When you have agood credit score, you can get better terms and lower interest rates on loan products and credit cards. But it's not always easy to just boost your credit score overnight. First, you need to consider why your score is low.
"Understanding the specific circ*mstances as to what is impacting your score is your first step in understanding how to quickly increase your credit score," Jim Triggs, president and CEO of nonprofit credit counseling agency Money Management International, Inc (MMI), tells CNBC Select.
Below, we get advice from Triggs and a couple other experts on how quickly your credit score can increase and tips for making it happen.
1. Pay down your revolving credit balances
If you have the funds to pay more than your minimum payment each month, you should do so. Chipping away at your revolving debt can have a major impact on your credit score because it helps to keep your credit utilization rate low.
"How quickly [your score can go up] depends on how quickly the individual creditors report the paid balance on the consumer's credit report." Triggs says. "Some creditors report within days of the payment, some report at a specific time each month."Credit card companies typically report your statement balance to thecredit bureausmonthly, but this could vary depending on your issuer. You can call or chat online with your card issuer to find out when they report balances to the bureaus.
The sooner you can pay off your balance each month the better. You can also make multiple payments toward your balance throughout the month so it is easier to track your spending, and it keeps your balance low. And although it helps to even pay off a portion of your debt, paying off the entire balance will have the biggest and fastest impact on your credit score.
2. Increase your credit limit
You can increase your credit limit one of two ways: Either ask for an increase on your current credit card or open a new card. The higher your overall available credit limit, the lower your credit utilization rate (as long as you're not maxing out your card each month). Before asking for a credit limit increase, make sure you won't be tempted to spend more than you can afford to pay off.
If you are considering opening a new credit card, do your research beforehand. How often you apply for and open new accounts gets factored into your credit score. Each application requires the card issuer or lender to pull your credit report, which results in a hard inquiry on your report and dings your credit score a few points.
"Usually the negative impact of those factors is much less than the benefit to your score of reducing your credit utilization ratio," Triggs says. Just make sure you don't apply to too many credit cards over a short amount of time and send a red flag to issuers.
It's more important now than ever to do your research before applying for new credit because issuersmay have stricter terms and requirements in wake of the economic fallout from coronavirus. Check to see what your credit score is beforehand.
Most of the best rewards credit cards require good or excellent credit to qualify, but there are some cards catered to those with less than stellar credit. The Petal® 2 "Cash Back, No Fees" Visa® Credit Card has no fees whatsoever*, offers cash back and allows applicants with no credit history to apply. If you have a credit file, it does factor into the application process. TheCapital One QuicksilverOne Cash Rewards Credit Card accepts fair or average credit and offers 1.5% cash back on all purchases.
3. Check your credit report for errors
One way to quickly increase your credit score is to review your credit report for any errors that could be negatively impacting you. Your score may increase if you are able to dispute them and have them removed.
About 25% of Americans have an error on their credit reports, so it's important to take the time to review. Some common errors to look out for include fraudulent or duplicated accounts, as well as misreported payments.
"Most of the clients we meet with have not reviewed their report within the past year, and are often surprised by what we find to discuss with them," says Thomas Nitzsche, a financial educator at MMI.
You can get a free credit reportfrom the three majorcredit bureaus(Experian, Equifax and TransUnion) on a weekly basis by going toAnnualCreditReport.comnow through April 2021.
4. Ask to have negative entries that are paid off removed from your credit report
You may have a series of late payments on your credit report, or perhaps an old collection account that's since been paid off still shows up. If this is the case, ask to have them removed. (And if you do have a collection account that's unpaid, make this a priority. Unpaid collection accounts can negatively impact your score.)
This step may take more time and effort on your end, but it could be worth it. Triggs suggests speaking to the collections agency, debt buyer or original creditor (depending on who now services your account) to remove a paid-off account from your credit report.
"You'd most likely have better results using this method with collection agencies or debt buyers versus the original creditor," he says.
Try to convince them to not only show the account as paid, but to remove the account altogether, which could have a much bigger impact on your credit score. "Having even a paid collection account or paid charge-off on your credit report could deter creditors in issuing you future credit at all," Triggs says.
Bottom line
When it comes to improving your credit score, no there's noone solution that fits all.
"It's important to remember that every person's credit journey is unique," Beverly Anderson, president of global consumer solutions for Equifax. "So while there are many factors that apply to most consumers, they won't always impact everyone's credit scores in the same manner."
Don't miss:4 steps you can take now to help you clean up your credit report
Petal 2 Visa Credit Card issued by WebBank.
*The regular APR variable for the Petal® 2 "Cash Back, No Fees" Visa® Credit Card currently range from 18.24% - 32.24%
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
