Getting the trust of financial institutions and proving your ability to repay any loans you receive will first start with your credit rating. It’s a mixture of different factors in your financial portfolio that can lead to a higher score to prove you can handle loans without falling behind or a low score that indicates you might be late with the payments.
It’s possible to raise your credit score almost overnight with quick and easy fixes such as credit utilization rate repairs and closing current debts. As there’s much more than meets the eye with credit score repairs, we’ll discuss the affecting factors and improvement methods in detail.
Why Is Your Credit Score So Important?
Your credit rating is calculated by the major credit bureaus like TransUnion, Experian, and Equifax based on your credit report payment history. As soon as you open a new bank account or get a new credit card, the bank will transfer the information to these bureaus.
They are in charge of making your credit file and conducting credit checks with all the relevant data. So, based on the number of your accounts, credit cards, revolving credit, credit utilization and frequency of applying for credit and/or loans, you will get a FICO score value from 300 to 850.
A low score indicates that you were often late on payments or you already have a large amount of debt to income ratio being reported, and this can cause severe damage to your rating.
For instance, just missing a single payment on your bills might leave a trace that lasts for 7 years on your credit report.
It’s therefore crucial that you are never late more than 29 days on bills or debt repayment, as being more than 30 days late is always reported to a credit bureau.
Factors That Affect Your Credit Score
Before we get into the details of raising your credit score, it’s time to deal with the factors that credit unions and bureaus use to build your file and rating. Your overall credit score value is calculated with the following aspects in mind:
- Credit utilization ratio
- Payment history
- New credit
- Credit mix
- Credit amounts
Another thing that might affect your credit score to drop is a hard credit check. Creditors might conduct a hard credit inquiry in case you apply for a new loan. They might leave a mark on your credit report while observing your capability to repay on time, and witnessing the available credit you have.
A hard credit check might leave a trace on your report for up to two years. That’s why the first step in increasing your score would be to prevent applying for loans with creditors that apply this method. On the other hand, you can still apply for a payday loan or other forms of personal loans where the lenders only conduct a soft credit check. This might also occur while applying for a new credit card, and they don’t leave a trace on your credit history, hence not damaging your credit score.
How Does Payment History Affect Your Rating?
At a glance, your credit history is visible via credit bureaus and it provides a first indication of whether you are reliable with credit repayment or not. Every payment you make concerning utility bills, loans, and credit card debt will be visible in your history as part of the credit report.
So, it gives the first and perhaps most crucial insight into your financial capabilities.
It might perhaps strike you as obvious, but applying for a new credit card can lower your credit score. It’s because it might leave a hard pull trace on your credit history, and at the same time it lowers the average age of your credit card accounts.
That’s why you should leave the old credit accounts for your earliest cards open even if you are not using them at the moment. It vouches that you were able to maintain the regular payments over the course of years and that you have a long history of making payments on time.
Credit Mix Influence
This factor influences your credit score by at least 10% and it includes a mix of credit you have taken over the years. It proves that you were able to close existing credit of different types over the years, such as car loans, installment loans, credit cards, etc.
It also helps calculate and determine your credit score, so having a diverse mix benefits your overall rating.
How To Raise Credit Score Fast?
If you have missed payments and it resulted in a low credit score, there’s no need to despair – we’ll guide you on swift credit score improvements. Here are some of the best ways to improve your rating without causing further harm to your credit report:
- Calculate and fix your credit utilization ratio
- Close caught-up payments
- Pay outstanding loan payments without delay
- Dispute errors and remove hard inquiries
- Use payday loans to repay credit debt
- Increase your credit limit
The first thing you should do and the easiest fast fix for bad credit are to deal with your credit utilization ratio and make it beneficial for your rating again. This can affect your credit score by more than 30%, so it’s an essential first step to make.
Adjusting Credit Utilization Ratio
The credit utilization ratio is essentially the amount of revolving credit at your disposal that you are currently using. While it mostly reflects credit card debts, it’s a crucial item for your credit score.
Your available credit usage shouldn’t exceed 30%, and this reflects all credit card accounts. So, if you have a credit limit in the range of $2000 across all credit card accounts, make sure not to use more than $600 in total. Doing so will result in instant changes in your credit scores and you can even expect a credit limit increase after some time.
This method is especially effective to rebuild credit scores nearly overnight in case you don’t have any late payments for utility bills. In the other case, you can ask for late payment forgiveness by vouching that you’ll pay within the next 28 days since being late for more than 29 days always gets on your credit report.
Adjusting the credit utilization ratio with on-time payments is by far the easiest and fastest way of getting your credit score to jump into the 500+ range. Once your credit card limits also get raised, you should still keep using just about 30% of available credit to keep your rating in an acceptable range.
Handling Late Payments
As mentioned, there’s no point in dealing with the credit utilization unless you are able to pay any outstanding late payments. You can use a free credit report check to get insight into all of your credit limits and payments you missed that you need to make on-time.
The best way to fix your credit score quickly is not just by paying bills, but also to pay other late payments. This includes any loans as well as other types of payments on your credit report that you are falling behind with.
Paying off the bills and credit card debt might raise your credit score 100 points overnight. The best thing is to start with rent and utility payments and move on to updating credit card balances to current.
If you are renting, you can ask the house owner to give you some more time on the late payment. This way, the information wouldn’t reach your credit history or the credit bureaus.
Pay Loans On Time
Taking a free credit report check can also result in proper insight into your late loan payments. If you have any installment loans, it’s vital to make your monthly payment on time. The good thing is that some lenders will allow you to re-negotiate the loan terms, and could even add a couple of days more on a due date.
Whenever you pay the loan installment, the information will be passed on to the three major credit bureaus. Because of this, making the payments always on time makes a huge impact on your credit history. It can be as significant as credit utilization in helping you raise your credit score.
Proving that you are able to make an installment payment on time also has one more benefit for you – you can apply for a credit builder loan.
How Do Credit Builder Loans Work?
We’ve already discussed how making on-time loan payments can affect your credit reports with a positive influence on your overall credit score. So, it can be a great move to apply for a credit builder loan if you want to make some quick credit score updates.
It doesn’t have to be a large amount – you can take as little as $300, and use installments for monthly payments. The thing is that you won’t get the money beforehand. Instead, you’ll be paying a monthly installment so that credit monitoring agencies take into account that you are reliable with payments.
Once the loan payment is complete, you’ll get the funds released and your FICO score can improve up to 100 points.
Remove Errors And Hard Pulls
Credit monitoring is not just essential for credit bureaus to build your rating, but also for yourself. You can remove your negative credit history with just one free credit report check.
By taking a look into your credit history and reports, you can search for inconsistencies that might occur. Perhaps even your credit score has dropped because of these inconsistencies and one of the most frequent ones is hard pulls.
If you notice any unauthorized hard inquiries, you can simply file a dispute to remove negative credit history and raise your credit score 100 points overnight. You can file it directly to one of the three credit bureaus, and with the Federal Trade Commission form if you are doing it without a lawyer. It’s one of the quickest ways of getting a higher credit score with a simple check.
Use Personal Loans To Repay Debt
The best way to raise your FICO score is to repay any loan installments and outstanding credit lines, but taking a new loan could further hurt your rating. So, what’s the best option in this scenario? It might well be to take a payday loan or other types of personal loans that only require soft checks.
These only require you to have a valid bank account, and you can even get them with bad credit. The details and due dates for this type of loan can be negotiated with the lender, and you might raise your credit score swiftly by using the funds to close other loans.
However, the downside is that it’s not a permanent solution and you usually won’t be able to take more than $1000 with this loan type. It can also be a way of making improvements to your rating overnight since you can fill out the form and apply online with some lenders.
You should always check the terms and conditions behind these loans. You could wind up paying much much more than the loan amount. Ask yourself if this is worth doing just to improve your credit score a little bit?
Boosting Your Credit Limit
Other than dealing with your payment history and closing existing loans, there are other ways of improving your credit score. One of them would be to raise your credit limit, which could result in lowering your credit utilization as well.
You can consult your credit card issuer about the possibility to raise your credit limit. You can be honest and state your reasons to the credit card company, while you might need confirmation of higher income.
Your credit score can be increased with a higher credit limit since the utilization ratio will allow you to use more funds, and still improve your rating. Although it will help build a credit score, you also might need to open a new credit card account.
The limit is not associated with a single traditional credit card alone, so you can get a good score even with multiple credit accounts. The downside is that you might be required to get a secured credit card and make a deposit before getting a credit card account for the bank’s assurance.
Hopefully, this guide can help you improve your credit score swiftly with some or all of the methods proposed. While it might not be literally possible to improve your credit score overnight, these tips can help you get a better understanding of what affects your rating long-term.
Sometimes figuring out where to start can be the hardest part, but it doesn’t mean you can’t raise your credit score with a few quick fixes.
If all else fails, you can use the aid of a financial expert to go through your reports, or even rely on the help of your lawyer in case you need to file a dispute.
Frequently Asked Questions (FAQ):
What’s the fastest way of raising my credit score?
One of the best things you can do to raise your credit score swiftly is to expand your credit line and lower the utilization ratio as it affects up to 35% of your rating.
How to maintain a FICO 500+ rating after a credit score update?
You might be able to raise your score swiftly, but the long-term mission of keeping it high remains. Some of the best pieces of advice in maintaining your rating at an optimal level include making your payments on time, and keeping the oldest credit cards active.
Can a credit score differ among credit reporting agencies?
It’s possible that your rating will have slight differences from one agency to another. It all depends on the exact sample of information they take from your history and reports when forming an overall rating expressed in FICO points.
Can I use a free credit score check to improve my rating fast?
When it comes to the mentioned credit bureaus, you can get a free annual credit report from all three of them. This way, you can even compare the rating with each agency, and get a sense of possible irregularities or items you must change to get your rating boosted.
Beacon Score – Everything You Need To Know About Equifax Credit Ratings
If you apply for a new credit card or a loan, you might notice one unfamiliar term describing your creditworthiness - the Beacon score. You might be used to...