Many people so come to believe that improving their score significantly in a short amount of time is either rather difficult or at least unlikely. Still, with good preparation and diligence, one can raise their credit score by at least 200 points in thirty days. Here is what you should know.
Credit Score and Its Importance
A credit score—which shows your creditworthiness—is a three-digit number ranging from 300 to 850. The lenders and other creditors view you as more creditworthy the higher your credit score is. It suggests that those who score highly are more likely to obtain credit cards and loans at reasonable rates. Conversely, a poor credit score alarms the lender's camp and usually results in credit denial or outrageous interest rates. Of course, improving a low credit score has to be among the financial top priority.
What factors are taken into account while calculating credit scores?
FICO is the most popular credit scoring model in use today. According to FICO, here is how much the different credit report factors impact your overall score: According to FICO, here is how much the different credit report factors impact your overall score:
- This accounts for payment history at 35% of the total score.
- Amount of total debt – 30 percent
- Length of credit history - 15%
- New credit applications – 10%
- Credit utilization ratio – 10%
As you can tell, the previous payments and the total outstanding balance that an individual has to pay play a significant role in the credit score. Therefore any efforts you wish to undertake towards increasing your score should be directed towards these two categories primarily. Also, the proportion of credit and the length of credit history can help your score go up to the decent range. New credit limits are another factor that will lower your score if you have applied for many credit limits within a short period.
Make a 30-Day Credit Repair Plan
Understanding what factors comprise your credit score helps you to design credible strategies that would increase your credit score in the shortest time. Here are the key steps to take: Here are the key steps to take:
Pay Down Revolving Debt In an ideal world, your credit utilization ratio, which is the amount of credit you currently use out of the total credit available to you, should not exceed 30%. Minimizing credit card and other revolving debt can significantly reduce utilization and give your score a boost in a short while. It is advisable to use not more than 30% of the total credit limit available in each of the credit cards.
Pay Off Collections Accounts This means that if you only can afford to pay off one or two small collections, you will gain valuable points back on your credit score. Outstanding medical bills, cell phone bills, utility bills, or any other bills that might have been taken to a collection agency should be efficiently paid. Lump-sum is preferred but not compulsory since some lenders may accept partial payment.
Credit Reports and Disputing Errors You need to review all the three credit reports to ensure they are not harboring negative information that is pulling down your score. Incorrect information, such as collections accounts that are not your own, late payments that were reported in error, and other negative credit entries that you did not initiate, can lower even a good credit rating. Critic errors with each bureau within the shortest period possible.
Become an Authorized User Navigate to one of the credit card companies and request to be added to someone’s credit card account as an authorized user if this person has perfect credit. This will also report them in your reports as positive payment history and normally cause your score to increase immediately. (Just be sure they don’t have balances and fail to make payments on them!)
Limit New Credit Applications Every time you apply for a new credit, it creates a hard inquiry on the credit report and this will reduce your score by a few points. Avoid applying for new credit cards, loans, or any other type of financing for the 30 days in which you want to have the best results in terms of credit score. Multiple hard inquiries indicate to lenders that you may be acquiring credit which you cannot manage.
Add Secured Credit if Necessary In case you have little established credit history, adding account as an authorized user may not significantly help. Thus, applying for new secured credit – in the form of savings secured loan or secured credit card – should help to get positive payment history under the account type and credit mixture, which lead to credit score enhancement. As long as the credit limit is low, and payments are made on time and in full, each month, there is no issue. However, if the credit limit is too high, then it is going to affect the credit utilization ratio negatively.
One of the best things that you can do is to check your credit score frequently. The best way to monitor your latest scores when you are working to improve your number for the next 30 days is by using Credit Karma. This enables you to determine the outcomes of your credit repair process so you can change your approach if necessary. You will notice relatively little progress at first as balances are initially charged and then larger improvements towards the end of the month as balances are paid off and credit scores are established. It might take a lot of effort to achieve 200 points, but the money saved will be worth the effort.
The strategies explained above should go along way in making the poor credit score to be a fair or good one within 30 days. Just be sure to keep practicing good credit behavior in the future so your score just keeps rising. Try to keep the credit utilization below 30%, never miss or pay any bill before or on the due date, and apply for new credit only when necessary. So, it is quite clear that with hard work and determination, it is possible to achieve a credit score of 700+.
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