Consumers with short or problematic credit histories may find themselves in the “bad” credit range. If a low credit score is holding you back, it’s natural to want to fix it as soon as possible.
How quickly you can increase your credit score depends on what affects it in the first place, but in many cases, you can see results much sooner than you think. Try the following methods to go from bad credit to good credit in no time.
1. Correct mistakes on your credit report
If you don’t know why you have a low credit score, it could be credit report errors. Credit reports aren’t always 100% accurate, which is why it’s so important to review yours. You can get your credit reports through AnnualCreditReport.com. You are normally entitled to one free credit report per year from each of the consumer credit bureaus: Equifax, Experian, and TransUnion. However, due to the COVID-19 pandemic, credit bureaus are offering free weekly reports until April 2022.
After reviewing your report, dispute any errors online with the credit bureau that issued the report. Removing an error from your credit report can make a huge difference in your credit score. In a recent example, an Ascent writer increased their FICO® score by 112 points by correcting a credit report error.
2. Pay off credit card balances
High balances affect your credit score. Once a month, credit card issuers report your current balances. Credit bureaus use this data to calculate your credit utilization rate, which is the percentage of available credit that you are using. If you have balances of $ 5,000 against credit limits of $ 10,000, your credit usage is 50%.
A ratio of 30% or more is generally considered high usage. The more you use your credit, the more it has a negative impact on your credit score. This is one of the main criteria for credit scoring.
Since balances are reported monthly, you can quickly improve credit usage. If you have some saved money that you can use to pay off your credit cards, it won’t take long for your credit score to go up.
3. Request a credit limit increase
Reducing your balances is just one way to reduce your use of credit. Another good option is to increase your credit limit.
Credit card issuers usually allow you to request a credit limit increase over the phone and online. If you’ve had a card for at least six months and you’ve always paid on time, the card issuer may agree to give you a higher credit limit. It also helps if your income has increased since you applied for the card.
Let’s use the previous example of having $ 5,000 in credit card balances and $ 10,000 in credit limits. You ask for increases on all your cards and increase your combined credit limits up to $ 15,000. This drops your credit usage from 50% to 33.3%, improving your credit score. You would see even better results if you paid off your balances as well.
4. Become an authorized user
Being an authorized user on another person’s credit card is a popular way to accumulate credit. The cardholder authorizes you to use the account and you receive an authorized user card. If they’re worried about the risk, they can often add you without giving you a card.
This helps your score because many credit card companies report card activity to the credit records of the cardholder and authorized user. Imagine that a family member or friend with good credit habits adds you as an authorized user on their card. They always pay the card on time and never let the balance get too high. This positive activity could end up in your credit report. This is especially beneficial if the only thing stopping you from getting a good score is your limited credit history.
5. Apply for a builder loan
A credit loan is a unique type of loan used to increase your credit score. The main benefit is that it allows you to improve the most important factor in your credit: your payment history. If you get a credit loan and pay on time, your credit score should go up. Homeowner loans can also help you by increasing your credit mix. When you have credit cards and loans are better for your credit score than just having one or the other.
Homeowner loans charge interest, so they’re not the cheapest option. But they’re generally easy to get, and a good way to start building your payment history.
Achieving a high credit score doesn’t always have to take years. If any of the above strategies work for you, they could yield much faster results.