Building a good credit score is like building a good reputation. It takes years of work and consistency. Lowering it is easy to do, it drops quickly if you stumble. However, it seems to take forever for it to rise when you’re doing things right.
While you can’t improve your credit score overnight, there are a number of things you can do right now to help it move in the right direction,
Check for errors on your credit report
Multiple studies have found that nearly 80% of all U.S. consumers’ credit reports contain errors.
Your first step should be to request a free credit report from each of the three major credit reporting agencies: Experian, Equifax, and TransUnion from a legitimate site like AnnualCreditReport.com. Under the Fair Credit Reporting Act, you are entitled to a free copy of each of your reports at least once every 12 months.
Once the reports are in front of you, examine every detail. Take extra care to search for accounts that show late payments or unpaid bills. In addition to obvious errors, look closely for smaller mistakes too. These include a slight misspelling of your name or addresses you’ve never resided at. Those types of things can indicate identity theft.
If you spot anything that looks inaccurate, file a dispute. If you’re able to get errors removed, it can have an immediate, significant positive impact on your score.
Get added as an authorized user on another’s account
If you have a family member with a high credit score that is willing to add you as an authorized user to one of their credit cards, you’ll get an almost immediate boost to your score. And, you don’t even have to use the card at all. The owner of the account can hold onto the card without worry that you’ll rack up debt, which can make it. Just be aware, if circumstances change for that person and they’re unable to pay their bills or max out their credit cards, your credit will take a hit too.
Make payments twice a month
Many people use their credit cards to rack up lots of points in exchange for things like flights or hotel rooms. In the process, they may charge close to the credit limit of a card, thinking that if they pay it off in full each month their score won’t be affected. But, that isn’t necessarily true. Your score is very sensitive to how much you’re charging compared to your credit limits. This is called a credit utilization ratio. If you make the payment even a day after your balance is reported to the credit bureaus, it could have damaging effects on your score.
As your score is very sensitive to how much you’re charging compared to your credit limits, something known as a credit utilization ratio, if you make the payment even a day after your balance is reported to the credit bureaus, it could have damaging effects on your score.
The answer is to make payments at least twice a month, once before the statement closing date, and once after.
Pay down your balances
As mentioned, your credit utilization ratio is a key part of your score, in fact, 30 percent of your credit score is based on the amount you owe. Paying down your balances as quickly as you can is one of the best ways to quickly boost your score. If you have a card with a limit of $5,000, for example, and your balance is $4,000, your utilization is 80 percent. Getting it down to under 20 percent could raise your score dramatically.
If you have a card with a limit of $5,000, for example, and your balance is $4,000, your utilization is 80 percent. Getting it down to under 20 percent could raise your score dramatically.
Request a credit limit increase
If you can’t pay down your balances right now, there is another option, requesting a credit limit increase. Say you’ve maxed out a $1,000 limit card. If you can get an increase to $2,000, that immediately cuts your utilization rate in half. Just remember not to use any of that additional credit or it will defeat the purpose.