This is a question I get asked often as a loan officer since credit is such a large part of the home buying process. Having a good credit score when making a large financial purchase whether it be a home or a car or anything of significant value for that matter makes a big difference in the rate that you are quoted and your costs to get that loan. For this reason, it is worth the time and effort to actively manage your credit and make the right adjustments to maintain a high credit score. In the article that follows we offer credit tips to learn how to improve your credit score in 30 days.
What’s the Quickest Way to Improve My Credit Score?
Good credit is something that takes a long time to build up, but unfortunately it can be damaged quickly with most any credit mistake. According to Fair Isaac, the company that invented the FICO credit score, they take a strong position about quick fix credit strategies when they say “there is no quick way to fix a credit score. In fact, quick fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast”.
With that being said, there are some credit strategies you can do with your credit that will provide better results than the quick-fix tactics promoted by some. These are short term strategies that may work for your unique credit situation. But the focus should always be on the longer term in regards to your credit and focusing on those known measures that will improve your credit score is always my best recommendation.
How Can I Raise my Credit Score in 30 Days?
As the team at myFICO has said, there is no quick magic cure to increase a credit score right away. But there are moves you can make that will provide the best results in the shortest period of time. Keep in mind that 65% of your credit score is made up of your payment history on your accounts, and the amounts you owe on each of these accounts. So, by addressing these two areas in a positive way, you can make some headway in improving your credit score.
Here is a list of some of the things you can do to improve your score quickly:
- Pay Bills on Time and Address any Late Payments
- Lower your Credit Utilization Ratio
- Increase your credit limits
- Use and maintain your old credit cards so the accounts are not closed
- Check your credit report for any errors and remove them
- Get a Secured Credit Card if your credit profile is thin
- Pay bills on time and address any late payments
Your payment history is 35% of your credit score so this is the credit factor that you should pay the most attention to.
But it also is the credit factor that is the easiest to control. Set up as many of your credit accounts on automatic payments so you are never late on any monthly payment. Late payments are hard on a credit score and the recovery time following a late payment can be long.
If you do have a mistake with one late payment on an account, reach out to the creditor immediately to request a one-time forgiveness for the late payment.
- Lower your Credit Utilization Ratio
This component of your credit accounts for 30% of your credit score. Your credit utilization is a measure of how much of your credit you have used compared to how much available credit you have.
Ideally you want to have a credit utilization ratio of 30% or less in order to maximize your credit score potential. For example, if you have a credit card with an available credit of $1,000, and your current balance is $700, then your credit utilization ratio is 70%, which is too high. You will want to pay down that credit card to $300 or less to lower your ratio.
Look through all of your revolving credit cards to make sure you are maintaining a low credit utilization ratio.
- Increase your credit limits
Another way to lower your credit utilization ratio is to increase the credit limits on your credit cards. Using the same example from above, if you have available credit of $1,000 and you have $700 charged on the card, you have a 70% credit utilization ratio. Call your credit card company and ask for a credit line increase. If they agree to increase your credit limit to $2,000, then your credit utilization on that card is now reduced which lowers your credit utilization ratio to 35% for that card and you didn’t need to pay down any debt to achieve that goal.
Try to use this tactic on any cards that have high balances with the goal of lowering your credit utilization ratio on any of the high balance credit cards.
- Use and maintain your old credit cards so the accounts are not closed
The length of your credit history is 15% of your credit score. You should strive to hold on to one or two credit cards that you use often and keep them in your wallet for the long term. A suggestion is to start with one Visa card and one Master Card and keep those in your wallet as your go-to cards.
This will give you a variety of cards to use and by holding on to the cards you will establish a credit history with at least two long term accounts.
- Check your credit report for any errors and remove them
A recent study by Consumer Reports that surveyed more than 6,000 participants found that more than one-third of them had errors on their credit report. Not only did a high number of participants identify errors on their reports, but many also found it hard to gain access to their credit reports and also found it difficult to work with the credit bureaus to correct any errors that were identified.
You will want to get a free copy of your credit report from annualcreditreport.com and spend some time reviewing it. If you find any errors or negative information that needs correcting or updating, be diligent in writing to the credit bureaus and disputing the incorrect information to request that it be removed. Keep good records of your correspondence and store those in a credit file that you can access anytime.
For more details and instructions on how to dispute any errors on your credit report, click HERE to learn more.
- Get a secured credit card if your credit profile is thin
If you are just starting to build out your credit and you don’t have many accounts on your credit report, get a Secured credit card in your name to start building your credit. The important thing when choosing a credit card is to get a card that reports to all three credit bureaus so you build up all three of your credit scores.
What Credit Score Should I Set as my Goal? Is 640 a Good Credit Score?
While it is possible to make a major purchase with a credit score of less than 640, I always recommend to stay the course and set a goal to get your credit score up and over the 700 level. If you follow the tried and true rules of how to improve a credit score, achieving a credit score of 700+ is well within the reach of any consumer.
While 640 is a good start to building a credit score it is considered to be only a Fair credit score on the credit scoring scale. According to Experian, 17% of consumers have a credit score in the Fair range. Of these consumers, approximately 27% of these consumers are likely to become seriously delinquent on their credit in the future. And Experian also notes that the credit reports of 42% of Americans with a FICO score of 640 include late payments of 30 days past due.
Going back to what I wrote earlier, 65% of a persons credit score is made up of things that are easy to manage for all of us. Paying your bills on time is fundamental to building a good credit score. Plus, managing your spending habits so you don’t overspend, and keeping your credit card balances low are also things that are fundamental and necessary to building a good credit score.
These two tasks should be at the top of anyone’s list of mandatory financial behaviors when working on improving your credit score and building your credit profile. If you follow the credit playbook and use credit responsibly each month you will see significant improvement in your credit score over time. Some of the things you can do to manage your credit include spending within your means, paying your bills on time each month, and not applying for too many new accounts. This pattern of responsible credit use will help build or improve any consumers credit score.
Anyone can build a good credit score, but it takes time and, in the end, the final results are worth it when you see your score cross over the 700 level, and even makes it to 800+.
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