Fastest Ways to improve your credit score.
- Pay your bills on time
Late payment takes part in 35% of your FICO score. The most common scoring system grade 300 as the minimum score and 850 as the highest score. Therefore, there are 550 points for you to play with. 35% of 550 is 192.5 points that you could lose if you have late payments.
Late payment and collection/charge off also stay in your credit report for 7.5 years and hence, affect your credit score for a very long time!
2. Pay down your balance
Under FICO scoring system, credit utilization takes 30% of your overall FICO score. 30% of 550 points is 165 points that you could lose if you carry a high balance (debt). Experts have recommended that you should only spend and carry less than 25% of your credit utilization in order to maintain and improving your credit score.
- Credit utilization is the percentage of how much you owe compares to how much your combined credit limit from all your revolving credit accounts is (meaning how much the banks let you spend).
- For example: Let say if you have a Chase credit card with a credit limit of $1000, you don’t want to owe more than $250 in that card. $250 over $1000 is 25% of your credit limit. However, if you spend $1000, then you have reach 100% credit utilization, which could harm your credit score significantly!
3. Increase your credit limit
- Many banks allow you to request for an increase on your credit limit without having to run a hard inquiry on your credit report! If your lender can do that, it helps to lower down your credit utilization.
- For example: Your Chase credit card limit is $1000, and you have a balance of $500, that means your credit utilization is 50%. If Chase agrees to increase your credit limit to $2000, now your credit utilization goes down to 25%.
- Remember, lower credit utilization, higher credit score!
4. Becoming an authorized user
- If you have a bad credit score but your spouse have great score with great credit history, you might want to ask him/her to add you as an authorized user to help you thicken your credit history and to improve your credit score. Being an authorized user doesn’t mean that you have control on that credit account. It means that you can use the card but cannot manage it. However, the information on that card will also be reported on your credit report, which would help you a lot as well!
- Another good example would be for parents with great credit scores to add their children on their credit card as authorized users to add the years of experience on the card. Since children that just turn 18 might not have any credit history.
5. Open a secured credit card/credit builder card (https://www.creditbuildercard.com/jennfinancialsolutions.html)
- How does secured credit card work? You put down a security deposit (for example, let say $200), and the $200 becomes your credit limit – how much you can spend in this secured credit card. The lender issues you the card to use and as you use this card, your information will be reported to the credit bureaus to build your credit. Remember not to use all the money that you put into this card. You want to use less than 25% of your credit limit! At the time that you close down this card, you will get your original deposit money back!
- Secured credit card can help you boost up credit score, if you are not qualified for any normal credit cards; you just started building credit and have lack of credit history and have a thin credit file; you are rebuilding your credit and are having bad credit score with no active credit revolving account; you are a new immigrant and are not qualified for any cards.
6. Dispute any inaccuracies on your credit report
- Statistically speaking, about 78% of credit reports contains errors!
- You have the right to look at your full credit report for free once every 12 months. Make sure you look at line by line items to make sure all accounts are reported correctly, and dispute anything that you see is not correct, inaccurate. However, I do not recommend disputing online, since you will waive some of your rights when you dispute online.
Let us know if you have any questions or need a full credit audit.
To book a consultation, please go to www.jennfinancialsolutions.as.me;
or call 619-607-1468
We are here to help!