Building credit is an important aspect of moving through life. From buying something as seemingly simple as a candy bar, to a major purchase like a house, establishing strong credit will open more doors for you when it is time to make that big purchase. The three-digit number that represents your credit can be negatively or positively affected by a multitude of factors, and knowing how it can change is the key to maintaining a positive score.
If you have never been tasked with improving your credit; the idea can seem daunting, but really, it is actually quite easy. You probably just never learned how! Schools might still prefer to teach you the Pythagorean Theorem over managing and maintaining a good credit score, but here at Mission Fed, we will teach you how.
In this article, you will learn in 5 easy ways how to improve your credit score fast.
Credit Score and Credit Reports
The first step in understanding how to increase your credit quickly is familiarizing yourself with several terms:
- Credit – Credit is a way of receiving something of value now, with the promise of paying it back at a later date (often with interest). It signifies the trust a lender has in your ability to pay that money back.
- FICO Score – This three-digit number ranging from 3-00-850, based on your credit report, represents your ability to borrow and repay the money. The higher your credit score, the higher your chances of being approved for major purchases.
- Credit Reports – A credit report is a detailed analysis outlining your credit cards, the amounts of any loans withdrawn, monthly payments made on time or not, and any severe financial setbacks.
Now that you are aware of these terms, you can move on to how to increase your credit score fast.
#1 Pay Attention to Your Credit Reports
Your credit reports are a financial bible. It is crucial to know exactly what they say, so you can check for errors, inconsistencies, fraudulent activity, and ensure that bills are paid on time. If you want to improve your credit score, you need to keep it in a good place from the beginning. There are free annual reports available to you through Experian, Equifax, and TransUnion.
#2 Set Up Automatic Payments
Missing bills are a surefire way to have bad credit, and the exact thing you should avoid when trying to increase your credit score. Always try to pay off credit card debt every month, so it does not accumulate and worsen. Paying your bills on time by enrolling in automatic billing will reduce the risk of late payments and increase your credit score.
Just be sure to monitor your bills every once in a while! You might feel like ignoring them since their payments are automatic, but if prices change drastically, you will want to be aware.
Boost your Score with Monthly Expenses
Some companies, like Experian, will let you apply your paid utility and cell phone bills to your credit report. This process adds positive payments onto your credit report and adds a boost to your score.
#3 Open New Accounts
Opening new accounts is exactly that — it’s a new credit line in your name. While you can get a credit card with bad credit, it is always recommended to try to boost your score before opening up another account. The added line of credit will immediately lower your overall credit utilization, and new lines of credit typically come with introductory rates.
However, just be aware, you could now run twice the risk of missing payments and ruining your score. While there are many benefits to having a credit card, it is still important that you use it correctly and pay it off in a timely manner. It’s a double-edged sword, but it does have its benefits:
- If approved, you will be given a new line of credit
- This credit will be initially debt free
- Your credit score will increase quickly
#4 Reduce Balances
Thirty percent of your FICO score is made up of the amount owed compared to your line of credit. For example, if you have a $1,000 credit limit, and owe $500, you have 50% utilization or owed. The key to maintaining good credit, or in this case, improving your credit score quickly, is by shrinking that 50% to 30% or less.
That is why, when opening a new account, your utilization will be at 0% and help boost your score.
#5 Maintain a Healthy FICO Score
Maintaining a healthy FICO score is the best way to improve your score. How do you maintain a good score? Great question. Think of the FICO score as a pie chart, more delicious and less threatening! Each slice of the pie include:
- Payment history = 35%
- Amounts owed = 30%
- Length of Credit History = 15%
- Credit Mix = 10%
- New Credit = 10%
In order for credit unions to give out loans, or landlords to accept new tenants, your FICO score must contain several elements. These elements include the following factors:
- You have held a credit card for a long period of time, and have a decent credit history
- You buy various items and pay your bills regularly
- You are not overspending
- You are trusted enough to open up a new line of credit
Doing each of these things will maintain a healthy credit rating and will naturally improve it over time.
New and Improved Credit Score
These are the most common ways to improve your credit score quickly. While the whole idea may seem overwhelming, it is very easy to stay ahead of the curve: by not over-spending, pay off your debts, and ask for help if you need it.
For more information on improving your credit score, chat with experts at any of your local Mission Fed branches.
The content provided is intended for informational purposes. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article does not constitute endorsement, control or warranty by Mission Federal Credit Union.
USA Today. Buying a house? Getting a loan? 8 ways to boost your credit score to get the best deal. https://www.usatoday.com/story/money/2019/05/09/credit-score-how-boost-your-fico-score-quickly/1142041001/
Forbes. 5 Ways to Increase Your FICO Score. https://www.forbes.com/advisor/personal-finance/5-ways-to-increase-your-fico-score/
Student Loan Hero. How to Raise Your Credit Score Up To 200 Points in 5 Steps. https://studentloanhero.com/featured/raise-credit-score-200-points/
Market Watch. How to rebuild your credit—fast. https://www.marketwatch.com/story/how-to-rebuild-your-creditfast-2018-11-08
Experian. What Is Credit? https://www.experian.com/blogs/ask-experian/credit-education/faqs/what-is-credit/