How to Raise Your Credit Score Before 2016
As 2016 approaches, are you realizing that your credit score is lower than you'd like? Perhaps you have plans to buy a house, purchase a car or get a new credit card in 2016, but your credit score is holding you back. If so, it's time to figure out how to raise your credit score before the New Year approaches.
How to Improve Your Credit Score in Just a Few Months
Increasing your credit score takes time and won't happen overnight -- but it might not take as long as you think. In fact, it could take only 30 to 60 days to see some improvement, Forbes reports. Be patient and follow these steps as you work on improving your credit score.
1. Become an authorized user. "One of the quickest ways to improve your credit score is to be added as an authorized user to credit cards of your family members -- or possibly friends -- who have a stellar score," said David Bakke, a financial expert with Money Crashers. "You should ask to be added to the cards with the longest credit history, the highest spending limits and those with no late payment history in order to have the most optimal effect."
If you can be added to more than one credit card, this can speed up the credit score improvement process as well, Bakke added. He said you could expect to see a change in your score in about 90 days using this method. I was able to add myself as an authorized user to a family member's credit card, and my score improved in about 90 days.
2. Keep your revolving balance low. Make payments frequently on your credit cards in order to keep your revolving line of credit and balance low. If you can keep your credit utilization as low as 30 percent, or even at 10 percent or lower, you can protect your credit score. In order to know what percent that is, first look at your statement to see what your current credit limit is. If your limit is only $500, this means you would make payments frequently enough to keep your balance between $50 and $150.
If you still want to use your credit cards frequently while trying to raise your credit score, you don't have to stop using them -- just double or triple up your payments each month. Instead of making one large payment each month, make several smaller payments to keep that balance as low as possible.
3. Pay down your most maxed-out balance first. Your FICO score looks at your overall debt-to-credit ratio and also your individual debt-to-credit ratios when calculating your credit score on credit cards, said Linda P. Jones, a personal finance expert. "Rather than go along with the 'debt snowball' of paying off your smallest balances first, consider paying your most maxed-out balance down to 50 percent first," she said.
Imagine you have two cards with the following balances:
- $3,000 out of $10,000, or a 30 percent debt-to-credit ratio
- $9,000 out of $10,000, or a 90 percent debt-to-credit ratio
While Jones doesn't know exactly how many points this formula will change a FICO score, she says it is an effective method for improving a FICO score quickly.
4. Pay every bill on time. You're already adding in some extra payments each month to keep your revolving credit balance as low as possible, but if you really want to take it one step further, pay every debt on time to avoid late payments. The bulk of your credit score, 35 percent, is derived from your payment history. If the payments are made on time and in full, it could have a positive impact on your credit score.
5. Check for and correct any errors on your credit report. When you check your credit report, make sure it's accurate. This is vital to raise your credit score quickly. Many consumers find errors on their credit reports, from misspelled names and wrong addresses to credit cards they never even opened. Don't let an error bring your score down; correct it immediately.
When examining your report, also make sure your bank or lending institution names, opening and closing dates, and credit limits are accurate. And keep an eye out for fraudulent accounts that are listed under your name.
6. Make small purchases on a secured credit card. Another tactic that can raise your credit score is taking out a secured credit card and making small charges on the card that you know you can pay off on time, said Bakke. This should boost your credit score within a short period of time. Bakke said he has personally seen this tactic yield an improved score right around the three-month mark.
7. Utilize a 'rapid rescore' to boost your score quickly. If you're trying to raise your credit score because you're seeking approval on a mortgage loan, you might want to take advantage of what is known as "rapid rescore," said Bakke. This process quickly updates a credit history with the intent of creating a new and more relevant credit history.
"Using a rapid rescore can help get errors on your credit report taken off faster," said Bakke. "Or if you recently paid off a decent chunk of your credit card debts, your credit profile will be updated in a shorter period of time than normal. There is usually a fee, however, in order to receive this service."
According to Bakke, you can expect this tactic to take at least two to three months to reflect a change in your credit score.
8. Limit your hard credit inquiries. While that big life event in 2016 might be prompting you to raise your credit score now, try to limit your number of credit inquiries right now. Credit inquiries commonly occur when you apply for a new apartment and the landlord checks your financial history, or when you apply for an auto loan or mortgage. You might be eager to hear if you qualify for more credit, but be patient. Your credit score takes a hit with every hard inquiry.
Don't waste any more time. If your credit score is lower than you would like, start to implement these steps today so you can start seeing an improvement in your credit score within the next couple of months.
This story, How to Raise Your Credit Score Before 2016, originally appeared on GOBankingRates.com.