Good things may come to those who wait, but time isn’t on your side if you’re struggling to raise your credit score quickly.
More than 30 percent of Americans have poor credit, and if you’re one of them it can be hard to improve it. Many people aim for a credit-building secured credit card, but it could take a year to a year and a half before seeing an improvement in your score that way, even with consistent, responsible use.
If you’d like to get a mortgage or loan within the next year, your credit score may be standing in the way since it’s the first thing a lender looks at when making a credit decision. Reach a score of 750 or higher and you have excellent credit, setting you up for the best loans and lowest interest rates.
Getting there doesn’t have to take forever. Try some of these hacks to give your credit score the shot in the arm it needs.
Double your bill payments
Consistently paying off your bills at the end of each month, on time, in full, makes a huge difference in improving your credit health. It’s especially important if you tend to carry a credit card balance at the end of each month. Letting your balance lapse from month to month can accrue interest, make your payments more expensive, and send you into debt.
Paying your credit accounts twice a month can help your credit score rise. It may not seem like it matters if you pay $500 once or $250 twice, but it does. Payment history accounts for 35 percent of your FICO score, and the credit scoring system will see that you’re paying up more frequently and keeping your running balance lower. This applies to any account where money’s been borrowed, like a credit card, auto loan, or other installment loan.
The balance you carry through the month is important, since you should strive to use no more than 30 percent of your available credit. It tells the credit bureaus in charge of compiling your credit report that you don’t rely on credit too much. Find out when your credit issuer reports your payments. It may be the closing date of your billing cycle, and not the due date; pay twice by this date, and it’ll ensure it counts towards your credit report and score.
Sign up as an authorized user
One common suggestion for building credit is to take out a loan with a cosigner, but this can be a risky move on both your part and the part of your cosigner. If, for whatever reason, you fail to pay back the loan, the lender/creditor will go after your cosigner, and if they can’t repay, both your credit scores will take a hit. And that’s nothing to subject your mother, father, relatives or friends to just for helping you out.
A more practical way of seeking help from others to build your credit quickly -- especially if you qualify for none of the options on this list -- is to become an authorized user on another’s credit card. Arrange it with someone who keeps their credit utilization low, and pays off their balance in full each billing cycle. It’ll raise their credit score and yours, and all you need to do is have your name added to their account.
Remember, though, that it’s kind of a reverse cosigner situation, so if you become an authorized user for someone with poor credit habits, your credit score could get lowered even further just for being associated with them. Choose carefully who authorizes you as a user.
Clean up your credit report
Take a look at your credit report, and it may seem like everything is set in stone.
Not always. Recent data from the Federal Trade Commission found that more than 42 million Americans have errors on their credit reports. Yours could contain outdated information, like listing an account actively in collections that was closed years ago. A few reporting mistakes may show that you were delinquent on your car payment when you were actually on time.
Then there are mistakes made by the credit bureaus themselves. A misplaced decimal, an extra zero, a transposed Social Security number: they can all reflect false credit behavior and negatively impact your credit score.
You may even have the same name as someone else with bad credit, and their information found its way to your report. You’re paying the price for someone else’s financial mistakes!
Don’t make the financially illiterate excuse of not checking your credit. You should be checking it at least once a year anyway, just to see where you stand. When you do, keep a close eye on any inconsistencies or information that looks out of place. Dispute errors on your report you’ve identified with the three bureaus, TransUnion, Experian and Equifax, and if you’re correct, the information will be removed.
Get aggressive with paying off debt
Sometimes, you just have to get in and tackle a problem in order to solve it. Take debt, for instance. You can slowly chip away at it until it’s paid off, and that’s fine -- but to really make a significant improvement in your credit score, you’ll need to bite off a big portion of it to reduce your debt load.
It could be credit card debt, student loan debt, or any type of debt you have an outstanding balance for. Not only should you have a budget, but you should be adhering to it, and that means not going over budget just to pay off your debt. That could create other financial troubles where there were none before.
Think of creative ways to free up more money to pay down your debt. You could set up a side hustle. You may want to sell off some of your old belongings, or if you’re artsy and crafty, sell what new things you’ve created. Airbnb your pad if you’re ever out of town. And you can always shop on sale, use coupons and negotiate prices, rates and fees as often as you can.
Using the extra money towards existing debt reduces the amount you owe, which also counts for 30 percent of your credit score.
Take out a credit builder loan
Another simple way to build credit is by taking out a credit builder loan, which does exactly what it says: build your credit. It’ll diversify your credit mix (which makes a difference in your credit score of up to 10 percent) and count as a loan you opened, paid off and closed.
It’s also an accessible option if your credit is poor to nonexistent and you may not qualify for a traditional loan -- not even a high-interest personal loan. Credit builder loans are essentially loans where the money you borrow is held by the lender in a deposit account -- in this example from Republic Bank, an interest-bearing CD. You’ll repay the money over a short period (typically 12 to 24 months) solely for the purpose of improving your credit, and then the money you earned on the deposit account can be withdrawn or reinvested.
Give your credit some credit
The good thing about building credit from the ground up (or close to it) is that the lower your score, the better your chance at getting an initial credit boost -- so a 100-point increase isn’t out of the question with some of these tips in place.
Then, as your credit begins to improve, monitor your score closely. If it was originally poor, start seeking out better credit products once you enter the fair or good range, like a better credit card, or that loan you wanted.
By making some of these strides to boost and rebuild your credit, keep up with regular, healthy credit behavior, and stick with it. It’ll raise your credit score to the heights it should be, and keep it there for a lifetime of financial prosperity to come.