5 Fastest Ways To Boost Your Credit Score
One of the best ways to deal with out-of-control debt is to consolidate it by taking out a personal loan that charges a lower interest rate than your credit cards. The problem is, in order to get a personal loan — or any loan for that matter — you have to have a credit score that doesn’t scare off lenders.
The good news is, there are ways to boost your score right away without actually paying down your debt. From there, you can get the loan you need to start eliminating your high-interest debt once and for all — or take advantage of the many other doors that open when you have good credit. There’s no reason you should pay more for loans, so follow these tips to boost your credit score and help yourself out.
Review Your Credit Report for Mistakes
When it comes to boosting your credit score, the first step is also the simplest. Visit AnnualCreditReport.com, which during the pandemic has been giving out free credit reports from all three credit bureaus — Equifax, TransUnion, and Experian — once per week instead of once per year as required by federal law.
It’s not uncommon for costly errors to appear on credit reports, but you won’t know if yours contains mistakes unless you check, which should be your first step if you’re looking to improve your score. The FTC offers contact info, procedures, and sample text for people looking to dispute errors they find on their reports.
In 2019, a white paper from the Credit Builders Alliance (CBA) showed the score-building power of a little-known tactic called rent reporting. Not all credit scoring models factor on-time rent payments into their calculations, but all three bureaus will include rental payments in their profiles and reports if they receive it — but that’s a big if.
The CBA paper showed that many people with low credit scores are renters who would stand to benefit the most from getting their history of on-time housing payments in front of lenders. About four out of five people saw their scores improve when landlords reported their rental payments, with the average score increasing by 23 points.
Some landlords and building managers report rental payments, but many do not. If you choose, you can pay for a service like RentReporters, which claims that their average user gets a 40-point boost in 10 days. Many services like RentReporters also get the bureaus to report your on-time utility payments, which can boost your score just like housing payments.
Ask for a Credit Limit Increase on Your Current Cards
If you’ve had a card for a few months or more that you use fairly regularly and you’ve made all your payments on time, it’s very likely that your lender might increase your credit limit if you request it. This is a great move because it doesn’t require a credit check or an application, there’s no fee, and if you’re approved you’ll increase your open credit and lower your credit utilization ratio.
That all-important ratio the amount of open credit that you’re utilizing, which accounts for 30% of your FICO score, second only to your payment history.
The best way to expand your open credit and boost your score is to pay down as much of your existing credit card debt as possible. If you pay down enough, you’ll see a boost in your score almost right away while eliminating toxic revolving debt from your financial life. Of course, that option requires money that simply isn’t in many family budgets — but there’s another way.
When it comes to your credit utilization ratio, lower is always better, but 30% is the industry’s magic number. If you’re struggling with debt, another line of credit might seem like the last thing you need, but if opening another credit card gets your utilization ratio below 30%, it might be worth it. This is especially true if you’re opening a balance transfer card that lets you park high-interest debt under the shelter of a 0% introductory APR for a year or more.
Take Action: 10 Things to Do Now If You Have a 500 Credit Score
This is more of a preventative measure than a strategy for score improvement, but the single best thing you can do for your score is avoid missing payments for any reason. The moment you do, none of your other efforts will matter — or at least they won’t matter nearly as much. Your payment history accounts for 35% of your total profile — greater than one-third of your overall score — which is more than any other factor in your financial life.
A missed payment is poison to lenders, and that mark stays on your report for seven years, according to Credit Karma. The longer you remain delinquent, the greater the negative impact will be on your report and your score.
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