Content of the material
- Raise Your FICO® Score Instantly with Experian Boost™
- 14. Steer clear of payday loans
- 4. Avoid multiple applications if you want to improve your credit score
- How long do derogatory marks stay on your credit report?
- Ask for late payment forgiveness
- How much will this action impact your credit score?
- 3. Aim for 30% Credit Utilization or Less
- 4. Raise Your Credit Limits
- Fastest Ways to Raise Your Credit Score
- The truth about raising your credit scores fast
- 5 factors that affect your credit scores
- How to Raise Your Credit Score … Fast!
- 2. Pay Down Debt Strategically
- 5. Make the Most of a Thin Credit File
- Establishing or Building Your Credit Scores
- Check and understand your credit score
- How Long Does It Take for Your Credit Score to Recover After Taking a Hit?
- How long does it take for your credit score to improve when you start paying student loans?
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.
14. Steer clear of payday loans
Payday loans are an expensive way to borrow. They were designed to tide people over until payday. But if used regularly and if you can’t pay on time, the charges, and debt, can spiral out of control. Avoid them at all costs.
4. Avoid multiple applications if you want to improve your credit score
Every time you apply for credit of any sort, it shows on your record. While it won’t spell out if you were rejected, multiple applications for credit cards, for example, will suggest your applications are unsuccessful. This looks bad to any other lenders you might apply to. Even just two applications in a short space of time could dent your credit score, making it even harder to qualify for a loan.
How long do derogatory marks stay on your credit report?
Your score is determined by the three credit bureaus (Equifax, Experian and TransUnion), but it’s up to your lenders to contact them to report information about you. It can be as simple as your credit card company reporting that you made a monthly payment on time, increased your debt or decreased your balances. These are all positive influences on your score, but there may be a slight lag in timing due to the reporting process.
In addition to a potential delay in the telephone game between your credit issuer and the credit bureaus, certain financial events can linger on your credit history for years. Unfortunately, the more harmful events are often the ones that stick around the longest, so it’s best to know what actions will be the biggest burdens:
|Event||Average time on credit report|
|Late payments||7 years|
|Debt collections||Up to 7 years|
|Chapter 13 bankruptcy||7 years|
|Chapter 7 bankruptcy||10 years|
This may seem ominous, but here’s the good news: recency bias is alive and well in the credit scoring world. Even if they’re still present, the old items that appear on your report have less weight than your newer ones.
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.
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.
4. Raise Your Credit Limits
If you tend to have problems with overspending, don’t try this.
The goal is to raise your credit limit on one or more cards so that your utilization ratio goes down. But again, this works in your favor only if you don’t use the newly available credit.
I don’t recommend trying this if you have missed payments with the issuer or have a downward-trending score. The issuer could see your request for a credit limit increase as a sign that you’re about to have a financial crisis and need the extra credit. I’ve actually seen this result in a decrease in credit limits. So be sure your situation looks stable before you ask for an increase.
That said, as long as you’ve been a great customer and your score is reasonably healthy, this is a good strategy to try.
All you have to do is call your credit card company and ask for an increase to your credit limit. Have an amount in mind before you call. Make that amount a little higher than what you want in case they feel the need to negotiate.
Remember the example in #1? Card A has a $6,000 limit and you have a $2,500 balance on it. That’s a 42% utilization ratio (2,500/6,000 = .416, or 42%).
If your limit goes up to $8,500, then your new ratio is a more pleasing 29% (2,500/8,500 = .294, or 29%). The higher the limit, the lower your ratio will be and this helps your score.
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.
The truth about raising your credit scores fast
While a lucky few may be in a situation where they can raise their credit scores quickly, the bottom line for most of us is that building credit takes time and discipline, especially if you’re trying to rebuild bad credit. That’s because your credit scores are complex and made up of several interconnected factors (more on that below).
So trust us: While some credit repair agencies may promise to raise your credit scores fast, there’s no secret that will help boost your credit scores quickly.
But if you start developing healthy habits now, you can build credit over time all by yourself.
5 factors that affect your credit scores
As we mentioned above, there are several factors that go into determining your credit scores.
- Payment history makes up the biggest chunk of your credit scores. That’s why it’s so important to make on-time payments each month if at all possible. Late payments can haunt your credit history for up to seven years.
- Credit usage, or credit utilization, is another important factor. This measures how much of your available credit you tap into at any given time. Experts recommend you keep this to less than 30%.
- The length of your credit history has some impact on your credit, though not much. This factors in the ages of your oldest and newest credit card accounts, as well as the average age of all your accounts. The older your credit, the better, because it shows lenders you have more experience managing credit.
- Your credit mix has a small impact on your credit. This looks at the types of credit you borrow. Lenders want to see that you can balance revolving accounts like credit cards with installment accounts like mortgages, student loans, auto loans and personal loans.
- Your recent credit also has a small impact on your credit. This tracks the applications you file for things like new credit cards and personal loans with hard inquiries. The fewer, the better.
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.
2. Pay Down Debt Strategically
OK, let’s build on what you just learned about utilization ratios.
In the above example, you have balances on more than one card. Note that Card A has a 42% ratio, which is high, and Card B has a wonderfully low 10% ratio.
Since the FICO score also looks at each card’s ratio, you can bump up your score by paying down the card with the higher balance. In the example above, pay down the balance on Card A to about $1,500 and your new ratio for Card A is 25% (1,500/6,000 = .25). Much better!
5. Make the Most of a Thin Credit File
Having a thin credit file means that you don’t have enough credit history on your report to generate a credit score. An estimated 62 million Americans have this problem. Fortunately, there are ways to fatten up a thin credit file and earn a good credit score.
One is Experian Boost. This relatively new program collects financial data that isn’t normally in your credit report, such as your banking history and utility payments, and includes that in calculating your Experian FICO credit score. It’s free to use and designed for people with limited or no credit who have a positive history of paying their other bills on time.
UltraFICO is similar. This free program uses your banking history to help build a FICO score. Things that can help include having a savings cushion, maintaining a bank account over time, paying your bills through your bank account on time, and avoiding overdrafts.
A third option applies to renters. If you pay rent monthly, there are several services that allow you to get credit for those on-time payments. For example, Rental Kharma and RentTrack will report your rent payments to the credit bureaus on your behalf, which in turn could help your score. Note that reporting rent payments may only affect your VantageScore credit scores, not your FICO score. Some rent-reporting companies charge a fee for this service, so read the details to know what you’re getting and possibly purchasing.
A new entry into this field is Perch, a mobile app that reports rent payments to the credit bureaus free of charge.
Establishing or Building Your Credit Scores
Depending on your experience with credit, you might not have a credit report at all. Or, your credit report might not have enough information that credit scoring models are able to assign you a credit score.
With FICO® Scores, you need to have at least one account that’s six months old or older, and credit activity during the past six months. With VantageScore, a score may be calculated as soon as an account appears on your report.
When you don’t meet the criteria, the scoring model can’t score your credit report—in other words, you’re “credit invisible.” As a result, creditors won’t be able to check your credit scores, which could make it difficult to open new credit accounts.
Some people may be in a situation where they’ve only opened accounts with creditors that report to only one bureau. When this happens, they may only be scorable if a creditor requests a credit report and score from that bureau.
If you’re brand new to credit, or reestablishing your credit, revisit step one above.
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|
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.
How long does it take for your credit score to improve when you start paying student loans?
Your credit score could start improving immediately once you start making payments on your student loans, but most people should keep their initial expectations low. Like with any major loan, early student loan payments go more toward paying down interest rather than reducing the principal loan amount. Your overall credit utilization rate (a major factor in your credit score) will remain high until your payments significantly reduce your principal.