Credit makes the world go around. Well, maybe that statement is a bit far-fetched but could seem like your reality if your credit score is decent but could use a boost if you’re trying to qualify for the best rate on a car, mortgage, or get approved for that travel rewards credit card.
But there’s only one problem. You have these goals on your radar to be checked off the list sooner than later and have no idea how to raise your score in a jiffy.
No worries because we’ve got you covered. Read on to discover simple tactics to build your credit score fast:
Access Your Credit Report
The first order of business: retrieve a copy of your credit report from www.annualcreditreport.com to identify the areas that could use a little help. You can access a copy of your report from each of the three credit reporting agencies, Equifax, Experian, and TransUnion, free of charge annually. These are the same agencies you will need to contact if you want to do a credit freeze.
Since reports are not always identical across the board, it’s a good idea to request all three. That way, you’ll be improving your FICO score with each of the three credit reporting agencies.
(Don’t worry about your score just yet. What’s important is that you focus on what’s actually in the report as it determines what that magic three-digit number will be).
What’s in Your Credit Report?
Pulled your report and have no idea what to look for or what you’re looking at for that matter? Here’s a quick breakdown of the components of your credit report:
- Report number: you’ll need to provide this information when reaching out to the credit bureaus regarding a dispute or general question
- Accounts: this section is usually divided into accounts in good standing, negative items, and closed accounts
- Credit inquiries: hard (voluntary) and soft (involuntary) inquiries are listed in this section
- Personal statement (if applicable)
- Personal information: includes your name, address, date of birth, Social Security number, employer, and phone number. This information is not used for scoring purposes.
Review The Contents From Top to Bottom
At this point, you have your credit report in hand and are ready to perform a thorough review of the contents. You should do this section by section, circling any inaccurate information or entries you have no knowledge of. You’ll need to dispute this information. More on that shortly.
Devise a Plan of Action
Understand How Your Credit Score is Calculated
For the fastest results possible, you want to place the most emphasis on areas of your credit report with the greatest impact. But to do so, you need to understand how your credit score is calculated. The formula is:
- Payment History: accounts for 35 percent of your FICO score
- Amounts Owed: accounts for 30 percent of your FICO score
- Length of Credit History: accounts for 15 percent of your FICO score
- New Credit: accounts for 10 percent of your FICO score
- Credit Mix: accounts for 10 percent of your FICO score
Dispute Credit Report Errors
According to the Federal Trade Commission (FTC), 1 in 5 credit reports has errors. So, there’s a strong possibility that an error in your report could keep your score below what it should be.
To get them removed, file disputes with the credit bureaus. This process usually entails writing a letter, sending it via certified mail with a return receipt, and awaiting a response, typically within 30 days. You can find detailed guidance on how to file disputes in this handy guide from the FTC.
Word to the wise: you may have run across advice from other financial experts telling you to dispute every negative item on your credit report in hopes of a quick fix. While this could work in the short-term if there’s a backlog at the credit reporting agency or the creditor does not respond, your actions could come back to haunt you when they do get around to your dispute. How so?
Well, the credit reporting agency must respond to your dispute within 30 days from the initial date of receipt or the item in question has to be removed. But if the creditor responds at a later date and provides evidence against your dispute, the negative item will reappear on your report.
When you dispute every negative item on your credit report, you also risk your disputes being labeled as frivolous and being tossed out by the credit reporting agency. This means they’ll never make it to the creditor for review.
So, only dispute information that is either inaccurate or untimely (past the reporting timeline) to have the best chance of success.
Make Timely Payments
Considering this is the biggest chunk of the credit scoring equation, you can’t afford to let your credit accounts reach a delinquent status. Otherwise, your score could plummet by up to 100 points off just a lone occurrence. But don’t worry if you’re a few days late and have incurred a late payment fee from the creditor as your account usually won’t be reported until it reaches 30 days or more past due.
Request Goodwill Adjustments
Did you go through a rough patch and miss a few payments that resulted in negative marks on your credit report? Assuming your back up and running and the accounts are now in good standing, reach out to the creditors and request that the late payments be removed from your report. This is what’s referred to as a goodwill adjustment.
You can start off by giving the creditor a ring requesting the removal because of your positive account history. But if the representative on the other line refuses to budget, ask for a supervisor to plead your case. Still no luck? Draft up a goodwill adjustment letter and send it to the creditor directly.
Use Discretion When Paying Off Collection Accounts
Maybe you have a nasty negative or collection account that’s been lingering for years and you’re considering paying it off to boost your score. Sorry to break it to you, but paying off the account won’t make it vanish from your credit report as they linger for seven years unless you reach out to them with a pay-for-delete letter. A better option: use the funds to pay down your outstanding debt balances in good standing.
Now, if the collection account is reported incorrectly or past the reporting timeline, file a dispute right away. If it’s removed, your score could benefit right away.
How about new collection accounts? Try reaching out to the original creditor and requesting that they take the account back and accept payments directly from you. In some instances, they’ll be inclined to do so (if the account hasn’t yet been sold off to a third party) as the chances of collecting in full once the account is turned over to collections is slim to none. Even better, your credit score will bounce right back.
Keep Debt Balances Low
The amounts owed to creditors account for 30 percent of your FICO score, so the lower the balances the better. But keep in mind that the credit utilization ratio only matters for revolving debts or credit cards. Try to aim for a ratio for 30 percent or lower, but if that’s a stretch, pay what you can and your score will start to rise.
Don’t Shuffle Debt Around
It may be tempting to move debt around in hopes of tricking the credit scoring model into giving you a higher score. But this tactic won’t work as the utilization ratio accounts for all your revolving debts and not just a single account.
Remove Yourself as an Authorized User if The Balance is High
Are you listed as an authorized user on a credit card with a hefty balance? Consider removing yourself from the account as this could be hurting your credit utilization ratio and dragging your score down.
Add Yourself as an Authorized User if The Balance is Low
On the other hand, if the card is managed responsibly and little to no balance, it won’t hurt to stick around as an authorized user. In fact, doing so or even being added to another card with stellar payment history and a minimal credit utilization rate can actually help your credit score.
Request a Credit Limit Increase
This is not a pass to go out and spend more on credit if you’re approved. Instead, it’s a tactic to decrease your credit utilization ratio, which in turn boosts your credit score, without doing any work. How so? Well, assume you have a credit limit of $10,000 across the board and currently owe $6,500. If one of your creditors decides to increase your line by $5,000, your credit utilization ratio will drop from 65 percent to 43 percent.
Quick note: if your current creditors won’t grant you an increase, it’s not wise to go out and open new accounts just to lower that ratio. Reasoning: each time you apply for new credit, it dings your FICO score. More on that shortly.
Don’t Close Old Credit Cards
Tired of those old credit cards sitting in your wallet collecting dust? Think twice before you call the card issuer to cancel the account and toss the shredded piece of plastic in the trash. Why so? Assuming you don’t carry a balance, closing the accounts could cause a large jump in your utilization ratio, which can cause your score to plummet. To illustrate, if your credit limit on all your cards is $20,000 and you are currently using $5,000, your credit utilization ratio is only 25 percent. But if you close two accounts that have credit limits of $5,000 each, your credit limit now drops to $10,000 and your utilization ratio jumps to 50 percent.
Only Apply For Credit as Needed
Each time you apply for credit, a hard inquiry is generated and your FICO score will drop between two to five points. This may not seem like much but could quickly add up if you’re applying all over the place. And remember, the goal here is to build your credit score fast, so you can’t afford to shave off any points.
Open an Account With Self-Lender
Self-Lender puts a twist on building credit with their unique credit builder loan. You can apply for consideration without impacting your credit score. As long as you have decent banking history, you’ll be approved for a credit builder account and the loan proceeds will be placed in a Certificate of Deposit.
But here’s what makes them unique: you’ll only pay between $25 and $150 per month (depending on which option you select) and your activity will be reported to the credit bureaus, which builds positive payment history fast. Once the loan term is up (usually 12 or 24 months), the funds will be yours to keep. Or you have the option to leave the funds intact and allow them to continue to grow.
Either way, you’ll be saving while building your credit score. Self Lender does not require a hefty deposit, like most secured credit cards, but a non-refundable administrative fee of $15 does apply. However, this nominal fee is a small price to pay for the credit boosting potential that you’ll have with Self Lender.
Consider a Credit Card Debt Consolidation Loan
Word of caution: this move could backfire if you’re not disciplined. On the flipside, if you’re able to kiss the credit cards goodbye, taking out a credit card debt consolidation loan could do wonders for your credit and bottom line. Not only will your utilization ratio be reduced at the drop of a dime, but you’ll also save a bundle in interest if the rate your receive is more competitive.
The Bottom Line
With a solid plan of action, it is possible to raise your credit score sooner than later so you can get approved and receive the best rates on the car, home, or travel rewards credit card you’ve been eyeballing. But what’s more important is that you continue to manage your credit responsibly so you can maintain your excellent credit rating over time.