Lenders use your credit score to determine your eligibility for a loan. If you have a ‘bad’ credit score, you may not qualify. Fortunately, credit scores aren’t stagnant. They change many times throughout the month.
Because they aren’t stagnant, there are ways you can increase your score. Just how fast can you make it happen? Keep reading to find out.
It Takes Time to Increase Your Credit Score
Overall, increasing your credit score takes time. Just how long depends on the situation. If you have a low credit score because you don’t have a lot of tradelines, it may be easy to increase your score in a few months. You just need to build your credit score by taking on new credit and using it appropriately.
If, on the other hand, you have a lot of credit, but it’s bad, it could take longer. The reason you have bad credit determines how long it takes your score to change. For example, are we talking about late payments, defaulted loans, or overextended credit? Each of these issues plays a different role in how long it takes to increase your credit score.
Below we help you understand how long it takes overall.
Fixing Incorrect Credit Information
One out of every 20 consumers has incorrect information on their credit report. By incorrect, we mean mistakes. It could be a trade line that doesn’t belong to you, an incorrect payment history on an account that is yours, or a defaulted loan that you never defaulted on.
Let’s face it, humans make mistakes. Since humans report your credit report’s information, there’s a chance for error. Transposed account numbers result in incorrect tradelines on your credit report. Wrong dates entered for payments or incorrect information provided by the creditor results in inaccurate credit reports.
If you notice you have incorrect information on your credit report, call the credit bureau right away. You should also contact the appropriate creditor. Credit bureaus have 30 days to fix the issue once you bring it to their attention. If they remove the incorrect information, your credit score may improve right away.
Lowering Your Credit Utilization Rate
How much of your available credit do you have outstanding? It makes a big difference in your credit score since credit utilization makes up 30 percent of your credit score. Typically, if you have more than 30 percent of your available credit outstanding, it negatively affects your credit score.
For example, if you have a $1,000 credit line and you have more than $300 charged at one time, it damages your credit score. Fortunately, it’s an easy fix. If you pay your balance down below $300, your utilization rate falls and your credit score increases.
Just how fast it works depends on how you handle the situation. If you have a high balance that takes a few months or years to pay off, your credit score increase will be slow. On the other hand, if you have a lower balance that you can pay off quickly, you may see a faster rise in your credit score.
Bringing Payments Current
Your payment history makes up 35 percent of your credit score. It’s the largest competent of your credit score, which makes on-time payments imperative. But, life happens. If you make a payment or two late, you need to bring it up to date as fast as possible.
If you make a payment more than 30 days late, though, it becomes a mark on your credit report. Credit bureaus report late payments for seven years. Fortunately, this doesn’t mean you’ll have a low credit score for seven years, though. There are ways you can counteract the negative information:
- Pay your bills on time
- Don’t overextend your credit lines
- Avoid opening new credit lines
- Don’t close old credit card accounts
If you have defaulted loans or accounts that went to collections, you must pay up on those debts. Make a payment arrangement with the creditor and keep the payments current. Once paid up, your credit score may slowly start to increase. Just like late payments, though, collections and judgments stay on your credit report for up to seven years.
You may not be able to increase your credit score overnight, but with consistent effort, you can increase it. Pull your free credit report and determine where your credit history needs help. Put a plan together and follow through on it to see the fastest increase in your score.