“How to fix my credit score!!!” – This is one of the biggest queries in Google search. Whether you are a serviceman or entrepreneur, an investment banker, or a common person, improving your credit score is everyone’s prime concern.
Having good credit is a must to take out a mortgage, credit cards, any personal loan, even insurance. Credit scores are important as they denote your creditworthiness, how much you are trustworthy to get a loan, or something like that. You must let the creditor or lender know how good you are at paying back the money.
#Why did the credit score drop?
There are several reasons that may impact your credit score and make it lower:
- If you have missed any monthly payments on loans or credit cards.
- A piece of incorrect information is listed on your credit report.
- You suddenly closed your old credit account with decent payment history.
- If your credit utilization ratio is too high, such as you use your credit cards for everything to its limit.
- If you have applied for multiple new credit cards or loans.
#How to improve your credit score quickly
You might be thinking about how to fix your credit score because it is much lower than what you have expected. Yes, you can do this with a few simple steps.
Your first step should be to stop panicking. You must avoid asking the lender to check your score and see if it is good enough yet or not. Repeated checks by the lender can be treated as a “hard” inquiry into your credit, and your score may drop by a few points.
However, you don’t need to be stressed about a “soft” inquiry, when you check your credit yourself. You may easily check your credit report as much as you like. You should regularly check your credit report to keep it free of errors.
Here are some important tips to improve your credit score within 6 months that you can try:
Check for errors
The easiest way to fix your credit score is to review your credit report for errors. Credit bureaus may also make mistakes by listing all the items on your credit report accurately. You must ensure that all items such as credit card payment, loan amount, on-time payment status, and others are correctly updated.
If you find an error, contact your credit bureaus and dispute the error. It is worth it to contest and you may save a lot of money in the long run.
Pay off your credit cards on time
Late payments can be listed in your credit report for 7 years. So, you have to deal with this issue first. Paying your bills on time is the most important tip to fix your credit score.
If you have some financial crisis, you just have to pay the minimum balance only. You must remember that the most important component of a FICO credit score is your credit history. So, being regular on your payments can influence 35% of your score.
Beware! Even one late payment can affect your credit score. If you are consecutively doing that, you’re ruining your score.
Minimize your hard inquiries
Every time you jump for a new line of credit, such as loans or credit cards, your credit report might be pulled by lenders or credit card companies. This is called a hard inquiry. Hard inquiries can hurt your credit badly.
If your primary objective is to improve your credit score within 6 months, it’s the best time to minimize the number of hard inquiries.
The less hard inquiries you have, the less effect it will have on your credit score. Multiple inquiries are generally counted as one inquiry for a given period. This may vary depending on the credit scoring model used but is typically from 14 to 45 days.
Keep balancing your credit portfolio
Another great way to fix your credit score within 6 months is to thoughtfully handle your credit accounts. You will mostly have to maintain a few revolving consumer credit accounts such as credit cards, store credit cards, store lines of credit, and fixed loans.
The credit bureaus will focus on credit profiles that are nicely balanced with a good credit mix. The mixed credit accounts in your portfolio may include things like a mortgage, car loan, student loan, and consumer debt. Maintaining such a credit mix and making all the monthly payments on time will be helpful. This way you may improve your credit score in a short period.
Lower your debt ratio
Check credit history length
Credit agencies prefer credit profiles that have a long credit history, particularly accounts that have been open for a longer period and are well managed. Accounts that have more than 10-year credit history are helping your score get better.
Get a copy of your credit report from the major credit bureaus and point out the accounts that have a long history. Use those accounts frequently and pay them on time. This way you can help to improve your credit score. You may also eliminate some of the recent accounts that are no longer required but don’t remove them at a time; otherwise, it may reduce your credit limit instantly
Ask for a higher credit limit
If you want to reduce your credit utilization ratio below 30%, but can’t pay off your debts because of a financial crunch, look out for other ways to fix your credit score.
You may ask your credit card company to increase your credit limit. This way you’ll have more available credit on hand and it’ll boost your score.
Become an authorized user
Ask a family member or friend with a long and good credit record (a person who handles credit cards well and makes on-time payments) to add you to his or her card as an authorized user.
This way you can get the share of his/her good credit score, and you’ll have a longer credit history. The account holder doesn’t have to give you the card or share details at all.
Being an authorized user is best for you if you have little credit experience and want to improve your credit score within a short period.