Your credit score is important. It’s how lenders decide if they’ll approve your loan application, how insurance companies determine your premiums, and even how some employers decide if they’ll hire you.
If your credit isn’t where you’d like it to be, you may run into some brick walls. Fortunately, there some quick ways you can improve your credit score right now.
1. Bring all payments current
Life happens and sometimes we get behind. That’s okay, as long as it’s temporary. As quickly as you can, bring your payments current. The faster you show a positive payment history, the faster your credit score will improve. Your payment history makes up 35% of your credit score – it’s the largest component of it.
Do what you can to get the payments current and then keep paying them on time. Late payments affect your credit score the most.
2. Reduce your credit utilization ratio
Your credit utilization ratio measures the amount of outstanding debt compared to your credit lines. It makes up 30% of your credit score (the second largest portion of your credit score) and any credit utilization rates higher than 30% hurt your credit.
If you can’t pay your balances down quite yet, consider asking your credit card companies to raise your credit limits. This decreases your utilization rate too. Keep this in mind – every $100 in credit limit shouldn’t have more than $30 outstanding at once.
3. Keep unused credit cards open
It seems natural to close credit cards you or your partner don’t use – but don’t. Keep them open, just lock them up. Closing credit cards hurts your credit length, which makes up 15% of your credit score.
Lock the cards in a safe or give them to a trusted family member – just don’t close them as it’s hard to make up credit length.
4. File a dispute for credit report errors
Credit report errors happen often. Whether it’s human error or creditor error, fixing it may help increase your credit score. File a dispute with the credit bureau with the incorrect information. You can file it online or write a letter and mail it in. Make sure you include as much proof of the error as you have. The credit bureau has 30 days to respond to your request.
5. Become an authorized user
If your partner or other close family member has good credit and/or good credit habits, consider asking to be an authorized user on their credit card.
You don’t have to use the credit card or make the payments, but you get the benefit of the cardholder’s good credit habits reporting on your credit report. Make sure the credit card you go on reports authorized users to the credit bureaus, though, as not all do.
With the right habits, you can turn your credit score around quickly. Consistent and good credit habits can create change in your score in as little as 30 days. Make sure you’re consistent with your efforts and you’ll see a nice increase in your credit score.