What can you do to boost your credit score fast?
It is important to have a good credit score in your life. If you are thinking that you are not going to take out any loan, so you don’t need a good credit score, then you might be wrong.
Having a good credit score can help you to get approved for rental houses and apartments, better car insurance rates, etc. Besides, you may wish to take out a loan afterward to buy a car or a home. At this time, you will need to have a decent credit score to qualify for taking out a loan.
How can you boost your credit score quickly?
It takes a certain time to build your credit score if you use it responsibly. But if you want to boost your credit score faster, you will have to take some effective steps to boost your credit score faster, like:
1. Paying off your credit card debt
Paying off your credit card debts can help you to improve your credit score as it will improve your payment history (accounts for 35% of credit score) and credit utilization ratio (accounts for 30% of credit score).
Once you pay off your credit card debt, your creditors will mark that debt as “paid in full”. This will improve your payment history, which in turn will help to improve your credit score.
Secondly, when you pay off your credit card debt, your credit utilization ratio is likely to decrease. The lower your credit utilization ratio, the higher your credit score. Since the credit utilization ratio is the amount of available credit that you are using. It’s always better to keep your credit utilization ratio below 30% to have a good credit score.
So, paying off your credit card debts can be a good way to improve your credit score faster. If you are unable to make necessary debt payments, you can consolidate multiple credit card debts to get rid of this situation with ease. It will help you to make single monthly payments for your multiple debts and at reduced interest rates.
2. Check your credit reports to spot any errors
According to a Federal Trade Commission (FTC) study, one in five people have an error on at least one of their credit reports. And these errors can lower your credit score without having your fault.
So, you need to check your credit report from all three credit bureaus (Experian, Equifax, and TransUnion). You can get a free copy of your credit reports from each of these bureaus by visiting AnnualCreditReport.com. However, due to this pandemic, the three national credit reporting agencies are providing weekly access to monitor your credit report by April 2021. And that’s too free of cost!
If you spot any errors in your credit report, dispute it at the earliest. According to the Fair Credit Reporting Act (FCRA), if you report any legitimate error in your credit report, the reporting agency must remove the error within 30 days.
So, once the negative items are removed from your credit report, you can expect a boost in your credit score shortly.
3. Trying to increase your credit limit
As we discussed earlier, paying off debts can help you to decrease your credit utilization ratio. And eventually, it helps you to improve your credit score.
Another way of decreasing your credit utilization ratio is by asking your creditor to increase your credit limit. So, if your credit limit is increased, your credit utilization ratio is likely to decrease (unless you spend too much). Eventually, that will help increase your credit score to increase.
However, your creditors may make a hard inquiry about your credit report. It will drop your credit score for a few points temporarily.
4. Becoming an authorized user
Are you new to credit? Or are you not eligible to take out a credit card?
If yes, you can look for a family member who can add you as an authorized user to his/her credit account. But make sure that the bank or credit union reports on authorized users. Otherwise, it won’t have any impact on your credit score.
This way, if you are building credit from scratch, you can boost your credit score quickly by becoming an authorized user of someone else’s credit account.
What mistakes should you avoid when trying to boost your credit score quickly?
Well, the above tips can help you to improve your credit score faster. But at the same time, you will have to avoid mistakes in the process as much as possible.
So, here we have listed some of the mistakes that you should avoid when trying to boost your credit score quickly.
1. Disputing inaccurate information in your credit report
If you spot any errors in your credit report, you will have to dispute them. But if you dispute everything in your credit report, the credit bureaus might disregard your dispute.
You need to find out whether or not there are any legitimate errors in your credit report. If yes, you can proceed with disputing them with the credit bureaus.
Because when you dispute any error, the credit bureaus conduct an investigation and talk to your creditors to check whether or not the error is legitimate. If they find it satisfactory, then only the errors are removed from your credit report.
2. Closing your old credit accounts
After paying off your credit card debts, closing your old credit accounts can be a bad move. Because when you are closing an old credit account, you are shortening the length of your credit history that accounts for 15% of your credit score. Eventually, it will affect your credit score adversely.
I would advise you not to close your old credit account. Rather, you can charge those cards for small amounts. Please pay off your outstanding balance amount in full and within the due date. This will help you maintain a positive payment history and thereby, you will notice an improvement in your credit score.
3. Consolidating your debts by taking out a secured loan
As I said earlier, paying off debts can help to boost your credit score. So, if you are trapped with multiple debts, you can opt for debt consolidation to pay off your debts. But taking out a secure loan like a home equity loan to consolidate debt may not be a good idea.
No doubt, it can help you to bundle your multiple debts with ease and save money too as the interest rate on home equity loans is comparatively much lower. But remember, you are keeping your shelter at stake. If you fail to make payments on time, it can lead to foreclosure.
I would suggest you consult a reputable debt consolidation company. Usually, they have a team of financial experts who can help you with consolidating debts into single monthly payments and with reduced interest rates. Thereby, you can pay off your debts in full, with ease, and boost your credit score faster.
4. Becoming an authorized user of a person who is not responsible with credit
When you become an authorized user of someone’s credit card account, make sure that person is regular in paying off his/her bills and has healthy credit. If that person racks up a huge amount of outstanding balance or misses any payment, it is going to affect your credit score too.
So, before you become an authorized user, try to find out whether or not that person has a good credit score and positive credit history.
So, the bottom line is, there is no silver bullet that can help you to improve your credit score overnight. But if you use your credit responsibly and follow the above tips, you will notice an improvement in your credit score comparatively faster. So, be patient and work hard on your credit. And please don’t fall prey to any scams that guarantee you will improve your credit score within a flash!