Your credit score is among the crucial measures of your financial well-being. The score tells lenders if you use your credit responsibly. If you have a better credit score, you have a high chance of being approved for new loans. Lenders will also offer low-interest rates. However, a low credit score will affect your access to loans and low-interest rates. Fortunately, you can do a few things to improve your credit. Although the process will take some effort, it will get you a better credit score. Read on to discover five ways to repair your credit score quickly.
- Build Your Credit File. The first step to improving your credit score is to open new accounts that will be reported to the major credit bureaus. You cannot build an excellent track record unless there are accounts in your name. These accounts include credit-builder loans for those with low scores and rewards credit cards if you want to improve an established good score. If you have no credit, you can start by getting a credit report from a bureau. If your friend or relative has a credit card with a high credit limit and a good history, ask them to add you as an authorized user. This will add that account to your credit report, and it will help your utilization. The authorized user status will allow you to benefit from the primary user’s positive payment history.
- Pay Your Bills on Time. No strategy to improve your credit score will work if you pay your bills late. Late payments can stay on your credit report for seven years. If you miss your payment, ensure that you call your lender and ask them not to report the missed payment. However, ensure you are current with the account. Your record of paying bills on time is the most significant scoring factor in FICO and VantageScore credit scoring systems. The rate at which this strategy works depends on how many payments you have missed and how late the payment was. Fortunately, the impact of late payment fades with time if you begin making punctual payments.
- Dispute Credit Report Errors. Any mistake on your credit report can pull down your score. Fortunately, disputing these credit errors will quickly improve your credit. The three primary credit bureaus will give you a credit report for free. Check the report for mistakes like payments marked late when you paid on time, another person’s credit activity mixed with yours, or old negative information. Dispute these errors once you have identified them. The only downside with this process is that it will take more effort to file the dispute and track the follow-up. However, it is worthwhile, especially if you want to improve your credit and apply for a large loan. The credit bureaus take about 30 days to investigate and respond, but you can work with a credit repair company to speed up the process.
- Deal With Collections Accounts. Ensure you pay off your collections account to prevent lenders from suing you over the debt. You will also be able to pursue the collection agency to stop reporting the debt once you have paid it. Ensure you check your credit report for old collections accounts and have them removed. A collections account is a significant negative mark on your credit report. The effect on your credit report depends on the scoring model used to create your score. However, it could help if your collector agrees to stop reporting the debt. Credit score models that ignore paid collection will benefit your credit score quickly. However, other strategies like disputing a collection account or asking for a goodwill deletion may take time.
- Use a Secured Credit Card. Another effective way to improve your credit score is to use a secure credit card. A cash deposit backs a secured credit card. You will pay it upfront, and the deposit amount is the same as your credit limit. You will use it like any other credit card, and your on-time payments will help build your credit score. However, this strategy is most likely to help someone new to credit or with dented credit who wants to add a more positive credit history and dilute past mistakes. The goal is not to have another card but to build a positive record of keeping balances low and paying on time.
Nothing beats the importance of having a good credit score. Improving it may take some time, but the sooner you begin working on your credit score, the sooner you will see results.
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