Content of the material
- Raise Your FICO® Score Instantly with Experian Boost™
- 3. Pay Twice a Month
- 7. Consider Consolidating Your Debts
- How Long Does It Take for Your Credit Score to Recover After Taking a Hit?
- Fastest Ways to Raise Your Credit Score
- 3. Aim for 30% Credit Utilization or Less
- How Long Do Derogatory Marks Stay on Your Credit Report?
- Rapid Rescoring for Fast Credit Score Updates
- 2. Identify the negative accounts
- What Factors Affect Your Credit Score?
- Ask for late payment forgiveness
- How much will this action impact your credit score?
- 7. Have someone add you as an authorized user
- Check and understand your credit score
- 1. Find Out When Your Issuer Reports Payment History
- In Summary: Tips To Improve Your Credit Score
- Top credit card wipes out interest into late 2023
- How to Raise Your Credit Score … Fast!
- Pitfalls to avoid when working on your credit scores
Raise Your FICO® Score Instantly with Experian Boost™
Experian can help raise your FICO® Score based on bill payment like your phone, utilities and popular streaming services. Results may vary. See site for more details.
3. Pay Twice a Month
Let’s say you’ve had a rough couple of months financially. Maybe you needed to rebuild your deck (raising my hand) or had to get a new fridge. If you put big items on a credit card to get the rewards, it can temporarily throw your utilization ratio (and your credit score) out of whack.
You know that call you made to find out the closing date? Make a payment two weeks before the closing date and then make another payment just before the closing date. This, of course, assumes you have the money to pay off your big expense by the end of the month.
Take care not to use a credit card for a big bill if you plan to carry a balance. The compound interest will create an ugly pile of debt pretty quickly. Credit cards should never be used for long-term loans unless you have a card with a zero percent introductory APR on purchases. Even then, you have to be mindful of the balance on the card and make sure you can pay the bill off before the intro period ends.
7. Consider Consolidating Your Debts
If you have a number of outstanding debts, it could be to your advantage to take out a debt consolidation loan from a bank or credit union and pay off all of them. Then you’ll just have one payment to deal with, and, if you’re able to get a lower interest rate on the loan, you’ll be in a position to pay down your debt faster. That can improve your credit utilization ratio and, in turn, your credit score.
A similar tactic is to consolidate multiple credit card balances by paying them off with a balance transfer credit card. Such cards often have a promotional period when they charge 0% interest on your balance. But beware of balance transfer fees, which can cost you 3%–5% of the amount of your transfer.
How Long Does It Take for Your Credit Score to Recover After Taking a Hit?
In order to understand how long it might take you personally to improve your credit, it can be helpful to look at one FICO study of the average amount of time it takes to recover your credit score back to its original number after a negative mark on your credit report.
This study was only done for mortgage payments, but it’s likely that it’d be similar for other types of negative marks, such as paying your student loans late or having a car repossessed if you don’t pay your auto loan.
|Starting credit score of 680||Starting credit score of 720||Starting credit score of 780|
|30-day late payment||9 months||2.5 years||3 years|
|90-day late payment||9 months||3 years||7 years|
|Short sale, deed-in-lieu of foreclosure, or foreclosure||3 years||7 years||7 years|
|Bankruptcy||5 years||7-10 years||7-10 years|
In general, the longer you forgo a payment you owe, the longer it’ll take to recover. And the higher your credit score was to begin, the longer it will take to recover. Know that there are things you can do to prevent this from happening and to build credit in the meantime.
Fastest Ways to Raise Your Credit Score
It takes time to improve your credit score, especially if you have lots of negative items on your credit report. Fortunately, there are a few things you can do to raise your credit score quickly. Paying down a large credit card balance or getting a credit limit increase, especially before your account statement closing date, can impact your credit score relatively quickly. Both of these improves your credit utilization rate, which is 30 percent of your credit score.
Disputing a negative error from your credit report can also raise your credit score, especially if you talk to the creditor over the phone and have them remove the error from your credit report right away. To enforce your rights under the Fair Credit Reporting Act (FCRA), you have to dispute credit report errors in writing. However, some creditors are willing to remove legitimate errors with just a phone call. The update can appear on your credit report and impact your credit score in just a few days if the creditor is willing to work with you.
If you're unable to dispute an error over the phone, disputing in writing is still effective, particularly if you have proof of the error. The dispute process can take 30 to 45 days while the credit bureau investigates then updates your credit report. Once the error is removed from your credit report, it will factor into your credit score right away.
3. Aim for 30% Credit Utilization or Less
Credit utilization refers to the portion of your credit limit that you’re using at any given time. After payment history, it’s the second most important factor in FICO credit score calculations.
The simplest way to keep your credit utilization in check is to pay your credit card balances in full each month. If you can’t always do that, then a good rule of thumb is to keep your total outstanding balance at 30% or less of your total credit limit. From there, you can work on whittling that down to 10% or less, which is considered ideal for improving your credit score.
Use your credit card’s high balance alert feature so you can stop adding new charges if your credit utilization ratio is getting too high.
Another way to improve your credit utilization ratio: Ask for a credit limit increase. Raising your credit limit can help your credit utilization, as long as your balance doesn’t increase in tandem.
Most credit card companies allow you to request a credit limit increase online; you’ll just need to update your annual household income. It’s possible to be approved for a higher limit in less than a minute. You can also request a credit limit increase over the phone.
How Long Do Derogatory Marks Stay on Your Credit Report?
No one’s perfect, and that’s very clear when you’re dealing with credit scores and credit reports. Your credit report is a history of how you’ve handled credit in the past. If you’ve made mistakes, such as late or missed payments, those will stay on your credit report for a long time. But just how long depends on the type of derogatory mark:
- Late payments: Because lenders usually report to the bureaus every 30 to 45 days (roughly), you may have a small window of time after missing a payment to make it up before it appears on your report. But once a late payment is on your report, it will stay for seven years from the original delinquency date.
- Collection accounts: If you have an account that is sent to collections, the account will remain on your credit report until seven years after your initial missed payment that led to the account ending up in collections.
- Bankruptcies: Depending on the type of bankruptcy you declared, it will remain on your credit report for seven to 10 years.
- Other negatives: Other derogatory marks, such as repossession, will typically stay on your credit report for seven years from the date of the first payment you missed.
Rapid Rescoring for Fast Credit Score Updates
There’s one more service that can give you earlier access to credit score changes, but only in a narrow set of circumstances. If you’re applying for a mortgage loan, the lender may offer rapid rescoring, a service that will update your credit score within 48 to 72 hours.
Rapid rescoring doesn’t work for every situation. You need to have proof that there’s inaccurate information on your credit report, like a payment inaccurately reported as late.
Rapid rescoring is only available with certain mortgage lenders when you're trying to qualify for a mortgage or get better terms; it’s not a service available directly to consumers or with other types of businesses.
FICO’s new credit score system—the UltraFICO—may help some borrowers boost their credit score right away by allowing access to bank information. Lenders who use UltraFICO may offer the score to you if you have an application turned down. UltraFICO can improve your credit score if you have a history of managing your bank account well.
The UltraFICO score was initially rolled out to a small group of lenders at the beginning of 2019 in a test pilot. Once the pilot phase is complete, and all is working in good order, the UltraFICO score will become available nationwide.
2. Identify the negative accounts
Now that you have your credit report go through it and highlight accounts with a negative status. Highlight any late payments, collection accounts, or any other negative information. Make sure your personal information is correct, including your address, employer, and phone number.
Items to focus on
- Collection accounts
- Late payments
- Credit inquiries
What Factors Affect Your Credit Score?
Understanding what goes into your credit scores can help you start gaining points faster and build up a strong credit file. Here are the main factors that go into calculating your scores:
- Payment history: Whether you pay your credit cards and loans on time accounts for 35% of your FICO® Score☉ , the score most often used by lenders.
- Credit balances: Credit utilization, or the percentage of your available credit that you’re using, makes up 30% of your FICO® Score. Keeping your balances under 30% of total credit available is key to maintaining a solid credit score; for top scores, aim to keep your utilization in single digits.
- Length of credit history: The length of time you’ve had your credit accounts open makes up 15% of your FICO® Score. The longer you have your accounts open, the better.
- Applications for new credit: Applications for credit cards and loans can cost you a few points each, and they impact your scores for a year. New applications account for 10% of your FICO® Score.
Ask for late payment forgiveness
Paying on time constitutes 35% of your FICO Score, making it the most important action you can take to maintain a good credit score. But if you’ve been a good and steady customer who accidentally missed a payment one month, then pick up the phone and call your issuer immediately.
Be ready to pay up when you ask the customer rep to please forgive this mistake and not to report the late payment to the credit bureaus. Note that you won’t be able to do this repeatedly — requesting late payment forgiveness is likely to work just once or twice.
You have 30 days before you’re reported late to the credit bureaus, and some lenders even allow as long as 60 days. Once you have a late payment on your credit reports, it will stay there for seven years, so if this is a one-time thing, many issuers will give you a pass the first time you’re late.
How much will this action impact your credit score?
If you’re a day or two late on a credit card payment, you might get hit with a late fee and a penalty APR, but it shouldn’t affect your credit score yet. However, if you miss a payment by a whole billing cycle, it could drop your credit score by as many as 90 to 110 points.
If you fall 30 days or more behind, you can try sending a “letter of goodwill” or “goodwill adjustment” to the credit card issuer. In this letter, you’ll take responsibility for the late payment and request the issuer remove it from your credit reports. The issuer isn’t required to comply, but for a loyal customer with a good record, it doesn’t hurt to ask.
7. Have someone add you as an authorized user
When someone adds you as an authorized user on their credit card account the credit history of that account from day one will be reported on your credit report.
Authorized users can have their own card with their name on it to make purchases, but they don’t have to even get a card. Make sure the account you are being added onto is in good standing. No late payments, low balance, and the longer it has been open, the better. Make sure you ask financially responsible people you know well to add you on as an authorized user cause if they become delinquent it will also hurt your score.
Check and understand your credit score
It’s important to know that not all credit scores are the same, and that they fluctuate from month to month, depending on which credit bureaus lenders use and how often lenders report account activity. So, while you shouldn’t worry if you see your scores rise or fall by a few points, you should take note when a big change occurs.
The two main consumer credit scoring models are the FICO Score and VantageScore. Here are the factors that comprise your FICO Score and how much each factor is weighed:
- Payment history (35% of your score)
- Amounts owed (30% of your score)
- Length of credit history (15% of your score)
- Credit mix (10% of your score)
- New credit (10% of your score)
Here are the factors influencing your VantageScore:
- Total credit usage, balance and available credit (extremely influential)
- Credit mix and experience (highly influential)
- Payment history (moderately influential)
- Age of credit history (less influential)
- New accounts (less influential)
There are a variety of options for checking your credit score for free.
For example, Discover cardholders can get a free FICO Score from the Discover Credit Scorecard, or anyone can get a free VantageScore by creating a LendingTree account. American Express and Capital One also offer free VantageScores to both card account holders and the general public, though many other card issuers offer free access only to their cardholders.
Here are the tiers that credit scores can fall into, according to FICO:
|FICO Score tiers|
|800 or more||Exceptional credit|
|740 to 799||Very good credit|
|670 to 739||Good credit|
|580 to 669||Fair credit|
|580 or less||Poor credit|
1. Find Out When Your Issuer Reports Payment History
Call your credit card issuer and ask when your balance gets reported to the credit bureaus. That day is often the closing date (the last day of the billing cycle) on your account. Note that this is different from the “due date” on your statement.
There’s something called a “credit utilization ratio.” It’s the amount of credit you’ve used compared to the amount of credit you have available. You have a ratio for your overall credit card use as well as for each credit card.
It’s best to have a ratio — overall and on individual cards — of less than 30%. But here’s an insider tip: To boost your score more quickly, keep your credit utilization ratio under 10%.
Here’s an example of how the utilization ratio is calculated:
Let’s say you have two credit cards. Card A has a $6,000 credit limit and a $2,500 balance. Card B has a $10,000 limit and you have a $1,000 balance on it.
This is your utilization ratio per card:
Card A = 42% (2,500/6,000 = .416, or 42%), which is too high.
Card B = 10% (1,000/10,000 = .100, or 10%), which is awesome.
This is your overall credit utilization ratio: 22% (3,500/16,000 = 0.218), which is very good.
But here’s the problem: Even if you pay your balance off every month (and you should), if your payment is received after the reporting date, your reported balance could be high. And that negatively impacts your score because your ratio appears inflated.
So pay your bill just before the closing date. That way, your reported balance will be low or even zero. This lowers your utilization ratio and boosts your score.
In Summary: Tips To Improve Your Credit Score
- Signup for Credit Karma, an easy-to-use and transparent one-stop shop: get your credit score, credit report, and credit monitoring.
- Download Tally, a credit card consolidation app that makes it easy to stay on top of your credit cards. Scan your cards and get a line of credit as well as manage payments.
- Signup for Experian Boost to include your cell phone and utility payments into the calculation of your credit score. This is huge because Experian won’t count missed bills, only positive history payments.
- Get a Petal Visa Credit Card. All the perks and rewards of a credit card, except no fees and catered towards improving your credit score.
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How to Raise Your Credit Score … Fast!
The quickest way to raise your credit score is unearthing an error in your credit report. If erroneous information somehow was entered in your credit report or you are the victim of fraud, you can dispute the debt. Notify one of the credit bureaus immediately and provide the correct information or evidence that you were defrauded.
Once the incorrect information is changed, a 100-point jump in a month might happen. Large errors are uncommon, and only about one in 20 consumers have one in their file that could impact the interest on a loan or credit line. Still, it’s important to monitor your score.
Get someone with a high credit score to add you to their existing account. The good info they’ve accumulated will go into the formula for your score. It doesn’t hurt to ask and explain how you might benefit. If you can make it happen, you could see a quick, significant jump in your credit score.
Another quick way to improve your score is to make payments every two weeks instead of once a month. The increased payments method helps reduce your credit utilization, which is a huge factor in your score.
Along those same lines, ask your card company to raise your credit limit. If you go from a $1,000 a month to $3,000, you help the credit utilization part of your score again, because you have more spending room.
If you are applying for a second or third credit card, only make one application a month. Applying for two or three at a time will result in multiple credit inquiries that will hurt your score.
Many credit card issuers offer timely credit score reports on their web sites. If you have access to your accounts online, keep an eye on the score, especially if it is updated frequently. If it plunges and you don’t know why, contact the card issuer or one of the credit bureaus right away.
Pitfalls to avoid when working on your credit scores
When it comes to building credit, it’s easy to get overly focused on ways to raise your credit scores fast. The truth is that building credit takes time. So take a step back and make sure your strategy doesn’t do more harm than good.
Here are a few “don’ts” to keep in mind.
- Don’t apply for a bunch of new credit cards just because you want to increase your credit utilization. Even though this might help lower your credit utilization ratio, it could also make you look like a risky borrower thanks to the new hard inquiries on your reports.
- For the same reason, don’t take out a loan just to improve your credit mix. Only apply for a new loan if you actually need it.
- Don’t carry a balance on your credit card just so you can build credit. Carrying a balance can lead to unnecessary interest charges, and it might actually hold your scores down by increasing your credit utilization ratio.
- Don’t cancel your credit card after you pay it off — unless you have a good reason to do so. Closing your credit card will hurt your length of credit history, so it’s better to leave it open, even if you’re not using it anymore. Of course, if having a card tempts you to spend more, or it comes with an expensive annual fee, you might want to rethink this conventional wisdom.