How to improve your credit score fast?
There are all kinds of questions people have about their credit score. People often want to know what exactly a credit score is, who is behind it, what things impact your rating and what effect a credit score can have on daily life. However the most frequent question people search answers to is how to increase a credit score fast.
In this article we will try to take a deeper look at what a credit score is, how it affects you, and what can be done to improve your credit score.
What is credit score?
Years ago, it used to be that if you wanted a loan you would go into the bank, and if you had a good standing in the community, or if the loan officer had a good feeling about you, you could get a loan. Obviously, there is a flaw in that system; anybody, no matter how well-respected, can be a bad credit risk. So, by calculating the effect of different factors on your ability to repay, the credit agencies came up with a way that seeks to treat everybody fairly.
Your credit score is a three-digit number (from very poor-300, to excellent-850), that shows how likely you are to repay debt; in other words, it represents your creditworthiness.
There are 3 main credit bureaus – Equifax, TransUnion and Experian that create a credit report for an individual.
To make it simple, your score is based on think like how many accounts you have in good standing and how often you make payments on time. Your gender, race, religion, citizenship or marital status do not influence your credit score number.
In what countries credit score is important and why?
The credit score is a very important, especially, in countries like USA, Canada, UK, China, Australia and India. This number is crucial in these countries as it helps to gather records of every person’s loan and credit card fees.
What factors can affect your credit score? What makes your credit score go down or up?
The factors that impact your credit score the most are:
- Credit card utilization (how much balance you carry on your accounts)
The percentage of credit card utilization is calculated by dividing your total credit card balances by your total credit card limits. Lower this percentage – higher your score.
For example if you have $800 limit, and you spent $400 – it’s 400/800=50%, which is not good for your score. It is the best to keep your credit card utilization from 0% to 9% for an excellent credit.
- Payment history (do you pay your minimum payment on time)
Making payments on time is the absolute most imperative thing you can do to expand your score and keep your report clean.
Even if you miss only one minimum payment on your account, it negatively effects your credit score for a long time. In fact, it is very hard to establish your credit after you missed even one payment.
And it’s terrible, because in my own experience, I missed only one payment long time ago, just forgot to pay it. Even if I paid the next day after the deadline, my Payment History score went from 100% to 85.7%. One missed payment! Furthermore, it took me about a year and a half to remove that from my credit. So, try to pay your bills on time. Maybe set up a reminder in your calendar or automatic payments, or pre-pay. It’s very important for your credit score.
However, if you actually have a missed payment, try to contact your bank and ask them to remove it, once you paid the balance. You may get lucky and some banks will remove it as a courtesy. Anyways, you won’t lose anything if you try.
Derogatory marks (accounts in collections as well as negative public records)
Credit score agencies consider derogatory marks as one of the main factor that impact your credit score. Negative public records and many unpaid bills are not a sign of a high creditworthiness.
Other factors also influence your credit score health. For instance, age of credit (average age of all open credit accounts), number of total accounts owned (both open and closed), and hard credit inquiries are also important.
In addition, having different sorts of credit accounts can help increment your credit score. Rather than having 3 credit cards and no other debt, creditors would rather observe a home loan payment, an instalment personal loan and a credit card. This is most essential when you don’t have a long credit history. After some time, the significance of this factor goes down.
How can I increase my credit score fast?
If you want dramatically increase your credit score in a short term – keep paying off your cards, lower balances on your accounts, keep your utilization low.
Try not to apply for a new credit card for some time, especially if your score is low. Opening a few new credit accounts will hurt your credit score as this may demonstrate that you are all of a sudden a higher hazard borrower.
Try to open new credit accounts just when you require them. Rather, try to have the credit limits on your present accounts raised if you require extra wiggle room.
The following video may be very useful if you are seeking to improve your credit score in short term.
How can I check my credit score for free?
The fastest and easiest way to check your credit score for free is through one of the many credit reporting agency websites approved by the Better Business Bureau. This website can easily be found with a quick search online, and the whole process should only take 2-5 minutes.
Many of these companies will offer credit monitoring and identity theft protection services along with your credit report and score. However, these additional services are optional and not required to receive your free credit check.
Another great option, that many people use is checking your credit score using Credit Karma. It is free, and Credit Karma also shows you which variables affect your score in details. They send you cute notes and suggestions to improve your credit score. It’s definitely worthy to try.
Hopefully, this article is not only helpful but also informative on most of the questions you have on credit score. Ensure you do what is supposed to be done so that your credit score won’t be compromised. And again, keep paying off your cards, lower balances on your accounts, keep your utilization low. It will help you to improve your credit score in a short time.
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