Simple, actionable steps that you can take to improve your credit score in a month's time.
Having good credit can benefit you in so many ways and open up many financial opportunities for you. There are 6 primary factors that make up your FICO score. 1) Payment history 2) Credit utilization 3) Credit age 4) Credit mix 5) New credit (inquiries) 6) Derogatory marks. If you can manage and control these 6 factors from getting out of hand over time, then you will eventually reach the 7/800 club by default.
In order to help get these 6 factors under control, I've listed 5 things that you can do right now to start improving your credit score in the next 30 days.
#1 - Get added as an authorized user
An authorized user is someone who is added to another person's credit card account by its owner, called the primary cardholder. The authorized user can make purchases with the card, but the primary cardholder is responsible for paying it off.
This can help improve your credit because as long as the primary cardholder has excellent payment history on the card, low utilization, decent age and other positive factors, then all of that positive data will be reflected onto your credit report and ultimately increase your score.
Be careful of adding too many authorized accounts to your report. Piggybacking is not looked at positively by lenders. You most likely want to also get added to a card that is owned by a close relative as opposed to someone not related to you if you can help it.
Also, if the primary cardholder is late, misses a payment, carries a high utilization ration that month or has any other negative occurrences happen under the card that you are an authorized user for, then that negative information and data will likewise impact your credit score as will, albeit in a negative way.
#2 - Pay down high credit card balances
Carrying high balances on your credit cards raises your credit utilization ration (which makes up about 30 % of your overall FICO scores). By paying down any high credit card balances to less than 10% of the limits on the cards, then this will help to lower that utilization ratio and in turn, increase your credit score.
Of course, you can continue to make minimum payments, but this is how the balance can continue to add up and you end up paying a lot in interest over time.
The three best ways to pay off credit card debt is 1) Debt consolidation 2) Debt snowball method or 3) Debt avalanche method.
With debt consolidation, you take a new loan (at a lower interest rate) and use it to pay off the credit card debt. Then all you have to do is pay off the new loan.
With the debt snowball method, you pay off the card with the smallest balance first then move to the card with the next smallest balance and so forth until you have paid off all of the credit cards.
With the debt avalanche method, you make the biggest payments to the card with the highest interest rate.
"Don't let credit card debt carry over. You can't get ahead paying eighteen." – SEO specialist
#3 - Ask for a credit limit increase
Most lenders will extend you a limit increase on your credit cards if you either request one or show good financial responsibility with the card over time. What this does is help to lower your credit utilization ratio. Again, which makes up 30% of your overall FICO score. This is because when your limit increases, the average amount of debt that you carry in turn decreases as a result.
#4 - Dispute errors on your credit report
If you have late payments, charge offs, collections, repos, medical debt, bankruptcy, hard inquiries or any other type of negative accounts on your credit report, you may be able to get them removed by disputing any inaccurate data that you find reporting on those accounts.
In the case of late payments, you may even be able to get them updated to positive or have the account removed entirely. in the case of hard inquiries, you only want to dispute those that are not connected to open accounts.
To learn more about how to dispute and remove these types of accounts from your credit report, click here to access my eBooks and courses.
#5 - Add new primary tradelines
In order to build credit, you must have credit. This is because you need to build credit history over time. So, if you don't have a good enough mix of credit types (credit cards and loans), then you won't see your score increase that much over time.
There are credit cards and loans that you can apply for that will not affect your credit by doing a hard pull. These are called credit builder loans and secured credit cards (there are also no credit check credit cards too, like the OpenSky credit card).
There is no specific amount of credit cards or loans that you should have. It's all about what you can manage and afford within your budget.
The 30-Day Challenge
I challenge those of you that read this article to utilize a few of these methods to help boost your score over the next 30 days and let us know how things turn out. You can also leave a comment on this post.