative items from your reports. Still, the only way to do that is by disputing incorrect information on your account - something you can do for free. But with professional help, they may also know some tricks of the trade. You may want to seek the advice of an attorney first before you start disputing.
Companies often charge large upfront or monthly fees and may or may not provide any real help. Credit card companies may also offer boosting services, but you should make sure to ask for previous proven results first, or any guarantees.
How To Raise Your Credit Score the Right Way
A few potential ways to raise your credit score is by doing the following:
- Dispute inaccurate information.
- If you have a collection, see if they will delete the tradeline if you were to pay off the debt.
- Seek the advice from an attorney, they may ask for proof of debt from the company reporting you amongst other things, such as inquiring about judgements, liens, or other items.
- Make sure that the debt belongs to you, since some companies may not have your social security number or other information so they may just attempt to put it on all credit profiles with your name on it in a given city or area. This allows for the process of elimination, and the last one standing might just be the correct person for such debt.
- Managing your credit responsibly and keeping up with regular payments.
- If it is medical debt, and you had insurance, double check to see what happened.
- Paying bills on time and reducing the debt you owe.
- Limit your use of any card to less than 30% of the account limit. Strive for 5% or below.
- Request an increase in your limits, if needed, but keep utilization low.
- To get started, consider becoming an authorized user on a spouses or relative's existing line-of-credit with a higher rating. Once your credit is improved, look into if your score will improve if you were to remove being an authorized user.
- Keep a vigilant eye on your report to ensure accuracy. Log in regularly for any discrepancies that could negatively affect your scores.
- By liaising with the bureaus, you may be rewarded for boost programs by taking care of necessary expenses such as your rent, utility payments, cell phone bills, utilities, and streaming services.
- Secure a card and make timely payments.
- Limit the number of accounts you open to minimize the number of hard inquiries on your report.
- Preserve accounts that you have been able to pay off that are in active use. Doing so might help extend the length of a positive history.
Although results may vary, and scoring models do change from time to time, you should always get guidance by the bureaus on the scope of how your score is created.
How To Start Building
If you have no credit history, the best way to start building a score is by opening a secured line of credit or seeing if you can be an authorized user on someone's account. Revolving debt and personal loans are a few ways to build. Make payments on time and stay within the agreed-upon limits.
Things to Stay Away From
Lenders may look at your credit report before approving you for a loan or other line. Any negative information can hurt your chances of getting approved and negatively impact your rating. It is essential to avoid things like late payments, too many applications, or debt settlement companies that will cause negative information to appear on your report.
Tips To Stay
Once you have achieved a good score, it is important to maintain it. The following tips can help:
- Pay all bills on time, card companies and other lenders generally report 30 days or more late payments.
- Pay off outstanding balances as quickly as possible to reduce the debt you owe.
- Limit the number of reports you check each year and avoid opening too many accounts at once.
- Avoid using more than 30% of your limit on any card.
How Long Does It Take?
Rebuilding your credit score takes time and patience. Paying bills on time and lowering your debt might raise your score, even though some bad information may stay on your report for up to potentially seven years. It can take from a few days to several months or a year or longer to rebuild a credit score, but it is possible with commitment and hard work.
It is essential to note scores are not static and will fluctuate depending on rating activity. For example, hard inquiries from companies or lenders might temporarily lower ratings. It can improve over time as long as long as activity is kept positive. It is important to stay informed and take steps toward improvement. When applying for a mortgage, if your score needs improving, we may be able to help guide you or even potentially improve it for the purposes of the loan. Connect with MortgageQuote.com to inquire more.