Taking advantage of services such as credit card and loan applications is a crucial part of your financial journey. For some people, they offer a great means to cover expenses, while others use it as a way to achieve a stronger economic footing. In other words, it’s an essential factor if you want to become financially stable and secure, both now and in the coming years.
However, your credit score will not stay high forever. Due to personal circumstances, it may go down and when this happens, your ability to avail of certain financial services such as business auto loans and the like may be hampered. If you find yourself asking the question, “How can I quickly raise my credit score?”, then this article strives to provide an answer.
The following consists of a few ways to help you understand and boost your credit score:
What Is A Credit Score?
Primarily, a credit score refers to a number ranging from 300 to 850, which shows a person’s creditworthiness. It’s determined using several factors. These include:
- Payment history – This involves the level of responsibility that your record shows in terms of paying your loans on time. If you miss a payment, it will cause a drop of points in your credit score.
- Length of credit history – This refers to the total length of time for which you’ve had credit.
- Credit application – Having multiple credit lines can impact your credit score. Therefore, when you apply for a loan, you may be marked down for opening a new credit line.
- Money owed – This includes all the money that you’ve borrowed from different lending institutions, as well as from credit cards that you’ve owned.
- Credit mix – This refers to the various credit accounts you own such as cash loans, credit cards, mortgages and more.
Credit score is also an essential element for a person’s financial transactions, because the higher the credit score, the better the impression that a borrower gives to a potential lender. In other words, this score plays a crucial role in a lender’s decision to offer you credit or grant you any financial services.
In most cases, a credit score of 700 or above is classified as good, and will offer you several benefits. However, in addition to a good credit score, it’s also important to know and understand what constitutes a good credit score, and when you need to start worrying:
- 800 – 850: Excellent
- 740 – 799: Very Good
- 670 – 739: Good
- 580 – 669: Fair
- 300 – 579: Poor
As you can see, a credit score comes in different ranges. Thus, if your score falls under either fair or poor, then you need to make diligent efforts to improve it so that you can have easy access to more financial opportunities.
Ways To Raise Your Credit Score Quickly
Now that you know what a credit score is, it’s time to get familiar with how you can improve your rating as quickly as possible. If you need to apply for a new loan and your credit score is holding you back, below are some ways in which you can fix this:
- Review Your Credit Report For Potential Errors
A great way to improve your credit score as fast as you can is to check your credit report for possible errors. These errors may be why your credit rating suddenly sees a dramatic drop, through no fault of your own. These common mistakes can include the following:
- Accounts have been recorded more than once, which makes it appear as if you have more open lines of credits or high debt.
- Loan or credit payments have been applied to wrong accounts.
- Identity thieves have made mysterious accounts and collected debt against you.
- If you’re divorced, your former spouse’s debt is reflected on your credit or loan accounts.
- Older debt from over seven years ago hasn’t been removed from your credit report.
- Someone made an error in entering your name and other relevant information on a hand-written application.
Due to the effect that these errors can have, it’s important that you review your credit report for any incorrect information. Once you find any, be sure to dispute it by calling the reporting agency and your lender. That way, you can right any wrongs and increase your credit score quickly.
- Pay Your Bills On Time
Paying your bills on time can contribute to the increase of your credit score. If you miss a payment, make sure to get it paid as quickly as possible to reduce any further chance of a decrease in your credit score.
If you have a bad credit score, do your best to make on-time payments of bills; you can do this using payment reminders from your bank’s virtual platforms, or using automatic payments with your credit cards. If you have an outstanding loan, you should try to contact your loan provider and request your payments to be automatically debited from your active bank account.
However, in case you’re having problems making ends meet and may not be able to pay your bills on time, make sure to call your creditors and see how you can remedy this problem. The earlier you deal with the issue in any case, the better you can manage your credit and make on-time payments. As a result, you’ll improve your credit score in no time.
- Reduce The Total Money You Owe
Typically, the amount of money you owe to various lending institutions contributes at least 30% or more to the calculation of your credit score. This means that having high outstanding debt negatively affects your credit rating.
If you have a poor credit score and want to grow it immediately, start by reducing the amount of debt you owe. You can do this by paying off the debt instead of moving it around. For instance, you may come up with a payment plan that allows you to place more of your budget in settling high-interest cards first, while making minimum payments on your other accounts. By doing this, you can easily decrease your outstanding balance and revamp your credit rating right away.
- Increase Your Credit Limit
Increasing your credit report can also be a smart way of revamping your credit score fast. When you have a high credit limit, you get a lower credit utilization rate, which is a contributing factor in the surge of your credit rating.
However, before you request a limit increase, be sure that you won’t be tempted to spend more than you can afford to pay off. Also, don’t apply for many credit cards within a short amount of time, as this will likely send some red flags to lenders.
- Refrain From Applying For Too Much New Credit
While opening a new credit card can expand your overall credit limit, the application can create hard inquiries on your credit report; when you consistently open new lines of credit, it’s seen as suspicious activity and looked at unfavorably. Hence, multiple inquiries about your credit can adversely affect your credit score, which will remain for a period of two years.
If you’re looking to elevate your credit score quickly, it’s best to avoid applying for too much credit, so that no hard inquiries will be done on your report. By doing this, even if you don’t see an immediate increase in your credit score, you’ll prevent any unwanted mark-downs.
- Avoid Closing Unused Credit Cards
Another strategy to raise your credit score right away is by avoiding closing unused cards. When you keep unused cards open, it won’t cost you any money in the payment of annual fees; this can be a wise move, because closing an unused credit card will raise your credit utilization ratio, which refers to the amount of money you currently owe divided by your credit limit. It’s a very easy way to appear more trustworthy to lenders.
Therefore, if you want to keep your credit utilization ratio low, quickly building your credit score, it’s a perfectly viable option to keep your credit cards open – that is, of course, as long as they don’t become a financial burden.
The Bottom Line
Applying for a loan or a line of credit is a huge responsibility, which is why you should try to stay on top of your debt and make your payments diligently. Failure to pay all the money you owe gives you a bad credit score, which will hurt you financially and prevent you from getting loans or availing of other financial services in the future.
If you’re having trouble increasing your credit rating, follow the tips mentioned above and you’ll make the process go much easier and faster. While these strategies can raise your score fast, keep in mind that the word “fast” is relative. You won’t get the results overnight, and you’ll have to make sure that you manage it responsibly over time. If you do this, you can expect to see a significant and positive impact on your credit score after three months or so.