(Article Updated April 17, 2019)
Looking for ways to improve your credit score? While the idea of building up a poor or fair credit score may feel daunting, it is achievable. Here are some fast fixes that can help get you into more positive credit score territory:
1. Pay down your credit card balances
Your credit utilization ratio makes up a large part of your credit score, only second to credit payment history. Experts recommend that you keep this ratio below 30% so if you’re close to maxing out your credit card, make room in your budget to pay those down as soon as possible. Paying down your debt can result in a fast boost to your credit score.
Wondering how to achieve this? One way is to go from small to large. In other words, try to pay a bit more each month on the card with the smallest balance. Once it’s paid off, move to the next smallest balance. This approach provides you with a faster sense of achievement and can be extremely motivating. Another way to look at this is to find the card with the highest APR and apply a bit more every month to that one. Once it’s paid off, find the next highest APR. Either approach can get you on the path to success.
2. Take a deep dive through your credit report
Every consumer is entitled to a free annual credit report, and you can get yours at AnnualCreditReport.com. Once you request yours, look through every detail. It’s not uncommon to find errors or mistakes. If you see anything that is not yours or is not accurately reported, file a dispute so that the problem can be investigated. The Fair Credit Reporting Act requires that credit reporting agencies investigate and remove items deemed to be errors within 30 days of the dispute filing.
3. Get credit for making utility and cell phone payments on time
Currently in beta, Experian Boost allows consumers to voluntarily opt-in to improve their credit scores by factoring in their utility payments. The platform requires users to connect their bank accounts in order to verify utility and cell phone payment history. Experian will then “boost” the credit score of those who illustrate on time payments. Designed for people who are looking for a fast way to improve their scores, or who have poor or limited credit, this is an easy way to get “credit” for paying your bills on time.
4. Consolidate your debt
If you get your debt into one manageable payment, you are far less likely to have accidental late payments or over-limit issues. But, if you do consolidate your debt, don’t close the paid off accounts. If you do, it reduces the amount of available credit you have and increases your credit utilization percentage—the exact opposite effect of what you want. And, once paid off, commit to not using those available funds, and if you do, pay them off at the end of the month.
5. Pay your bills on time
This one may seem obvious, but late payments negatively impact your credit score. Since lenders want nothing more than for you to prove reliability when paying your bills, this factor holds a lot of weight on your score. One of the best ways to keep this in check is to automate your payments—that way you never miss a payment.
6. Commit to change
Finally, there’s this: Stop beating yourself up over your less-than-perfect score. Many people have credit issues for a lot of different reasons, and you're certainly not alone. Remember: A credit slump is temporary, and with just a few simple changes, you can take control of your financial destiny. Don’t let the negative feelings attached to your score prevent you from doing what needs to be done to fix it.
When your credit score is in good shape and you’re ready to buy a home, speak with a loanDepot Licensed Lending Officer to get pre-approved for a home loan.
Originally Published February 10, 2016
RELATED TOPICS
What affects mortgage interest rates?
Improve your spending habits one at a time
Add up your interest: How much are you really spending?
