When it comes to your credit score, there are numerous ways to improve it. This article will provide you with steps every person should take to increase their credit score in no time. Before we go any further with ways to bring up your credit score, we must explain the exact meaning of it.
A credit score represents a numeric summary of your credit history based on several different types of analyses of a person’s credit files to show that individual’s creditworthiness. However, if your credit score is higher, your chances of receiving positive feedback from lenders are exponentially better. The credit score is mainly viewed by lenders such as banks, mobile phone companies, insurance companies, etc. Of course, no need to say that the banks and credit card companies are the ones that use these scores the most to evaluate their potential clients and to determine multiple factors and details regarding the loan.
Why Is a Good Credit Score Important?
As previously mentioned, a credit score is of great value for every single individual, especially those that highly rely on banks or any other company. No need to point out that most people worldwide currently depend on landers in many different forms. That is the reason why improving your credit report is extremely important.
A good credit score brings many possibilities when it comes to pretty much everything that involves financing, as those with a good score are considered lower-risk borrowers. Credit scores can influence many aspects of your life: whether you get a loan or credit card, what interest rate you pay when buying a car, and sometimes whether you get an apartment or a house you want.
How Is a Credit Score Calculated?
Multiple factors and indicators are considered when calculating the credit score. The higher the score the better. You’ll be offered more options, and the range of possibilities is more comprehensive. The credit score is calculated via computer algorithms called scoring models. Two companies stand out in this field. The first one is the leader on the market, called FICO Score and they are well known and most commonly recognized. The second one is called VantageScore, which is FICO’s main competitor. Generally, they use similar data, and the results are similar; the main difference is in approach and processing methods.
A credit score, in general, stands for a number consisting of three digits, mainly on a scale from 300 to 850, but that may vary depending on the lender and the purpose of the credit score. The most important thing shown from the data is your likelihood of reimbursing the borrowed funds. Most frequently, the data that used for calculation is gathered from different credit card agencies and their reports and credit bureaus.
In the following chart, we will show different value credit scores and how they are divided into categories:
- 300-629, considered a BAD credit score
- 630-689 considered a FAIR credit score
- 690-719, considered a GOOD credit score
- 720-850, considered an EXCELLENT credit score
In the United States, the average credit score may vary between two major scoring models. Widely accepted research shows that a score in the mid-600 or higher is usually considered a good credit score. The average FICO score for the year 2021 was 716; in the same period, the average VantageScore was 695.
Seven Proven Ways to Improve Your Credit Score Quickly
Many people do not have a good credit score, and if you are one of those people and wondering “How do I get better credit” this is the perfect guide for you. We will show you how to strengthen your credit rating. Here you can find seven proven ways to improve your credit score in no time.
1. Don’t Miss Payments and Pay on Time
The first step towards increasing your credit rating is being responsible and paying your debts and bills on time. That is the number one thing you must follow to improve a credit rating. Being late on payments is not a good sign for the landers. Therefore you do not want to find yourself in that position. It shows a lack of responsibility and represents a red flag for most companies.
The most effective thing every individual should do is hold themselves accountable, organize and make priorities to ensure they can pay upcoming payments in time. Meeting your deadlines and paying bills on time will increase your credit score faster and in a much shorter time frame than any other improvement. One piece of advice we always want to point out in this regard is setting up payment reminders. Whether you write them down or set a reminder on your phone, just do it. It will make a positive impact on the way to improve your credit score.
2. Request Increased Credit Limits
Another proven way to improve credit is by requesting a higher credit limit. This type of improvement can boost your credit utilization. If your account balance stays the same as it was and at the same time, your credit limit increases, your credit score strengthens. Probably the best thing about this way of improvement is that it is not time-consuming, and it has a lot of advantages as the request can be made over the phone. Also, a great benefit is that it can be approved quickly, which aligns with a more significant cause you are trying to achieve. If your income has been increased over a specific period, there is an excellent chance that you will be allowed and approved for a higher credit limit.
3. Examine Your Credit Report
Firstly, you should know your current status to improve your credit score. We recommend that you take some time and ask for your credit report. This is a relatively simple procedure that shouldn’t take too much time. There are currently three major reporting agencies, Equifax, Experian, and TransUnion. The main reason you should check your report is that there is always a possibility for smaller transactions to go unnoticed, which can leave a bad mark on your overall score. With these credit bureaus, you get a once-a-year free review of your status.
Once you get a report from their side, you will get an in-depth review of what is affecting your current credit report, and after that, you can adequately react and improve it. Remember that the review is only for your eyes and stays between you and the agency. If you notice something that can be explained and rectified, contact the agency, and they will make sure everything is in order.
Many consumers have seen their scores increase after identifying the mistakes. We advise you to check your score via the official AnnualCreditReport.com website. Then, review each report to see what’s helping or hurting your score.
4. Maintain a Total Credit Utilization Rate of Less Than 30%
Maintaining a low utilization rate is often considered a strategy for improving your overall credit score. Meaning not many people pay attention to it even though they should. It could be a highly influential factor that can lead to a quick boost. One thing you should always pay attention to is trying to keep the utilization rate below the 30% mark.
For instance, if your limit is at $3,000, you should always try to use up to $1,000, not going much more over that amount. What this does? It shows how reliable you are on credit, and that is a great sign for your credit score to increase. You want to keep this rate low because as soon as your credit card reports a lower balance to the credit bureaus, lower utilization will be used in calculating your score.
5. Register as an Authorized User
Having someone who has always acted responsibly and is organized with payments can also be an excellent thing for you. Getting added as an authorized user on someone else’s credit card showed you can quickly improve your status in this regard. Approved user status allows you to benefit from the primary user’s positive payment history. The account holder doesn’t have to let you use the card nor even give you the account number for your credit to improve. Of course, ideally, this is someone really close to you, preferably a member of a family or a relative.
6. Avoid Multiple Credit Applications
You should stay away from multiple credit applications if you are looking for ways to raise your credit score. Every application for any type of credit is going to be shown in your credit history. If there are too many of them, that can be an indicator that you’ve been rejected more than once, and that is not a good sign. Also, do not apply two times in a short time because this can make an unfavorable impact on your score as well.
7. Settling a Collection Account
If you have an account in collections, we recommend that you try to make the payment and settle that account. It would increase your credit score because by paying it off, you remove the negative impact that comes along with it, especially if the collector agrees to stop reporting the account. Granted, it may take some time to get this done, but we do advise you to keep that in mind and try to settle all of the collection accounts.
How Long Does It Take to Rebuild a Credit?
There is no exact timeline in which you can rebuild a credit score. We can say that it can substantially be improved over 3 to 6 months of good credit behavior. After some time, you will be able to see a noticeable change.
How long it takes to increase your credit scores depends on what’s hurting your credit and the steps you take to rebuild it. It all depends on what damages the account, as there are different penalties for every wrong action you take. It is important to say that it takes more time to repair a bad credit score than it does to build a good one. In addition to letting time help you rebuild your scores, you can follow the steps above to impact the credit score you are trying to increase positively.
To conclude this topic, we will summarize everything previously said. You should start thinking ahead, organizing your payments, being aware of your priorities, and acting responsibly regarding your finances. If you plan to apply for a loan or make a significant purchase, such as a new car or home, you must take action and work on improving and increasing your credit score.
After all, taking care of those things can only benefit you. Thus, we recommend you start as soon as possible. Sure, it may take some time, and it doesn’t increase overnight, but in some reasonable time of a few weeks or perhaps months, your credit score could be respectable, and it may open many new doors for you as a customer.
Remember, the first step is always the hardest, and in that regard, the sooner you make it the sooner you will see the positive impact and the wanted result.