To qualify for good rates on personal loans, credit cards and even getting better deals on rent requires you to have a good credit score. Ideally you should aim to have a score of above 720, which puts you in the top tier.
However if you are like many Americans whose score is within or below the national average- which currently stands at between 695 and 673, then you need to find ways to fix it. So how do you go about it? Let’s look at the different ways you can improve your credit score quickly.
- Clear Off Credit Card Debts
Paying off credit card debts will bump up your score.
Here is why: Credit scores are calculated from several factors. Of these, amount owed account for roughly 35% of the total score. The ratio is arrived at by comparing your debts against the limits allowable on your lines of credit.
This is to say that if your total credit limit is $6,000 and you are carrying $2,500 in balances across all your cards, then your credit utilization ratio is around 41.7%. To increase your score, this ratio should be as low as possible; industry experts advice that it should be at most 30%.
If you can pay off all your credit card debts, then the better your score will be. However if your finances are not looking that great, then aim to reduce your balance as much as possible to endear yourself to lenders.
- Fix Errors in Your Credit Report
Could your credit score be low because of an erroneous entry in your credit report?
A study by the Federal Trade Commission (FTC) found that the credit reports of 20% of consumers had errors. These were errors in at least one of the three major reporting bureaus (Experian, TransUnion and Equifax).
One in every twenty of the consumers who disputed their reports successfully had a 25-points increase in their credit score. This is a significant change that can propel you from a low tier to a higher one for better rates from lenders.
To underscore the importance of this, one of those who participated in the study had an increase of 100 points after errors were rectified.
So how do you about fixing errors? The FTC provides guidelines for this; in a nutshell, get your report from each of the three major bureaus and compare the entries. Dispute any discrepancy by writing to the lender or the reporting bureau whose entry you deem erroneous.
This will be followed by investigations and if your claims are valid, then you will get a letter to that effect followed by changes in your report and ultimately your score.
For assistance with credit report disputes contact Credit Absolute for a free consultation!
- Stay on Top of Your Payments
The largest contributing factor (35%) on credit scores is payment history. Although it may be difficult to fix overdue payments, there are still some steps that you can take to fix this aspect of your credit score;
- Avoid falling into collections by being punctual with your current debts. Collection does not just involve financial institutions; a library may call these agencies on you for overdue books. If these collectors list such an item in your report you will sure lose some points.
- Strive to reduce past debts even if it’s by small periodical payments. Such a move will make your recent history look favorably. As time goes by the old unpaid patterns fade and you create a cleaner slate.
- Contact your creditors and negotiate on how to settle past payments. With luck and commitment on your side, they may agree to rescind the delinquencies on your reports.
Bottom Line Fixing your credit score will take dedication and well calculated moves. Above are three ways through which you can get you started. That said, items listed in your credit report stay for seven years. You should therefore concentrate on fixing your score as early as possible. This will save you money in the future when you will be applying for a mortgage, buying a car or even help you look favorable for a job posting.