How To Quickly Increase Credit Score – Your credit can help pave the way to achieving your dreams, or it can hold you back from achieving those goals. Whether your credit is an asset or a liability for your future depends of course on its performance, and the most common and dominant measure used by almost all lenders and creditors is your credit score. A high credit score gives you access to larger loans at lower interest rates with lower monthly payments and lower upfront costs. Conversely, a low credit score completely closes the door to many loans, while those that remain available are smaller in amount but higher. With a high credit score, you can more easily buy a home or get approved for a car loan or finance a new small business. With a low credit score, you may have to pay extra deposits and fees just to improve yourself and support your family. In it you’ll learn how to build your credit fast and how to boost your credit score fast – including easy steps you can take today to get better credit and raise your credit score as fast as possible. What is a credit score? Before you can learn how to increase your credit score, you should know what a credit score is and how it is calculated. Basically, a credit score is a number that indicates your creditworthiness. Regardless of the scoring model used (more on that later, ), the purpose of metric credit scores is to provide creditors and lenders with the likelihood that a consumer will be 90 days or more in arrears during the next two years. Lenders and creditors therefore use this number to assess the likelihood that you will repay the debt on time. There are two main types of credit scores that most creditors and lenders use: FICO Short for Fair, Isaac and Company, the FICO score is the original and probably the most widely used credit scoring system. FICO scores typically range from 300 to 850 as follows: 800 to 850 – Excellent 740 to 799 – Very Good 670 to 739 – Good 580 to 669 – Fair 300 to 579 – Very Poor Alternative VantageScore Alternative to the FICO scoring system Developed in collaboration with The three major credit reporting bureaus: Equifax, Experian and TransUnion. The latest incarnation of VantageScores ranges from 300 to 850, like FICO scores, but with slightly different scores as follows: 750 to 850 – Excellent 700 to 749 – Good 650 to 699 – Fair 550 to 649 – Poor 300 to 5 Poor There are some differences between the two scoring models. First, you can’t even get a FICO score until you’ve had at least one open credit account for at least six months, as well as activity on that open credit account for the past six months. Conversely, you can get a VantageScore if you have at least one account on at least one credit report, no matter how new or old, no matter how recently it was active. One of the biggest differences between FICO scores and VantageScore is that your FICO score may be slightly different for each of the three bureaus because FICO adjusts its scoring metrics to accommodate differences in each bureau’s database. In contrast, your VantageScore is the same across all three credit bureaus. Therefore, obtaining a FICO score from at least one of the bureaus and your VantageScore can give you a fairly broad view of how lenders and creditors may view your creditworthiness based on which bureau or scoring system they use. Factors That Determine Your Credit Score There are only a few factors that affect your credit score. Learning what these factors are and how they affect your credit score can help you more effectively target areas where you can get the best results with the least amount of effort. While different credit scoring systems rate and evaluate each of these factors slightly differently, all of the factors they use to calculate your credit score are based on your credit history, as follows: Payment history – have you made your payments on time or late? If you are late with your payments, how late and how often? Do you have bills in collection? Have you ever defaulted or declared bankruptcy? It shows your level of consistency in staying responsible for your debts. Length of credit – how long has it been since you opened your oldest line of credit? This indicates your level of experience in managing credit accounts. Credit usage – how much available credit are you currently using? This is expressed in a number of ways, including as your total debt balances and as a percentage of your available credit, known as your credit utilization rate. The more you owe compared to your income and the more you use available credit at any given time, the less likely you are to take on new debt. Account Diversification – Are all your credit accounts credit cards, or do you also have other types of debt, such as car loans or a home mortgage? Having several different types of credit accounts instead of all credit cards means you have more experience managing multiple types of debt effectively at the same time. Recent credit inquiries – have lenders or other creditors recently made inquiries about your creditworthiness, and if so, how much? How recently have you opened new credit accounts? Lenders and creditors want to make sure you don’t try to take on too much debt at once, so they know you’ll be responsible for the credit they give you. Why will my credit score be different in all three bureaus? Although your VantageScore should be the same regardless of bureau, your FICO score may vary depending on which bureau you use to get it. The reason is simple: not all creditors and lenders report uniformly or in the same time frame to each of the three credit bureaus. Therefore, some bureaus may lack certain information or contain information that is missing in other bureaus. Therefore, it is essential to make sure that all three credit bureaus have all the accurate and up-to-date information about your credit history. By checking your credit reports annually and tracking them throughout the year, you can ensure that a change reflected on one report is reflected on all reports, and any inaccurate changes are corrected immediately. How to Monitor Your Credit Score You can monitor your credit score using a credit score monitoring service provided by one of the credit bureaus, FICO or VantageScore yourself or a responsible third-party agency. How long does it take to build a credit score As mentioned earlier, you can get a VantageScore credit score as soon as one of the three credit bureaus learns that you have a first line of credit, and as a result will create a credit report for you. To speed this up, you can always contact each of the three bureaus as soon as you open your first credit account and let them know. Your first FICO score will be available just six months later. 5 Steps to Quickly Build Credit and Improve Your Credit Score Each of the following steps can help you build credit quickly and improve your credit score. Combine more than one to boost your efforts even more. Do each of these steps first as you see fit, then do them in any order. One recommendation is to start with the step that seems easiest so that you can complete it and see results the fastest. This small success can motivate you to take more complex or personally challenging steps for even greater rewards. Step 1 – Get help from a financial advisor There’s nothing better than one-on-one personal guidance from a qualified financial professional to help you navigate the minefield of credit and debt. A professional advisor can help you create a realistic game plan to build your credit and increase your credit score as quickly and efficiently as possible. 121FCU offers free financial advice to all our members. Step 2 – Pay all your bills on time each month. The fastest way to get and maintain excellent credit is to pay all your bills on time each month. If you can pay more than the minimum required, even better. If you can’t pay more than the minimum amount due on all of them, pay more on the one or those with the highest interest first. Then aim to drop one or several
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