Ways to Improve Credit Quickly

It takes neither a long time nor a lot of effort to tarnish a credit score. A missed payment or using too much of your available credit can drop your credit score in a hurry. When that happens, banks may increase the amount of interest you have to pay to borrow money, require you to put up more collateral when you take out a loan, or deny your loan application altogether. Poor credit can be a hindrance, but there are ways to improve it quickly.

It takes neither a long time nor a lot of effort to tarnish a credit score. A missed payment or using too much of your available credit can drop your credit score in a hurry. When that happens, banks may increase the amount of interest you have to pay to borrow money, require you to put up more collateral when you take out a loan, or deny your loan application altogether. Poor credit can be a hindrance, but there are ways to improve it quickly.

Pay Bills On Time

Pay your bills on time. That is the best way to begin improving your credit. Bill payment is one of the main factors in the computation of a credit score, and payments that are 30 days or more late will have negative consequences. Payments that are later than that will hurt your score more, and a bill that is not paid and goes to collections could cause your credit score to drop by 100 points or more.

Reduce Your Balances

Pay off, or pay down, the right debt. The main two kinds of debts that consumers have are revolving loans and installment loans. Revolving loans, of which credit cards are the main type, typically have a greater effect on your credit score than do installment loans, which include things like car loans, student loans, and mortgages. As a result, if you want to improve your credit rating quickly, make the minimum monthly payments on installment loans and pay as much as you can toward revolving loans.

Consider Your Limits

Use no more than 30 percent of your available credit. There are two ways to do this. One is to pay down the accounts until you are at the 30-percent threshold. The other is to make sure your credit limits are accurately reflected in your credit report. If you have a $10,000 limit and use $3,000 of it, that is 30 percent, but if your credit report indicates your limit is $5,000 and you are using $3,000 of it, your score will suffer. As a result, simply ensuring that your credit report contains an accurate summation of your credit limit can improve your score.

Keep Your Cards Open

Keep old credit card accounts open, and use them from time to time. Even if you make a small purchase on your old card each month and immediately pay off the balance, it will help your credit. Credit history is an important component of your credit score, so keeping old cards active adds length to your credit history. Additionally, it increases the amount of available credit you have.

Take a Look

Check your credit report at least once a year through annualcreditreport.com (see Resources). Errors in your credit report could have serious consequences on your credit, so it pays to ensure the report is accurate. Make sure your credit limits are listed correctly in the report, and that your payment history is accurate. Checking your credit report regularly also will help guard against identity theft, which can be disastrous for your credit.