How Do I Fix My Credit Score as Quickly as Possible?
Depending on the actions you take, you can actually improve your score in weeks or months -- as opposed to years. If somebody tells you it took them years to fix their credit, it's probably because they didn't try very hard. If you take the right approach, you can boost your score quickly. Here's how to go about it.
The key here is to focus on the things that matter the most. By learning which factors affect your score the most, and by focusing your energy on those areas, you can fix your credit quickly indeed.
With that in mind, let's talk about the different things that influence your FICO score (the one most frequently used by lenders). As you can see by the scoring chart below, there are several categories of data that determine your overall credit score. This data comes directly from your credit reports that are maintained by the three reporting agencies.
So let's at each slice of the "pie," one item at a time. And let's start with biggest chunk first, the 35% that's shown in blue.
Payment History -- This category refers to your history of making payments, and it influences your FICO score more than any other single item. So if you want to fix your credit quickly (which is the whole point of this lesson), you need to understand this concept. Your payment history includes just about every type of bill you can think of -- credit cards, mortgage payments, student loan payments, etc. If you get behind on these payments (and it's reported to the credit agencies), then it's going to hurt your credit score. So pay all of your bills on time!
Also in this category are matters of public record, such as bankruptcy filings, garnished wages, and other types of legal judgments. These things can also have a major impact on your score.
Amounts Owed -- This category reflects the amount of your available credit that you are currently using. It takes into account all lines of credit that you currently hold. You'll often hear the term "utilization ratio" used to describe this, which is simply a ratio between the amount of credit you have and how much you are utilizing.
Within this context, a lower percentage is better. If you are using 90% of your available limit (i.e., you are nearly maxed out on credit), it shows that you cannot manage your finances properly and rely too much on credit. This will have a negative impact on your FICO score. On the contrary, if you are only using a small percentage of your available credit line, it shows that you are a responsible credit user. This will help to improve your score.
So let's get back to the idea of fixing your credit as quickly as possible. If you put together what we have learned so far, you can see it makes a lot of sense to (A) pay your bills on time and (B) keep your credit balances low. These two things combined will help you fix your score quickly and considerably.
Length of Credit History -- This is the last piece of the pie I'm going to discuss. Now that you understand the basic concept, you can research the other factors on your own. This category simply refers to the length of time you've had credit accounts open. A longer, more stable credit history helps you maintain a good score.
A lot of people think they can improve their FICO score quickly just by closing some of their credit accounts. But that's not always the case. In fact, you can actually hurt your score by closing accounts, especially is you cancel the oldest one you have on record. For example, if you got a credit card when you first turned 18, and you are now 30, then that particular account (if left open) will give you a 12-year credit history ... give or take. But if you were to close that account, and the next-oldest one was only six or seven years old, you would basically be shortening your overall credit history. This can hurt your score.
Lastly, I'd like to stress the importance of reviewing your credit reports once a year. This will help you spot errors, such as accounts that aren't yours, duplicate entry items, and other inaccuracies. These things can drag your score down lower than where it should be. Here are some tips on reading your reports.
You asked how to fix your credit score as quickly as possible, and now you are armed and ready to do just that. Take the information I've given you and put it into practice. You should start seeing dramatic improvements in a matter of weeks.
Related questions:
I hope this helps you out some. Good luck, and happy holidays.
Labels: scores
posted by Brandon at
3:10 PM
