5 smart ways to do it


There are certain times when it helps to have the highest possible credit score. Maybe you are about to refinance your mortgage, or maybe you are recovering from a bad credit history or want to get a credit card approved. It is always good to have a healthy score, of course. But if you’re in a place where you really need to improve your score as soon as possible, there are a few smart ways you can do to speed up the process.

How to improve your credit score fast

How long will it take to improve your credit score? It won’t happen instantly, but if you follow these steps in this article, your credit score will start to rise in a few months. Let’s get started.

1. Find out when your dealer reports your payment history

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Call your credit card dealer and ask when your statement is reported to the credit bureaus. That day is often the cutoff date (the last day of the billing cycle) for your account. Note that it is different from the “due date” date on your statement. There is something called a “credit employment radius.” It is the amount you have used compared to the amount of credit you have available. You have a radius for the use of all your credit cards and also for each one of them.

It is better to have a ratio (general and individual on the cards) of less than 30%. But here’s a tip: to increase your score faster, keep your credit employment ratio below 10%. Here’s an example of how the radius of employment is calculated: Let’s say you have two credit cards. Card A has a $ 6,000 credit limit and a $ 2,500 balance. Card B has a limit of $ 10,000 and you have a balance of $ 1,000 on it.

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This is your employment radius per card:

Card A = 42% (2,500 / 6,000 = .416, or 42%), which is very high.

Card B = 10% (1,000 / 10,000 = .100, or 10%), which is very good.

This is your general credit employment ratio: 22% (3,500 / 16,000 = 0.218), which is very good.

But there’s a problem: even if you paid your balance every month (and you should), if your payment is received after the reporting date, your balance report could be high. And that negatively impacts your score because your radius appears inflated. So pay before the closing date. That way, your account status report will be low or even zero. This decreases the radius of employment and improves your credit score.

2. Settle a debt strategically

Ok, we used what we just learned about radios. In the example above, you have balances on more than one credit card. Remember that on Card A you have a 42% radius, which is high, and on Card B you have a splendid 10% radius. Since FICO credit also looks at each card ratio, you can improve your credit score by paying off the card with the highest balance. In the example above, pay off Card A at approximately $ 1,500 and your new ratio for Card A will be 25% (1,500 / 6,000 = .25). Better!

3. Pay twice a month

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Let’s say you have a tough financial months. Maybe you need to rebuild your deck (I raise my hand) or you had to buy a new refrigerator. If you put large items on a credit card to get rewards, it can temporarily hit your employment ratio (and your credit score) disastrously. Remember that call you made before the closing date? Make a payment two weeks before the closing date and then make other payment just before the closing date. This, of course, assumes that you have the money to pay the big expense by the end of the month.

Take into consideration that you should not use your credit card for a large bill if you plan to have a balance. Compound interest will create a horrible mountain of debt quickly. Credit cards should never be used for long loans unless you have one with a zero introductory percentage of TPA in expenses. And even if it does, you have to take the card balance very seriously and make sure you can pay the bill before the introductory period ends.

4. Increase your credit limits

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If you tend to have a problem with overspending, don’t try this. The goal is to increase your credit limit on one or more cards so that your employment radius decreases. But again, it works in your favor only if you don’t use the new available credit. I do not recommend trying this if you have failed payments with the company or have a score that tends to go down. The company might see this request for a credit increase as a sign that you are about to have a financial crisis and you need the extra credit. In fact, I have seen this end in a reduction credit limits. So make sure your situation looks stable before asking for a raise.

With that said, as long as you’ve been a good customer and your score is reasonably healthy, this is a good strategy to try. All you have to do is call your credit card company and ask for an increase in your credit limit. Have an amount in mind before calling. Make that amount a little larger than you want, in case they feel the need to negotiate. Do you remember the example of number 1? A card has a limit of $ 6,000 and you have a balance of $ 2,500 on it. That translates to a 42% employment ratio (2,500 / 6,000 = .416, or 42%). If your limit goes up to $ 8,500, then your new radio is 29% more rewarding (2,500 / 8,500 = .294, or 29%). The higher the limit, the lower the radius will be and this helps your credit score.

5. Credit mix

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A few years ago, I realized that I didn’t have much of a credit mix. He had credit cards with low employment ratios and a mortgage, but hadn’t paid off an installment loan in a couple of decades. I wanted to improve my credit score a bit, so I decide to get a very low rate car loan. I spent a year paying it just to get a mix on my credit. At first, my score dropped a bit, but after six months, it started to increase. Your mix is ​​only 10% of your FICO score, but sometimes that little push can take you from good credit to excellent credit. I had no plans to apply for a loan in six months, so my idea was good. But if you are thinking of refinancing your mortgage (or filling in something really big) and you want a quick increase, do not use this strategy. This is good for a long-term approach.

conclusion

When you want to improve your credit score, there are two basic rules to follow: First, keep your credit card balances low. Second, pay your bills on time and complete. Do these two things, and then do one or more of the smart ways above to boost your credit. Remember no you have You have to have a balance to build a good credit score. If you do that, you are close to slipping on debt.





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