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Why Your Credit Score Matters

For better or for worse, your credit score is one of the most important numbers in your life. Not only will your credit score determine whether you will be able to access credit (or even buy a home), it will also affect the interest rates you pay for any loans you might need to take out.

If you are planning on taking out any loans in the near future—a mortgage, a new credit card, an auto loan, a personal loan, etc.—it’ll be a good idea to check your credit score. Keeping an eye on your credit score will help make it easier to identify the kind of loans that are within reach.

As you may have already discovered, your credit score can often change very quickly. Missing a single payment, going over your credit limit, or getting taken to a collections can cause your score to drop quite quickly.

Luckily, there are also quite a few things you can do to help your credit score go back up. If you are hoping to quickly raise your credit score, consider any of these following options:

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1. Pay Down Your Current Balances

 

Utilization Ratio

One of the most important thing lenders will consider is your current credit utilization ratio. In other words, of the money you are allowed to borrow, how much of it is currently being borrowed? Ideally, you will want your credit utilization to be 30 percent or less. If you want to see your scores jump up quickly, then you should do everything you can to pay these balances down.

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2. Expand Your Current Credit Limits

 

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Increase Credit Limit

Keeping the importance of credit utilization in mind, lenders would much rather lend to someone that is borrowing $3,000 out of a possible $10,000 than lend to someone borrowing $2,000 out of a possible $2,000. Though the first person is technically deeper in debt, they have a lot more credit available to work with. Increasing your credit limit will improve your utilization ratio, even if you have no plans to actually borrow more.


3. Continue Making Payments

 

Get Ahead

Making monthly payments for existing accounts will help gradually increase your credit score. But missing even just one payment can cause your score to significantly drop. The best way to get a good credit score is to ensure that all of your balances are completely current. You might even want to try getting a little bit ahead. If you have recently missed a payment and saw your scores drop as a result, consider calling your creditor and asking them to stop reporting that lay payment to the bureaus (the worst they can do is say no).

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4. Dispute Any Errors

 

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Mistakes Happen

It is not uncommon for errors to appear on your credit report—the system is certainly far from perfect. If there are any errors that appear, you have the right to dispute them. Common errors you might encounter include incorrectly marked missed payments, outdated credit information, and credit fraud. Disputing these errors can be a bit of a pain but you’d be surprised just how often these disputes actually succeed.

 

5. Address All Collection Accounts

 

Address Collections

There are many reasons you might have been taken to collections and some of these reasons are not your fault. Regardless, if there is a collection currently affecting your credit score, it is much better to address it than ignore it. In many cases, paying off your remaining debts will help you get them removed from your report. You might also be able to ask for a full deletion, depending on the nature of the collection.

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6. Get Credit for Other Payments

 

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Rent and Utility

 One of the most common criticisms of the credit score system is that it tends to overlook rent and utility payments—that is, until recently. If you have made your utility and rent payments on time, consider using a rent reporting service to help boost your credit score. Having a more extensive payment history will undoubtedly make you more appealing to potential creditors.

 

7. Consider Using a Secured Loan

 

Collateral

If you are willing to offer collateral—such as your car title or home—you can often qualify for loan amounts that would have otherwise been out of reach. These sorts of loans, called secured loans, are among the easiest to qualify for. Over time, continuing to pay off this loan will help improve your score; just be sure to continue making each of your payments in full and on time.

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8. Contact Each Credit Bureau

 

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Big Three

There are currently three main credit bureaus in the United States: Equifax, Experian, and TransUnion. Though the data each of these bureaus use will usually be pretty similar, there is still sometimes a surprising amount of variation between them (this is why your score will often drop with one bureau but not the others). If there is a current account you are paying off that isn’t being reported, consider contacting each of the bureaus directly and seeing if it can get added to your report

Conclusion

There isn’t always a “magic button” that will improve your credit score overnight. However, no matter how bad your credit score might currently be, there will almost always be some actions you can take to begin building it in a positive direction. If you are currently looking to bolster your credit score, be sure to keep these important tips in mind.

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