There is no "quick fix" to credit, but the sooner you begin work on your credit score, the better. It can take several months or even years to build or rebuild an excellent credit score, especially if you've made some serious mistakes in the recent past.
But there are some things you can do to improve your credit score that can have a positive impact more quickly.
What Factors Affect Your Credit Score?
Your FICO® Score☉ is influenced by 5 factors in your relationship with your creditors. Understanding each one and how much they impact your score can help you prioritize your efforts to improve your credit history.
· Payment history: The most important element, your payment history makes up 35% of your FICO® Score. Paying on time every month is crucial to maintaining a positive payment history. If you miss just one payment by 30 days or more, it could drop your score significantly.
· Amounts owed: The total amount you owe is a factor in your credit score, but this component focuses more on your credit utilization ratio than anything else. Your utilization ratio is the percentage of your available credit on credit cards and other revolving accounts that you're using at a given time. The lower your balances compared with your credit limits, the better it is for your credit score. This factor also considers how close you are to paying off your loans. Amounts owed makeup 30% of your FICO® Score.
· Length of credit history: The FICO® Score model considers how long you've been using credit, as well as the average age of your credit accounts. Opening multiple credit accounts in a short period can significantly decrease the average age of your accounts, so it's best to apply for new credit only when you need it. This factor makes up 15% of your score.
· Credit mix: Having different types of credit on your credit reports shows a broader capability of managing your debts. For example, having a credit card, an auto loan, student loans, and a mortgage can be better than just having credit cards. However, you should avoid applying for new credit simply to bolster your credit mix. Your credit mix makes up 10% of your FICO® Score.
· New credit: The last 10% of your FICO® Score is determined by new credit accounts. Virtually every time you apply for credit, the lender will check your credit based on one or more of your credit reports. When this occurs, the credit report will record what's called a hard inquiry, which may cause your credit score to dip slightly for a short time. However, if you apply for multiple credit accounts in a short period, it could have a negative compounding effect.
Is There a "Quick Fix" to Repairing Credit?
Unfortunately, there's no way to improve your credit overnight. In some cases, credit repair companies may advertise fast results, but they can't do anything about your credit score that you can't do for yourself.
Credit repair companies often promise that they can improve your credit score by disputing information on your credit reports for a fee. If negative information is legitimate, disputing it won't cause it to be removed.
In general, it's best to develop good credit habits and use them to build your credit history. Go over your credit report and the credit score factors above to plan out the steps you can take to improve your credit score now and in the future.
The bottom line about building credit fast
When you’re working to fix your credit, it takes good behavior over time. However, lowering your utilization rate by paying down existing debt, getting a new credit card, or requesting a credit line increase on an existing card can provide the quickest credit score boost.
Any late payments and debts sent to the collection should be handled promptly — otherwise, they’ll just cause more pain once they hit your credit reports. It’s also wise to review your credit reports on a regular basis. in order to spot errors that might be dragging down your credit score.
Knowing what actions to take that can help improve your credit score and being a responsible borrower can boost your chances of increasing your credit score by 100 points or even more.
Comments