6 Tricks to Boost Your Credit Score Quickly & Legally
We’ve all heard the term “credit score” but many people aren’t clear on how it is determined and the factors that impact it. The housing market is so hot right now and competition is so steep, get ahead of the crowd by using these 6 tips to increase your credit score and mortgage rate possibilities.
Step 1: Pay Down Your Balance
This step seems like common sense but many people don’t realize that your credit utilization (or the amount you can borrow versus the amount of debt are carrying) accounts for 30% of your credit score. That being said, it is a very important step.
“The easiest way to optimize your utilization is to use a credit card and pay your balance down to 1% of your credit limit right before your bank reports to the credit bureaus,” says Liran Amrany, founder and CEO of Debitize, a financial technology company that automates better money and credit habits.
“You want to have positive utilization so it’s clear you are using the card, but otherwise want to be as low as possible.” A good trick is to call your creditor to see when they will be reporting or you can check your credit report and ensure that you pay before the date last reported.
Estimated time for improvement: One month
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Step 2: Get Your Bills Current
Paying your bills on time is the most important factor in a credit score. You goal should be to go from paying one or two bills late each month to paying all on time. I am sure you are thinking. “easier said than done,” but this should be a priority for you as it can show improvement to your credit score in one to two months.
Remember if you are less than 30 days late and have money to make a payment, do it. This can help your credit score as creditors typically don’t report until after the 30 day mark.
Estimated time for improvement: One to two months
Step 3: Open a New Account
This can help is two ways.
Firstly, opening up a new card, should increase your total outstanding credit line, which should improve your utilization.
Secondly, opening another type of credit car or small loan can help your “credit mix.” Credit mix is a term used by the bureaus to indicate whether a person can handle different kinds of accounts.
This strategy is beneficial but don’t go crazy. Start with one new account. If you continually apply for “store cards” to get discounts on purchases, you’ll take a hit on the number of recent inquiries, which won’t look good. Remember that every time you open an account and ask for credit, a credit score is run.
Estimated time for improvement: One to six weeks, based on processing and reporting your new account.
Step 4: Become an Authorized User
If you have a responsible partner or family member, that will allow you to be an authorized user of one of their accounts, you can piggyback onto their good credit history.
“The full history of the other account shows up on your credit report immediately,” Gallegos says. “And when this older, established credit account is added to your credit history, it results in an increase in the average age of accounts you’ve ‘managed’ (which also increases your credit score).”
Be careful though, piggybacking on to their credit means that you are attached to their credit, whether good or bad.
Estimated time for improvement: Immediately
Step 5: Don’t Bother with Additional Payment Histories
A common credit-boosting myth says you can add to your credit history (and improve your score) by calling your other providers—like your wireless provider or utility company—and asking them to report your payment history to your credit report.
Unfortunately, “Each of the major credit-reporting agencies is making some changes to include more bill payments, albeit slowly. In general, though, most of the time, these types of payments only appear on credit reports when they are delinquent,” Gallegos says.
So, that one probably won’t work in your favor, but following the previous four steps will help. Up next: Home Ownership!!
Step 6: Bonus Step
Call the Schreder Brothers Real Estate Group to ensure you have the dedicated, experienced, knowledgeable Realtors® you need to help you conquer the ever-changing real estate market!
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