How to Raise Your Credit Score Quickly

Adsense
 How to Raise Your Credit Score Quickly 
 
So much rides on a good credit score, from your auto loan rates to where you live. The difference between an acceptable credit score and a good credit score is huge and can save you thousands of dollars in the life of an auto loan or mortgage. Before you apply for a loan, it is wise to check your current credit score and try to reach the next level of credit before submitting your loan application.

Setting Realistic Expectations

You can raise your credit score quickly, but expect it to take one to two months to take effect. This might seem like a long time to wait when you are in the middle of looking for a vehicle or personal loan, but waiting just a little bit longer will save you a lot of money. A better credit score means a better loan rate, which then means less interest paid in the life of a loan.
For example, if an excellent credit score secures you a $160,000 30-year mortgage for a 3.9% annual percentage rate (APR) then you would end up paying $89,000 in interest. However, if your credit score was slightly under 740, you might end up paying 4.2% APR. The rate difference looks minimal, but it will add up to $8,000 more in interest charges over the next 30 years. It is worth the time and effort to boost your score before securing a loan.

Check for Errors

The easiest way to raise your credit score is to dispute any errors on your credit report. You want to make sure the credit bureau did not make any mistakes or accidentally mix up your report with someone with a similar name. (For more, read:10 Steps to Help Erase Errors On Your Credit Report.)

Pay Off Debt

Paying off debt benefits your financial situation in many different ways. When you pay off debt, you give your credit score a boost, and you also lower your debt-to-income ratio, which makes you a more appealing candidate for loans. Note, it is best to pay off credit card debts rather than pay off long-standing loans and mortgages where you have established a good standing.

Become an Authorized User

The best way to raise your credit score quickly is to use a credit card. However, if you are younger or do not have an established line of credit, then you might be turned down for several credit cards. Instead, ask a trusted family member if you can be added as an authorized user on their account. You do not even necessarily need to use the card to improve your credit score. Just make sure you are not becoming an authorized user to someone that has mediocre credit or many late payments since that will make your score worse.

Open a New Card and Use Your Current Card

If you currently have a credit card, use it wisely. You want to spend about 10% of your credit limit and pay it off monthly to help boost your score. Opening a new credit card will also raise your score slightly. If you currently have bad credit, consider a secured credit card that is specifically made for those with bad credit. Many secured credit cards frequently report to the credit bureaus and send you monthly credit score updates, so that you can keep track of your improvement. (For more information, see How Your Credit Card Can Improve Your Credit Score.)

Ask for a Raise

Ask you current credit card company for a credit limit raise. Even if you do not plan to use it, this will help credit utilization ratio. This is a smart move only for those who exercise good financial habits. If you increase your credit limit and your credit spending, then you will not boost your credit score and can also wind up in more debt. (For more, read What Is A Good Credit Utilization Ratio?)

Don’t Close Out Your Credit Cards

Don’t close out a credit card, even if you don’t want to use it anymore. Closing a credit card will lower your credit score. It doesn’t matter if you always paid it on time and did not have a balance. If you desire to close a card due to annual fees, try calling the credit card company and ask them for a downgrade to one of their free cards. This allows you to maintain a longer history with the company, which is important for a healthy credit score. (See also: 4 Habits That Damage Your Credit Score.)

The Bottom Line

Improving your credit score quickly is possible, but you have to be intentional about your credit card usage and debt repayment. The credit bureaus will raise an individual’s score based off of good habits, such as paying bills on time, having a manageable amount of debt, and not spending more than 35% of your line of credit. If you have filed for bankruptcy or went into foreclosure, understand that it will take you much longer to improve your credit score.

Get Out of Debt – Start Making Money
Want to get out of debt, get a mortgage and save for retirement? Investopedia’s FREE Personal Finance newsletter shows you 7 Steps to Become Financially Independent. Take control of your money and Click here to start managing your finances like the pros.

Powered by Blogger.