Mónica Taher’s FICO Scores.
Improving a low credit takes time and there really are no immediate fixes. Since quick fixes will likely cause more harm than good, it is wise to take any advice claiming to improve your credit score overnight with a grain of salt. This is because you don’t actually rebuild your credit score but rather you rebuild your credit history which will eventually be reflected in your credit score. How long this process will take depends mostly on the reasons behind the lower score. Most changes in credit scores are due to a negative addition to your credit report, such as a delinquent payment or a bill that has been sent to collections. These factors will continue to affect your credit score until they reach a certain point.
The best way to rebuild your credit is to manage it responsibly over time. Your payment history makes up 35 percent of your total score so perhaps the best suggestion is to simply pay your bills on time. If this isn’t something you have been doing already, then repairing your credit history is crucial to seeing any improvement in your credit score. Below are 5 tips that can help you move your score in the right direction:
- Make arrangements with creditors
While you can’t pretend that lapses in payment history don’t exist, you can ask creditors to remove from your report any debt that went to collections. A good way to go about this might be by offering to pay off the remaining balance if the creditor will remove the default from your account altogether. However, make sure this is agreed to in writing before making any payments. It is also an option to write a goodwill letter requesting that late payments be removed from your credit report. If you were previously a good customer until something like unemployment or illness interrupted payments, emphasizing this may make creditors more inclined to remove negative history from your credit report.
- Under-use your credit cards
Your credit utilization ratio is discovered by dividing the total outstanding balance by the credit limit on the account. So if you owe $500 on a credit card that has a limit of $1,000, this gives you a credit ratio of 50 percent. Ideally, this ratio should be no higher than 30 percent. Even if you pay your balance in full every month, if your utilization rate is high then it appears you are maxing out your limit and will be reflected in your credit report.
- Become an authorized user
Ask a friend or family member if you can be added as an authorized user to their existing account. You will receive your own card that is linked to the main account holder and can make purchases and payments but no significant changes to the account. An important point to keep in mind about becoming an authorized user is that the main cardholder is responsible for all the charges. So if you don’t pay your bills, that person’s credit is at risk.
- Don’t close credit cards
Credit cards with available balances will mostly likely improve your score by lowering your credit utilization ratio. 10 percent of your credit score is based on the different types of credit you have so hanging onto a credit card with a low balance will raise your overall score. This is especially important if it is your only active credit card. It is also a bad idea to close out old credit cards because this shortens your credit history. It won’t impact your score immediately but when the credit card eventually falls off your report you may see a sudden drop in your credit score.
- Pay credit cards twice a month
Even if you are paying off your credit card every month, using too much of your available credit can hurt your credit report because it appears you are maxing out your card. Instead of paying your card off in full, make two separate payments — one payment just before the closing date and the second payment right before the payment is due. This will ensure that your overall balance appears lower and that you won’t pay interest or late fees. Did you miss my post on How You Can Profit From The Strength Of Our Dollar? You can read it here!