When times were tough, you did what you had to do to get by
and your credit score suffered. Now you're in the market for a
home, car, or other purchase and that sagging credit score is
Here are five strategies that can improve your score fast and
also lay the foundation for a permanent, long-term improvement in
your personal finances.
1. If you're past due on an account, pay it
Honestly, if you are past due on one or more of your credit
accounts you shouldn't be focusing on your credit score. You have
much more urgent considerations -- like hustling just to make
ends meet. You can work on fixing your credit after your monthly
cash flow becomes more stable.
But if you are in a jam and need a quick boost to your credit,
catching up on payments will improve your score. It seems
obvious, and perhaps it is. But fundamentally this is what it's
all about -- paying your obligations on time. Don't expect
miracles here, but a current account is far better than a
Creditors are not legally allowed to report your account as
delinquent unless you are 30 days or more past due. Use this to
your advantage and keep your accounts less than 30 days behind.
Ideally, keep them current enough to avoid any late fees, but
when times are tough you are forced to make tough choices.
2. Check your credit report online and report any
If you haven't already, log in to
and check your credit report for any inaccuracies. Carefully
review everything: payment history, outstanding balances,
collections actions, credit limits, account numbers. Check it
Source: Company website.
If anything is incorrect, file a dispute with each of the
three reporting agencies:
The formulas these companies use to calculate your score are
top secret. No one really knows exactly what causes your score to
jump 20 points from one month to the next. The last thing you
need is an inaccuracy hurting your score any more than is
justified -- particularly when that discrepancy is the difference
between qualifying for a loan or not.
3. Focus on paying down "bad debt" first
Even though the credit score formulas are secret, the credit
agencies do provide some guidance on how they work. For example,
a mortgage loan that is paid on time every month is actually a
major credit score boost. And on the flip side, a maxed-out
credit card is among the greatest credit score negatives outside
of delinquent payments.
One large driver of the credit card's impact on your credit
score is its "utilization rate."
The idea is that a maxed-out credit card is bad, while a
credit card that is at 30% of maximum or less is better. The
credit agencies see this level of use as evidence that you can
use your revolving credit responsibly and with discipline.
Knowing this, focus immediately on reducing the balances on
your credit cards until they reach that 30% level.
A maxed-out credit card is a powerful enemy to your credit
score. As long as your payments are completely current, attack
those credit card balances to see a quick improvement in your
4. Negotiate with your creditors
There are hundreds of shady credit advisers trolling the
Internet with promises to reduce your debt overnight. The sad
reality is that this oftentimes means negotiating a "charge off"
with the creditor. If you have any intent of borrowing money for
the next seven years, you should avoid a charge off like the
To a bank, a charge off is tangible proof that you won't repay
your debts. Imagine loaning money to a friend. If that friend
didn't pay you back, would you lend your money to them again? Of
course not, and that's why you should work to always avoid a
Source: Company website
That said, it's perfectly acceptable to negotiate. If a
collection agency has been hired, you can request in writing that
the agency mark the debt as "paid as agreed" if you pay the debt
in full. This would remove that collection action from your
record and immediately boost your score. Proceed with caution,
though. This tactic only works if the debt is changed from a
collection to a "paid as agreed" status. Just paying off the
collection will not remove it from your report. Get it in
writing, and follow up to ensure the change actually happens.
5. Pay your bill twice a month
This final tactic goes back to the credit utilization concept
mentioned above. By paying your credit card bill twice a month,
you'll only keep two weeks worth of spending on the card at a
time. That means that each month your total credit card balance
will be lower.
US Average Credit Score
It's a clever trick that can lower the appearance of your
credit card balance on your credit report without any change in
your actual month-to-month cash flow. If you typically spend
$1,000 per month on your card, pay $500 on the 15th and $500 on
the 30th. That way, the maximum on your card at any time is 50%
less without any change in your budget or use.
Credit is a long-term game
Applying these five tactics will immediately boost your credit
score. But the next 30 days is only the start. By committing to
paying your bills on time, working hard to reduce credit card
balances, and checking your credit report every year, you can
turn your credit score from a liability to an asset.
Building solid credit is a key component to taking control of
your personal finances.
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