The higher your credit score, the better your chances of obtaining a loan, and the better your rates and terms. Here, Bankrate offers four tips for improving your credit score quickly so you can get the loan you need.
1. Check for errors on your credit report
If you have a low credit score and you’ve paid your bills on time and never had any issues with lenders or credit card companies, you might have a mistake on your credit report. You’re allowed to review your credit report for free once a year with each of the three credit reporting bureaus—Equifax, Experian and TransUnion. You can get access to your free credit reports by visiting AnnualCreditReport.
2. Begin paying on time
Sometimes, a low score could be a result of your payment habits. Your payment history has a big effect on your score. According to the Fair Isaac Corp., which calculates the FICO score, payment history makes up 35 percent of your score. If you aren’t already in the habit of paying your debts on time, doing so can improve your credit score quickly.
3. Keep balances low
The amount you owe comprises 30 percent of your FICO score. The less you owe compared with what you could borrow, the higher your score. Try paying off your balances before the closing date of your credit card statement. If you charge $1,000 to a single card during a month, but pay the balance in full before the statement period ends, the credit card will report that you owe nothing, making it look like you’re not using your credit at all. Even if you can’t pay the entire balance off before the statement closing date, try to keep the amount you charge less than 30 percent of the amount of credit available.
4. Be cautious about new credit
Your credit score drops a bit every time you open a new credit card or other account. So, one way to improve your credit score fast is to be wary of opening new accounts or cards. The one exception to this is if you don’t have much of a credit history and need a credit card to get started. In some cases, opening a new account can help improve your credit mix, raising your score in the long run. Also be careful about closing credit cards you’ve paid off because it can lower your credit score. Closing a card causes your available credit to drop, reducing your borrowing power.
