Are you looking to buy or refinance your existing home at attractive rates? Perhaps you are in need of a new family car? How about taking advantage of some of those zero interest promotions for your home appliance purchase? If any of these things are something you are planning in 2021, you’re probably going to need a loan.
Your Credit Score is a determining factor in qualifying for a loan or getting an excellent competitive interest rate. If your credit score is less than ideal or you’re only looking to improve it, you’ll want to read this article as we review the 5 Ways to Raise your Credit Score 100 Points Quickly.
Understand How Your Credit Score Works
Before we jump into what methods you can employ to raise your credit score, it’s essential to understand how it works and what factors play a role in increasing or decreasing your score.
Image Courtesy of MyBankTracker
As the graph above shows, the five major factors: Payment History, Amount Owed, Length of Credit History, and Types of Credit Used, are weighted differently and have different time impacts. Per Experian, the following items are the factors that impact your credit score:
- Payment History. Payment history is the most important ingredient in credit scoring; if you’ve missed a payment, it can have an impact on your score. Lenders want to see that you are paying off your debt on time when they are considering you for new credit. Payment history accounts for 35% of your score.
- Amounts Owed. Your credit usage, mainly as represented by your credit utilization ratio, is the next most crucial factor in your credit scores. Using your credit cards and other credit accounts plays a part in your score. The lower the ratio (Usage vs. Available), the better the score. Using more than 30% of your available credit is a negative to creditors. Credit utilization accounts for 30% of your score.
- Credit History Length. How long you’ve held credit accounts makes up 15% of your score. This includes your oldest credit account, the age of your newest credit account, and the average age of all your accounts. Generally, the longer your credit history, the higher your credit scores.
- Credit Mix. Having a diverse portfolio of credit accounts, including a car loan, credit card, student loan, mortgage, etc., demonstrates responsible credit usage to a lender. Credit mix accounts for 10% of your score.
- New credit. The number of credit accounts you’ve recently opened, as well as the number of hard inquiries lenders, make when you apply for credit, accounts for 10% of your score. If you have too many hard inquiries in a short amount of time, this could harm your score.
5 Ways to Raise Your Credit Score Quickly
First, let’s answer the most obvious question: Will these steps raise my credit score 100 points overnight? The short answer is no. Nothing will happen overnight.
But if you follow these steps, you can certainly raise your credit score over 100 points within 30-60 days (this all depends on your current credit profile). If you are in the process of credit restoration or are sitting on a 740 credit score, using these methods will undoubtedly lead to a significant boost to your credit score.
Sign up for Experian Boost
As one of the three big credit bureaus, Experian has the most secure, user-friendly interfaces that make reading your credit report very easy. They also offer a service called Experian Boost. By activating Experian Boost, your credit score can increase instantly by factoring your everyday bills into your score. This includes your cell phone, utility bills, and even your Netflix subscription!
To sign up for Experian and learn more about Experian Boost, click here.
Pay Off Your Credit Cards Now!
We get it. Paying with a credit card is very easy and affords you the ability to pay off something over time if you don’t have the money to pay for it today. However, your credit utilization accounts for 30% of your score.
If your utilization is over 30%, then you are at risk of a lower score. By paying off your credit cards and keeping your utilization low, within 30-60 days, you could see anywhere between a 20-60 point jump.
Part of Experian’s service includes a Score Simulator that gives you the ability to see what your score could be by paying off your credit card debt. Regardless if you are in the process of credit restoration or have a 740 credit score, this one act will quickly boost your overall score.
Pay Your Bills on Time
While this may seem obvious, paying your bills on time plays a significant role in raising your credit score. As previously mentioned, Payment History accounts for the largest percentage of your overall credit score (35%).
Making your monthly payments demonstrates to the lenders that you are responsibly paying all your debts on time. While this does take time to build, you could see improvement in just a few months.
Even if you can’t pay your entire credit card bill (see above why that helps), try and pay more than the minimum payment. This could help with raising your score.
Another tool included in Experian’s service is the Score Planner. Experian uses your credit profile and creates a customized Action Plan to help increase your score based on your time frame. This tool is helpful if you’re looking to raise your credit score by a specific time frame.
Dispute Credit Report Errors
Another fast way to increase your credit score is by disputing errors on your report. Take 10 minutes and go through your credit report. These days, reading a credit report is much easier than in the past.
Review your accounts. If there is any delinquent reporting on your account that shouldn’t be there, immediately dispute it, and if you can provide proof why it shouldn’t be there. Credit companies have 30 days to investigate and resolve the issue.
Once removed, watch how fast your score will increase. For those in credit restoration, this is even more important as removing adverse reports helps improve your score faster.
Leave Your Accounts Open
It may sound silly, but closing your credit card account after you’ve paid it off may hurt your credit score. Leave it open, and don’t use it.
Credit History accounts for 10% of your overall score. The longer you have the account, the better your overall score will be. By closing the account, you’ve effectively capped the credit history on that account.
Final Thoughts – 5 Ways to Raise your Credit Score 100 Points Quickly
Keeping constant tabs on your credit score is essential for improving your credit score quickly. This means checking your report every month, executing a plan of action, and being disciplined on paying off your debts. Using Experian’s tools will provide insight and layout a strategy to help you accomplish your financial goals.