10 Clever Ways to Build and Improve Your Credit Score FAST
This is the first step to fixing your credit score. There are three credit reports – one from each of the 3 credit bureaus: Experian, Equifax, and TransUnion. Credit reports can make mistakes, in fact, my sister’s information was on my credit report and I had to jive on by writing to the credit bureaus to fix this error.
1. Make a Plan
When you check and all your information is accurate, but you know what you did to make these balances, and you are ready to improve it, make an action plan using your free Credit.com account. And you will have sight of how the plan will impact your score over time. You can also get tips on what your problem areas are.
2. Check for accuracy
You are entitled to a free copy once a year, of all three reports under the Fair Credit Reporting Act. These can be accessed on AnnualCreditReport.com
Most scores range from 300 to 850 and the credit tiers generally look like this:
Bad: below 600
Here is a list of potential errors you can quickly check this list and ask yourself to spot potential errors:
- Is all your personal information accurate, including SSN, birth date, full name, and address?
- Are all the credit accounts being reported?
- Check if there are any accounts or applications for credit you do not recognize?
- Are there items from decades ago reappearing in your report?
It helps to go through with a highlighter to pick out all or any inconsistencies and this will help you on the next step on pinpointing what you need to improve. Also, hiring a reputable credit repair company can help when disputing these errors.
3. Understanding your score
When you find errors in your credit profile, such as a misspelled name, or an error that is not causing your credit score to dip, there are possibly other reasons why those errors are there, and you need to dig deeper.
- Identity theft
- A collection account is still being reported from years ago
- A bill your ex was supposed to pay, (per your divorce) and has gone unpaid
- Defaulted on a loan, and now it is showing as multiple defaults on your credit report
- Your credit information is mixed with someone else who has a similar name (and had gone through a foreclosure lately)
When you check your credit, and everything is accurate, but you still have a bad credit score, it is very important to understand why. Here are some major credit scoring factors and how each can impact your credit score:
- Payment history: when you have a history of late payments, creditors will see you as a bigger risk and this will have the greatest effect on your credit score.
- Amount of debt: debt contributes 30% in a FICO Score’s calculation and can be a lot easier to clean up compared to payment history, according to the FICO’s website.
- Age of accounts: When you’re new to borrowing, there is not a whole lot of data going on. You will need some time to see your credit score improve.
- Account mix: lenders want to make sure you can handle various types of credit such as credit lines in form of credit cards and auto loans, for example. And when you have credit only in the form of credit cards, you are most likely keeping your score from climbing.
- History of Credit Applications: when you have applied to a dozen of credit cards, creditors will wonder why. They will be concerned that you have overextended financially.
4. Fix those late payments
When you close an account, it will not make late payments disappear. You can also set it up on your bank or lender’s website, and have the due dates in relation to your paycheck schedule.
Ask your credit card issuer or a lender if they can forgive a late payment and some credit card companies are pretty forgiving when you have a long track record of making on-time payments.
5. Build a strong credit history
When you have a short credit history, there is not much you can do to improve your credit. And it may be difficult when looking for a friend or family member to be an authorized user. Especially willing to do because they are liable for any changes you make. Your best option: wait it out and do not close any accounts.
6. Clear up collections
Pay off debt instead of repeatedly transferring it to new accounts. And when you contact the debt collector on your credit report. See if they’d be willing to stop reporting the debt to the credit bureaus in exchange for full payment. This does technically violate the terms and agreements collectors’ have with credit bureaus, but it doesn’t hurt to ask. And when it is a debt you do not recognize or seems inaccurate, dispute this with all three credit bureaus.
7. Do not let your credit past history haunt you
For all the mistakes, your credit took the biggest hit but this impact will eventually disappear and can only impact you for a limited amount of time due to federal laws.
8. Credit Card
Be sure to make on-time payments, because a new credit card account with bad payment history will end up hurting you instead of helping. When you have poor or bad credit a secured credit card is a good way to go.
9. Secured Credit Card
A secured credit card is when you make a deposit into a checking account and secure a line of credit the bank or lender is extending to you. The deposit you make, let’s say $200, becomes a line of credit, (and sometimes secured options will give higher credit limits than your deposit).
10. Fixing credit utilization ratio
When your credit balances are more than 30% of your limits, your score is most likely suffering and even though you are paying off balances in full by the payment due date. Your statement balance is mostly what is being reported to credit bureaus. Consider repaying the balance when you know it is above that 30% mark this month.
Improving credit takes time, though in the end, is completely worth it. Following these tips will not only save money but in the long run will teach you the necessary skills to maintain a good credit score in your future. Make sure to not give up and keep yourself educated about your accounts. So that way you can be successful in getting a handle on your finances.
What is Foreclosure and how will affect my credit?
When you default on a mortgage loan, your lender will repossess your home then auction it off the recover the amount of the mortgage. Limiting your ability to obtain new credit in the future, and can remain on your credit report for 7 years.
Credit affects interest rates on mortgages and car financing, affects car insurance and employment determination.