You most likely have a credit score if you’ve ever borrowed money from a bank or financial institution. Your credit score, also commonly called the FICO score, falls within the range of 300 and 850 and provides insights into your creditworthiness. A good credit score is 670 or higher, and the average credit score in the U.S. is presently 714. That good credit score can give you access to lower interest rates on loans and credit cards, higher borrowing limits, and more general borrowing flexibility. If your score is below the average, particularly at 669 or below, you are considered to have a low credit score and should take the steps to improve it.
Suppose you want to borrow money for debt consolidation, fund a dream vacation, or tackle that home improvement renovation. In that case, consider a personal loan or installment loan to help you fund the expense. But if your credit score is low, you'll likely be subject to higher interest rates and unfavorable terms. So, if you can hold off on making that investment for a while, there are things you can do to improve your credit score fast and help you get better loan terms later.
Check out these tips to help you improve your credit score fast.
A secured credit card is a great way to build your credit score because it requires you to put down a deposit, which acts as collateral. You can use the card to make purchases and then pay off the balance each month to show that you are responsible with your credit. Provided you make your payments on time every month (and don’t default or miss payments on any of your other financial obligations), your credit score can experience an improvement over six months to one year.
If you have a friend or family member with good credit, ask them to add you as an authorized user on their credit card. This can help you build credit without taking on any debt. And, this is a great way for you to benefit from the credit history and good habits of someone with good credit. Before doing this, however, ensure that you can fulfill your end of the deal and cover your share of the expenses related to using the card.
Your credit utilization represents 30% of your overall credit score. Utilization refers to the total of your credit balances compared to your total credit lines. Keep your credit utilization low by only using a small percentage of your available credit. You should use no more than 30% of your available credit to help your credit score.
If you have a credit card with a low credit limit, consider asking the issuer to increase it. This can help improve your credit utilization ratio and, in turn, your credit score. However, understand that it may be tempting to use that newly available credit once your higher credit limit is approved, especially if you are holding off on an investment while taking the time to improve your credit score. Use this credit wisely.
Credit-builder loans benefit those with a credit score in the poor range between 300 and 579. They are usually for relatively small amounts, generally $1,000 or less, typically repaid within six to 24 months. These loans are designed to help borrowers build or improve their credit scores, and work by setting aside the borrowed money in a secure savings account or CD while the borrower makes regular payments with interest. As the borrower makes these payments, the lender reports the activity to the major credit bureaus, helping to establish a positive credit history. Once the loan is paid off, the borrower receives the funds that were previously held in the secure account.
One of the most obvious but often overlooked ways to build and improve your credit is to pay off any debts that you already have. Not only does it help your payment history (which represents 35% of your credit score), but it can also reduce your credit utilization ratio. There are two common approaches to paying off your debt: the snowball and the avalanche approach.
With either approach to pay off your debt, don’t forget to make the minimum monthly payments on your other debts too. Missing a payment and not making it up within 30 days can cause your credit score to plummet by as much as 180 points.
This is one of the most important things you can do to build your credit score. Make sure to pay all of your bills on time, including credit card payments, loan payments, and utility bills. As mentioned above, late payments can hurt your credit score.
Although most creditors report to the credit bureaus, not all monthly payments are reported, such as rent payments which credit bureaus do not automatically collect. However, some landlords report rent payments which can be included in your credit report and improve your credit score. Another option is to use a credit card to pay rent or sign up for services like Experian Boost, which recognizes timely payment of monthly utility, cell phone, and streaming service bills, including Netflix, HBO, Hulu, Disney+, and Starz and adds them to your credit report.
The Fair and Accurate Credit Transactions Act (FACTA), passed in 2003, made it so that all consumers in the U.S. can get free access to their credit report once a year. Consumers can access their credit report at annualcreditreport.com and check it for errors. If an error is found, it should be disputed right away with the applicable credit bureau.
If you're struggling with debt and can’t seem to master your finances, or need help creating a family budget, you might need to work with a credit counselor. Non-profit credit counseling organizations typically have certified and trained counselors who specialize in consumer credit, debt management, and budgeting and will work with you to assess your financial situation and develop a customized plan to resolve your money problems. These organizations offer various services such as financial advice, assistance with budgeting, obtaining your credit report and scores, educational materials and workshops, and even debt management plans designed to help you pay off your debts.
We recommend setting a SMART goal to help achieve a credit score in the good range (between 670 and 739), though of course, the higher the better. By following one or more of the above approaches, your credit score should begin to improve. Remember that the most important thing you can do to improve your credit score is to pay your bills on time. Missing even one payment that causes a lender to report it to the credit bureau can send that credit score spiraling in the wrong direction.
*The content on this page provides general consumer information or tips. It is not financial advice or guidance. Each person’s circumstances are unique. The Cash Store may update this information periodically. This information may also include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs
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