A question that seems to come up more often these days is how to increase your credit score. Especially how to do it fast! Maybe you and a partner or a spouse want to buy a home that you think is a great deal. Or maybe you want to refinance a loan or get a rewards credit card, but you’re not thrilled with your credit score. You’re secretly afraid that your application will be denied or that you’ll end up paying a much higher interest rate than someone with squeaky clean credit.
Credit scores range from 300 to 850. Consider this: Someone with a credit score of 550 might be charged an interest rate that’s three to four percentage points higher than someone who scores over 750. That could translate into paying several thousand more dollars in interest for a $20,000 car loan or over $100,000 extra bucks in interest over the life of a 30-year $200,000 mortgage! That’s serious money you could invest for your retirement instead.
How to Get Your Credit Score
You can get your credit report from each of the three major reporting agencies–Equifax, Experian, and TransUnion – for free once a year at annualcreditreport.com. A good strategy is to pull a different free report every four months. For example, get Equifax in January, Experian in May, and TransUnion in September. Just put a reminder on your calendar.
Even though credit reports don’t include your actual credit score, don’t let that keep you from checking your reports once a year. Carefully reviewing your credit reports is how you could nab an identity thief or correct a silly error that’s crushing your score. You can purchase your credit score for about $15 from each of the credit agencies or from myfico.com. However, I recently joined Credit Karma, where you can get a credit score estimate for free.
10 Tips to Raise Your Credit Score
Try out these 10 tips to increase your credit score fast:
- Clear up any errors on your credit report. Incorrect credit limits, late payments, or collection items that aren’t yours may be silently wreaking havoc on your credit score.
- Always pay your bills on time. Delinquencies have the biggest negative effect on your credit score.
- Reduce your overall debt. If you don’t have the funds to pay down debt, consider taking a loan from a family member or friend. That doesn’t reduce what you owe, but it does move debt off your credit report and give your credit score a quick boost.
- Don’t close unused credit cards accounts. Canceling a card can actually lower your score because it leaves you with less available credit relative to your total debt. It may also shorten your credit history, which will ding your score.
- Never max out your credit cards. A good rule of thumb is to keep your balances below 30% of your credit limit – even if you pay your accounts off in full each month.
- Do your loan shopping quickly. Having lots of credit inquiries can decrease your score. But the system won’t treat a cluster of credit inquires (for a car or home loan, for example) within a short time period – like a week or two – unfavorably.
- Get a secured credit card. You’ll have to dish out an upfront security deposit of at least a couple hundred dollars, which the card issuer holds as collateral. Check out the Public Savings Bank Visa and more secured offers on Creditcards.com.
- Get a gas or retail store card. Even though you may want to buy more than gas and clothes on credit, making small monthly charges that you pay off in full and on time each month will work wonders for boosting your credit score. Check out cards offered by BP, ExxonMobil, Kohl’s, or your favorite retailer.
- Get a subprime credit card. If you have bad credit, a subprime card can help you build up a strong payment history if you use it wisely. They come with sky-high interest rates – some as high as 30%! So, use subprime cards with extreme caution and pay them off in full each month. You’re never charged interest when you don’t carry a balance from month to month. Find subprime offers on sites like Bankrate.com and Creditcardguide.com.
- If it ain’t broke, don’t fix it. If you already have good credit, why would you want to risk doing something radically different? A score over 750 is excellent and means that you’ve been doing everything right when it comes to your credit.
Unless you have a serious black mark on your credit, like a foreclosure or bankruptcy, putting these tips into practice is the fastest way to pump up your credit score.
(photo by joellevand)
First let me say I love the graphic you put at the top of the story.
Second, I would argue that if you need to raise your credit score rapidly you don’t need whatever it is you’re considering purchasing. If raising your credit score quickly is the key to buying whatever you want you can’t afford it. Sans maybe removing something like an error on your credit report.
Now I use to have a credit score north of 780 but I was broke. At the end of every month I was waiting on payday. With less than 50 bucks to my name. I felt like I doing great, I made good money but spent everything I earned. Just because you have a great credit score doesn’t mean you should rush out and buy a house, car, or whatever it is.
Laura, I know nothing about you other than I have seen your podcast listed in iTunes before. I don’t mean to sound disrespectful but I do question how you can suggest items 7-9 given that in your bio the first thing listed is author of “Money Girl’s 10 Steps to a Debt Free Life”. I understand giving views on both sides of a story and don’t fault you for that. But suggesting someone get a ripoff store card at 20% or better interest rate is not a good way to do anything except learn about compounding interest first hand.
How about writing a story about having a 0 credit score by choice and not borrowing money. I am sure you have written something similar elsewhere but would love to see it on this site. I enjoy the blog and everyone keep up the good work.
Thanks
To Jason – Thanks for your comments. Having a high credit score has nothing to do with wealth, but it’s the way potential creditors, landlords, employers, and insurers judge your level of financial responsibility. Having a good score could save you huge amounts of interest over the life of a mortgage, save you money in monthly insurance premiums, or be the difference between getting a job or not. I think you are confusing having a credit card and abusing a credit card. Having a secured credit card or a retail card that you pay off in full each month is the fastest way for someone with poor credit to raise their score and get their financial life back on track.
Laura,
Impressed you respond to people who comment on your article. Let me say I was impressed with your knowledge, straight-forwardness but in a non-condescending manner to those who’ve stumbled a little with their credit. Keep giving us good material. I will check up on your podcast since Jason mentioned you have one. I have a cool blog that covers lots of topics in regard to credit repair and credit restoration. If you want some material for your show or future articles, feel free to use our material.
Thanks again,
Brandon
http://www.nitrocredit.com