It’s one thing to work your way slowly out of debt to increase your credit score. It’s a different beast if you need an auto or home loan, to rent an apartment, or need other types of financing immediately. When timing is of the essence, these seven methods will help you increase your credit score rapidly.
1. Dispute Errors on Your Credit Report
Fixing errors on your credit report is an excellent way to increase your credit score rapidly. Take a look at your credit report, do you have:
- Late payments reported inaccurately?
- Accounts in collections that were paid off?
- Accounts in your name that are not yours?
If any of the above situations apply towards you, it’s time to work on removing them from your credit report. You can pull your free credit report once a year from each of the three major bureaus: Equifax, Transunion, and Experian. You’ll find the instructions on each credit bureau’s website on how to dispute and correct errors. Also, remember the burden of proof does not always lie in your hands. Many times the creditor needs to prove what the debt is.
2. Lower Your Total Credit Utilization
Place yourself in a lender’s shoes. No one wants to extend credit to someone consistently maxing out their credit cards. It shows you are dependent entirely too much on credit and could fall into the trap of not paying your debts on time. Just about every creditor monitors your credit utilization ratio. The lower your ratio, the better. Most credit experts advise your utilization ratio to be below 30%. That’s why one of the first suggestions a credit expert will advise will be to pay off your debts to increase your credit score.
Let’s assume your total credit line is $20,000. If you carry a balance of $15,000 across each credit line, your credit utilization ratio will be 75% ($15,000/$20,000). You’re just $5,000 or 25% away from maxing your credit availability. However, paying it down to even just 50% utilization will make your report look better than it once was.
3. Establish More Credit
Now if you can’t possibly pay down your credit line, consider increasing it. Again, this is based on your credit utilization ratio, which means if you can get an additional $5,000 for a new credit card, your utilization will now be 60% ($15,000/$25,000). The more credit you have access to, the more creditworthy you appear to other lenders. Now, the hard inquiry on your report may bring you down a point or two, so do keep that in mind. Also, if you take out a loan this doesn’t increase your credit utilization in a good way. If you do be sure to understand all the fees associated with the loan.
4. Ask Your Current Creditor for an Increase
If applying for a new credit card is out of the question, start with your current creditor. Ask them for a credit increase. This will help lower your credit card utilization. If it’s been at least six months since your last review, contact them. You have a good shot at an increase if your income has increased, or you’ve made on-time payments.
5. Become an Authorized User
If your credit is a bit shaky, you can see about piggybacking off someone else’s good credit line. Ask your significant other or family member if you can be added as an authorized user on their account. Your credit score will not be impacted as if you were a primary account holder, but you will benefit from it. The payment history and access to the credit line will help out and increase your score.
6. Sign Up for Automatic Payments
It’s believed that one late payment can decrease your credit score by at least 20 points. So if you’re having difficulty remembering to pay your bills, consider signing up for automatic payments. You can set this up through your creditor’s website or talk to a representative. Many financial institutions also have online bill payment options that will do it for you as well.
7. Use Your Credit Cards
Now this may seem a bit off, but you should use your credit cards to increase your score. Using your cards ensures information is being reported to the credit bureau. Paying it off each month is another plus to show on-time payments. You may also earn reward points you can use towards paying down the debt as well.