Many people don't put much thought into their credit scores until the time comes to apply for a loan. If you expect to need financing in the next few months and aren't convinced your credit score is high enough to get you approved, you'll need to act quickly to improve your chances.
How Can I Improve My Credit Score?
It's important to note that repairing bad credit is a bit like losing weight: It takes time and there is no quick way to fix a credit score. In fact, out of all of the ways to improve a credit score, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast. The best advice for rebuilding credit is to manage it responsibly over time. The tips below will help you do that.
1. Make Sure Your Credit Reports are Correct.
The first step to improving your credit score is checking your credit reports. Everyone has three credit reports — one from each of the 3 major credit bureaus: Experian, Equifax and TransUnion. Credit reports can, and often do, have mistakes on them. Since your credit scores are based on the data in your credit reports, it’s incredibly important to make sure all of that information is accurate. If you have a mistake on your credit report, your credit score will reflect that mistake.
It’s easy to check your credit reports from each of the three major credit reporting agencies. You’re entitled to a free copy, once a year, of all three of your credit reports under the Fair Credit Reporting Act. These reports can be accessed via AnnualCreditReport.com, the government-mandated site run by the major bureaus.
Most credit scores – including the FICO score – operate within the range of 300 to 850. The credit tiers generally look like this:
Excellent Credit: 750+ Good Credit: 700-749 Fair Credit: 650-699 Poor Credit: 600-649 Bad Credit: below 600
It helps to go through your credit reports with a highlighter and pick out any and all inconsistencies. Keep in mind that a credit report from one bureau may have an error, while another may not. That’s why it’s so important to check all three of your credit reports for inaccuracies. You may find none, a few or perhaps many errors on your reports. That’s where the next step to improving your credit comes in.
If you find an error on all three credit reports, you’ll have to dispute it separately with each credit bureau, as they’re run separately from one another. You’ll also have to file a separate dispute for each error you find. You can dispute these errors on your own for free, or you could consider hiring a reputable credit repair company to help.
2. Create a Plan
After you've become knowledgeable, then you can really attack your credit problems. In your case, you already know what's in your score and that your length of credit history and payment history are areas of your credit profile that need improvement. So, you may want to avoid opening a lot of new credit accounts. As for your payment history, you probably found out that this is one of the biggest components of your FICO score so you really need to focus on keeping current with all of your bills.
3. Clear up Collection Accounts
Pay off your debt instead of transferring it to new accounts. Contact the debt collector listed on your credit report to see if they’d be willing to stop reporting the debt to the credit bureaus in exchange for full payment. Just be sure to get that promise in writing before you make a payment. Also, if it’s a debt that you don’t recognize or seems inaccurate, dispute it with all three credit bureaus. You may get it removed and see your credit score improve quickly.
4. Limit your number of new accounts
Avoid opening multiple new accounts within a short period of time. If possible, avoid opening new accounts altogether when you are working on raising your credit score.