5 Ways to Improve Your Credit Score Fast

By Dan Rafter on 11 April 2016 0 comments

You need a strong FICO credit score today if you want to qualify for mortgage loans and credit cards at the lowest interest rates.

The challenge? Boosting a low credit score takes time. Even if you start a new history of paying all your bills on time and paying off your credit card debt, it could take you months — or longer — to build your credit score up to the 740 or higher level that most lenders regard as a top-quality score. (See also: Rebuild Your Credit in 8 Simple Steps)

Fortunately, there are some strategies that you can take to improve your credit score in less time. Just be careful: There are credit repair companies that promise to improve your score for a price. Don't fall for this. You don't need the help of an outside company to nab a quick boost to your FICO score. Do it yourself and save your money for better things — like debt reduction.

1. Order Your Credit Reports, and Fix Any Mistakes

You might not know that you have three FICO credit scores, one each from the national credit bureaus of TransUnion, Equifax, and Experian. Each of these bureaus also maintain a credit score on you, and the information on these reports determines your FICO credit score.

The reports list your open accounts and how much you owe on your credit cards and loans. They list any missed payments and include any negatives judgments filed against you, such as bankruptcies that are up to seven to 10 years old and foreclosures that are up to seven years.

You can order one free copy of each of your three credit reports every year from the website AnnualCreditReport.com. Once you have your reports, look them over carefully for any mistakes. If your Experian report, for instance, lists that you paid three car payments late during the last two years and you know you've made all of your auto-loan payments on time, you'll need to correct the error. Doing so can immediately boost your credit score.

If you find an error on your reports, send a message to the offending credit bureau. You can contact all of the bureaus through their email addresses.

2. Pay Down Your Credit Card Debt

Cutting down on your credit card debt will quickly improve your credit score. That's because lenders worry that consumers burdened with thousands of dollars of credit card debt are more likely to miss future mortgage, car loan, student loan, and credit card payments. The more of your credit card debt you can eliminate, the better for your credit score. (See also: How to Use a Balance Transfer to Pay Down Credit Card Debt)

To do this, you'll have to resolve to stop using your credit cards except in emergencies. Don't look at this as a burden, though. Paying down your credit card debt brings with it an added benefit: You'll reduce the amount of extra money you're paying in interest each month whenever you carry a large balance from month to month.

3. Keep Those Credit Card Accounts Open

Consumers often want to cancel their credit card accounts whenever they pay off a card. Don't do this. Canceling unused credit cards will only weaken what is known as your credit utilization ratio.

This ratio measures how much of your available credit you are using. If you are using too much of it, your credit score will drop.

Closing an unused credit card immediately hurts this ratio. Say you have three credit cards each with a maximum balance of $4,000 for a total amount of available credit of $12,000. Say you also have $4,000 of credit card debt. If you pay off one of your cards and then close it, you are removing $4,000 worth of available credit. That $4,000 of credit card debt looks worse when you now have just $8,000 worth of available credit.

Once you pay off a card, keep your account open. Your stronger credit utilization ratio will strengthen your credit score.

4. Don't Be Afraid to Borrow Money or Open Credit Card Accounts

If you don't take out installment loans and pay them back on time, or if you don't use any credit cards, your credit score will be a low one. That's because lenders have no idea if you can manage credit successfully.

If you have a credit score that's weak not because of missed payments, but because you lack a credit history, it's time to open a credit card account and use it wisely. Make purchases with your credit cards, making sure to pay them off in full and on time each month. Do this, and your credit score will steadily rise. (See also: How to use Credit Cards to Improve Your Credit Score)

And if you need a new car? Don't be afraid to take out an auto loan. Taking out a loan and paying it back will also help your credit score to rise. Of course, don't just take out a loan for this purpose.

5. Missed a Due Date? Send That Check!

Don't panic if you miss a due date. Creditors won't report your missed payment to the three credit bureaus until your payment is at least 30 days late. So if you notice that your mortgage payment was due last week, send off that check immediately. Doing so won't cause your FICO score to immediately rise. But it will prevent it from taking a tumble. A single missed payment can cause your FICO score to drop by 100 points. A missed payment also remains on your credit reports for seven years.

What steps are you taking to improve your credit score?

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