A good credit score is extremely helpful in terms of getting loans, credit cards, mortgages, and even some vacancies for work and living. However, most people feel that it becomes almost impossible to improve the score especially if one has had some financial misdeeds that have lowered the score. The good news is that although fixing credit histories does not occur quickly, there are methods to restore credit history quickly.
Review Your Credit Reports
The first step that you must undertake is to obtain your credit report from any of the three credit reference agencies; Equifax, Trans Union, and Experian. Carefully read through the reports to challenge any errors that you notice that are pulling down your score when they were supposed to do otherwise. This can increase your score within a short time by simply erasing errors on the score sheet. You can challenge errors through the website or by post and normally it takes 30-45 days to solve disputations.
Pay Down Balances
Another factor that tends to have a significant impact on your credit score is the credit utilization ratio which represents the amount of credit currently in use in proportion to the total amount of credit available. This is calculated as the outstanding balance on each card divided by the total available credit on all credit cards. Mortgage usually should not exceed 30% of this value although it can be higher depending on one’s income and other factors. Try to reduce consumption as much as possible and pay off more of the balances especially if the card is at its limit. This can do the job quite fast and bring your score up to the mark you want. Do not increase the price while paying off as it is called though.
Become an Authorized User
One more tip to improve credit scores is that you can become an authorized user on someone else’s credit card with good credit. It will help them develop a good payment history and include it in their credit report and credit score calculations. Nevertheless, not all of the credit card companies will report on the activity of the authorized users, so, check this, please.
Use Secured Cards Responsibly
Secured credit cards work based on a cash deposit which the cardholder has to make with the credit card company and this deposit is in the same amount as the credit limit. This makes it possible for people to begin to establish or re-establish themselves with credit. By charging small amounts monthly and always paying your balance in full on time, you will get the best deal and avoid being overwhelmed by large bills. After six months to one year, you can request an upgrade to an unsecured card and check if you can get back your initial deposit.
Limit New Credit Applications
Many people feel the need to apply for several new cards to pump up the total amount of credit available and consequently, reduce the credit utilization ratio. However, credit scoring models have adverse feelings toward people who open many credit accounts within a short duration. It’s okay to apply for only one new account every 6 months approximately because multiple hard inquiries are not good for your score.
Correct Payment Errors
Payments that are made a little behind a due date are known to have a very negative impact on a good credit score. If you have any payment errors within the last 7 years of the report, then you should contact the credit card company or the lenders and politely request them to remove the error. Some can allow the student to erase some negative scores from his or her record. For the remaining payments, ensure that you always set autopay so that you do not forget to make the payment in the future.
Monitor Progress
Enroll for a free credit monitoring agency for example Credit Karma so that you can track your credit score with the three credit bureaus. This way, you can monitor what happens in real-time when you make a change to something. Monitoring also makes you aware of any suspicious activity as it takes place because monitoring instantly informs you of such an occurrence.
It is important to note that it takes time and effort to rebuild poor credit and certain steps can help a person rebuild their credit faster: Paying bills and loans on time, avoiding numerous credit applications, keeping credit card balances low, addressing errors on reports as soon as possible and maintaining a good payment history. So one can reasonably expect to increase anything from 50 to 100 points or more for six months with intensive practice.
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