How to Increase Credit Score: The Easiest and Fastest Way

How to Increase Credit Score: The Easiest and Fastest Way

How to Increase Credit Score: The Easiest and Fastest Way

Are you one of those people who have been struggling with their credit score? Do you want to know how to improve your credit score?

If you answered yes to the questions above, you found the right article.

Increasing your credit score will never be a challenge if you know the pointers and the factors that might affect it.

To help you increase your credit score quickly, here are the three major things that affect your credit score:

1.      Utilization rate

Utilization is about how much limit you have available to you, and how much of that limit you are using. For a single credit card that you use, if you have a $2000 limit, the $200 that you use is 10% of your utilization rate.

Or, if you own two credit cards with a $2000 limit on both of them, and you use $200, 5% utilization. (Because $2000 per card is $4000. And $200 divided by $4000 is 5%.)

You must keep your credit utilization low if you want your credit score to increase dramatically.  An excellent utilization rate is only between 0%-9% while 10%-29% is good, and 30%-49% is already fair.

On the other hand, 50%-47% utilization is already considered very poor. The key on how to improve your credit score is to keep your utilization in the excellent range. You can do this by spending just a small percentage of the total amount of credit that you have.

If you have a $2000 credit limit available, only spend 0-9% of that amount which is $200 or below to keep your utilization rate low.

2.Payment History

One of the most important components of your credit score is your payment history. And it is all about whether or not you pay your bills on time, or whether or not there are any defaults on your credit report.

Your payment history can be broken down into 7 components:

  • Your payment information. That includes your information on different types of accounts (if you have more than one), credit cards, mortgage, installment loans, or any retail account.

  • Any adverse records like bankruptcies, criminal record, etc. can reflect on your payment history.

  • How long it has been since the appearance of any adverse records

  • Late payments and how past the due dates are

  • How many long overdue payments are there on your credit report

  • How many of your accounts are paid

  • How much money or items you owe on accounts that may or may not be paid

Paying your bills on time to avoid late payment reports and any default can help you build your credit score.

3.Derogatory Marks

A derogatory mark on your credit report means that you did not pay your loans as agreed. These are negative marks on your credit report that will last a long time.

And by ‘long-time’ it means, 7-10 years or more. Late payments of bankruptcy records can damage your credit score, even more, if it is partnered with an already low score.

So, how would you raise your credit score instantly?

Now that you have learned what makes up your credit score, it is now the time to consider asking “ how do I boost my credit score overnight?”.

Unfortunately, there are no shortcuts when it comes to increasing your credit score from a low score of 500 to a high score of 720.  It can’t and it will never happen overnight.

As mentioned above, keeping your utilization in the excellent range (0-9%) will create a major impact on your score. Continually doing so for a few months can eventually increase your credit score. 

Making sure that you pay your rent or your credit card on time to avoid default or any derogatory mark to appear on your credit report can also affect your score big time, in a positive way. So make sure you do it!

Aside from the major components that affect your credit score, there are another few more sets of factors that you should consider if you want to dramatically increase your credit score.

1. Your account’s age

The length of time that your account has existed is another thing to consider. The longer the time that it exists, the more credit history it might have. It doesn’t matter if you have a 10-year-old credit card or if you have some other types of credit, what matters most is the average age of your account!

2.The total number of accounts

Most people think that having more than one card is unacceptable which is just another misconception! In fact, having more than one credit card in use is very helpful when it comes to improving your credit score.

Banks would think that if you can manage multiple accounts well, you will be able to manage other loan accounts that you would apply for in the future and it will result in a higher credit score. Applying and using more than one card is not financially necessary but if you have them and you pay for them in full and on time can greatly improve your credit score.

 3.       Inquiries

Inquiries are basically the credit reports that lenders ask from the credit bureaus when you’re applying for a card or for a loan. These inquiries are also being listed on your credit report and might affect your credit score in the near future.

There are two types of inquiries: hard and soft inquiries. Hard inquiries are those requests made by an institution when making a lending decision.

A hard inquiry can possibly lower your score by a few points. So, if you are planning to apply for a new credit card, this is one thing you may want to consider first before doing so.

On the other hand, soft inquiries are those requested for the sake of background checks. It doesn’t usually affect your credit score, so don’t be bothered about it.

There are really no shortcuts or instant ways when it comes to building your credit score. None of these factors and exercises can boost your credit score overnight.

Even so, if you focus on maintaining a low utilization rate, paying your bills on time, avoiding the appearance of any default or derogatory marks on your credit report, can make a huge difference.

If you want to learn more about how to BUILD, IMPROVE or anything ABOUT credit, you can browse through our other blogs to find helpful and informative insights.

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