Raise Your Credit Score in 3 to 6 Months

Your credit score is the gateway to getting better loans at lower interest rates. With a low credit score, you will most likely be denied credit or subjected to smaller amounts at higher interest rates. High credit scores reflect your trustworthiness as a borrower, and must be earned. Even if you currently have a low credit score, you can increase it in just a few months by keeping good track of your number and changing a few habits.

Steps

Raising Your Score if You Have Bad Credit

1. Find out your credit score. There are a number of good ways to learn your credit score quickly. You can call a credit bureau directly, or use one of several free online services to get the number. You can also sign up for a credit monitoring service, which will track your credit score for you, and let you know of any significant changes.
   • There are three main credit bureaus, Experian, Equifax, and TransUnion. Each will calculate your score slightly differently, so you will want to get a number from all three.
   • Some banks and other credit issuing institutions will enroll you in a monitoring service as part of signing up. Check with your bank or credit card company to see if that is the case.
   • Your score can range anywhere from 301 to 850. Anything over 700 is a good score, while 750 and above is a very high score, and would put you in great shape for any loans or credit you may need. A score below 600 is not good, and you will only qualify for loans at a very high interest rate, if you qualify at all.
2. Note any significant recent changes to your credit score. Major changes could be recently filing for bankruptcy, foreclosing on a mortgage, or being the victim of identity theft. Other, less obvious ways to do serious damage to your credit include maxing out several credit cards at once or skipping bills. If you have had a significant change to your recent financial history, it can be much more difficult, if not impossible, to raise your credit quickly.
3. Challenge any issues on your credit report. Make sure all credit cards, loans, bills, and mortgages belong to you, and that the balances indicated on each are correct. If the reports have outdated or incorrect information, you should contact the reporting agency as soon as possible.
   • Keep good debt on your reports. If you have paid off a large debt, such as for a car or house, don't try to get that off your credit report quickly. Paying off the large debt looks good to your creditors, so leave it there to demonstrate your trustworthiness.
   • Sometimes incorrect information can arise from sharing a name with someone else, and sometimes it can be the result of attempted identity theft. You will be able to work with the reporting agency to figure out what is the case.
   • Discrepancies or issues can arise at any time, so you should get into the habit of checking your credit report annually to keep track.
4. Pay your bills on time. This is the best step you can take to improve your credit score. Payment history accounts for 35% of your credit score, and paying late reflects negatively on you, suggesting you are untrustworthy. You can work with your bank or the billing company to pay automatically from your bank account.
   • If you do use automatic payments, make sure you have enough funds in your account to cover the bills. If not, you can easily cause more issues for yourself.
   • Consider paying your bills twice a month, rather than just once. This can quickly erase large debts that build up suddenly due to unexpected expenses. Otherwise, it can look like you are too willing to max out your credit.
5. Reduce your debt as much as possible. Make sure you are paying the minimum on all your debts, then use your available cash to pay some of them off completely. Focus on smaller debts, which can be easier to manage. This can allow you to work your way up to paying off the big ones. You will need to pay more than the minimum for it to have any effect, so pay as much as you can as soon as possible.

Raising Your Score if You Have No Credit History

1. Take out a small loan. Go to a local bank or credit union, and get a small personal loan. Use that loan on a large item you already planned on purchasing. This is not an excuse to go shopping, as you want to be able to pay off the loan on time and in full.
2. Become an authorized user. Find a family member or close friend who has good credit, and ask them to add you to their account as an authorized user. By agreeing, they assume all liabilities for your use of the card. You will be able to utilize the card, and benefit from the owner's strong history of paying.
   • If anything happens to the finances or credit of card's owner, that will seriously damage your credit as well, so be very careful.
   • This is risky for the card owner, as anything you do to damage your credit will hurt them as well. It should be someone who trusts you a great deal.
3. Apply for a secured credit card. You will give a security deposit to the issuer, usually equal to the credit limit. This is collateral for the card, so the issuer is covered if you default or otherwise can't pay. Make sure to pay off the card on time. A secured credit is meant to be temporary, until you can get a good rate on a card with an unsecured limit.
   • You can apply for a secured credit card through your bank or credit union, or directly from a credit card company. Look for a card that has a low annual fee.
4. Report your rent on your credit report. Chances are you rent an apartment and pay rent. As long as you do so on time, that can help build your credit. Many private landlords will not report your payments to credit agencies, so ask yours if they do, and if not, if they will.

Raising Your Credit Score in General

1. Keep track of your credit score. Just like you can improve your score, it can also go down if you are not careful. You should get into the habit of checking your credit score from each of the three major credit bureaus annually. Contact the bureaus quickly if anything seems troublesome or out of the ordinary.
2. Manage your credit card usage. Don't pull out a credit card to pay for everything, as it will push you up against your credit limit and make you look irresponsible. You will want to keep your debt utilization ratio (how much you owe against how much you are allowed to owe) as low as possible. Ideally, you will only spend about 30 percent of your credit limit, showing you will use money loaned to you, but are able keep debt manageable.
   • You do need to spend some money on your cards. Otherwise, banks and other institutions won't loan to you. Without a credit history of any kind, they can't prove you are reliable.
3. Reduce your regular credit cards. Pay off small balances on cards that you don't use very often, and stick to a few cards. All those cards floating around may be harder for you to track, and doesn't look good to a reporting agency.
   • Keep paid for or unused credit cards, unless you are still incurring fees whether they are used or not. You may actually make a small purchase on an unused card so the issuer continues to report the action, but pay the amount off immediately. Maybe keep a card for paying one or two specific bills. Make sure you keep track of your spending on those cards.
4. Shop for a loans in a short period of time. Your credit score is checked every time you apply for a loan and too many inquiries on your credit can decrease your score. Note however, that a bunch of credit inquires within a short period of time is not treated negatively, so consider shopping for loans within a 2-week period.
5. Increase your line of credit. Increasing the limit on credit cards without increasing your spending can make your debt to credit ratio look better. Increasing the limit is not an excuse to spend more money. You want to make your current debt look better, not give yourself an opportunity to spend more.
   • You should only do this if your credit is already fairly strong, and you are in a good habit of paying on time. If you are not careful, and your credit is particularly bad, your lender may actually reduce your credit.

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Sources and Citations

See also

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• Avoid the Most Common Reasons for Credit Denial
• Build Good Credit
• Pay Off Credit Card Debt
• Build Credit Without Credit Cards
• Get Out of Debt Without Hurting Your Credit
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• Get a Motorcycle Loan With Bad Credit
• Manage Your Credit
• Buy Debt

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