The bad news is that if you have a low credit score, it will be harder to get a loan or line of credit, and your interest rate will often be very high and your terms not great.
The good news is that there are things you can do to repair your credit score quickly. Sure, you’ll want to make bigger, long-term changes, but if you need to bring that number up quickly, you can start right away.
Keep reading to learn more about how you can repair your credit score and be on your way to having good or even excellent credit.
Understanding Your Credit Score
Your credit score is a way for lenders to judge how risky it is to lend money to you. The higher it is, the less risky you are, meaning you’ll get the best interest rates and loan terms.
The FICO score is the most commonly used credit score and is calculated with information from the three main credit bureaus, including Experian, Equifax, and TransUnion.
Your score is a number that considers your payment history, the amount of credit you are using (e.g., how much do you owe compared to how much credit you have available), what kinds of loans you have, how old your credit history is, and the age of your most recent credit account.
Credit scores can range anywhere from 300 to 850. If you have a bad score, which is typically considered to be anything less than 630, you’ll want to work to improve your credit score. Here are some ways to do that.
Ways to Repair Your Credit Score Fast
Although your score isn’t going to change overnight, you can make some changes in the next 30 days to help your score. Here are some things to start doing ASAP.
1. Pay Down Your Balances
Pay down your revolving balances as much as possible. Revolving balances are ones that can change, such as credit cars. Paying down installment loans, like car loans, student loans, or your mortgage won’t do much to change your score.
If you can’t fully pay them down, try to get them to less than 30% of your total credit. For example, if you have $20,000 available to you in credit and have used $10,000, you’ll want to get your balance to less than $6,000. This will help your score rebound.
Whether you get a side hustle or stick to a strict budget, throw any extra money you have at your balance.
2. Increase Your Credit Limits
Raising your credit limits will increase your available credit balance and decrease your utilization ratio. Call your credit companies and ask them for increases in your credit limits. They may be able to do with with a “soft” pull of your credit history. This is preferable to a hard inquiry, which will drop your score a few points.
Your chances of getting a higher limit are higher if you have paid on time and don’t have a high balance on that particular account.
3. Get New Credit
If you’re unsuccessful at getting your existing credit limits increased, you can always opt to apply for new credit. This will help you by increasing the amount of credit available to you. You might opt for a credit card or a personal loan (which can help with suggestion number 1). Find out more here.
Be careful with this strategy, though, because too many new accounts or inquiries to your credit report will hurt your score. Opening multiple new accounts at one time won’t look favorable. It might indicate to creditors that you are going to go on a shopping spree.
4. Correct Errors on Your Credit Report
You are entitled to a free credit report each year from all 3 of the different credit bureaus. You should request these annually and review them for any mistakes.
Examine your credit reports closely and check for any errors. If there are accounts with late payments or unpaid bills, accounts that are not yours, or accounts that have been closed but are still showing up, you’ll want to get those corrected.
To dispute information on your credit report, you should contact the credit bureau with the incorrect information in writing. Tell them what you are disputing and they will have to investigate it, usually within 30 days.
After you do that, you should also let the company that has issued the incorrect information know. Send them a letter as well, letting them know that you have filed a dispute and include documentation to support your dispute.
5. Become an Authorized User
One last resort to improving your credit score is to become an authorized user on the credit card of someone who has a very good credit history.
By becoming an authorized user, the account will show up on your credit report. If the account holder has a history of on-time payments and low balances, it will help your credit score as well.
If you have a spouse or family member with an account with a high limit and very low balance, this might be a good option for you. Don’t use the card (you don’t want to impact their credit negatively), but as long as you’re listed as an authorized user, you’ll reap the rewards.
The Bottom Line
To say that you can repair your credit score quickly is relative. While you can make some changes to impact it in the next 30 days (credit bureaus only report information once a month, so you won’t see the changes the next day, for example), the best way to increase your score is through hard work over time.
Use these suggestions to get yourself started and then be a responsible credit user to keep your score high. You’ll thank yourself later.
For more resources about credit, finance, and making money, explore some of our other blog posts.