Do you want to improve your credit score?
If you’re like most Americans, then the answer is yes.
But what if you’ve been late on your student loans, auto loan, personal loans or credit card payment? Is there hope? the good news is there is.
Your credit score can have a significant impact on your life. For example, it determines whether or not you get approved for car loans and mortgages, if you qualify for s lower interest rates, and even if some employers will hire you.
So it’s vital that yours is as high as possible. But there are many myths about improving your score that isn’t true – and in this article we’ll provide you clear and simple guide on the best way
It doesn’t matter what time of year it is when trying to improve your credit score – all months are equal in the eyes of lenders and creditors.
There isn’t any real difference between applying for new cards in January versus December because they both fall within one billing cycle (as long as they’re applied for before the end of the billing cycle).
Keep reading to learn about the factors that impact your credit score and the steps you can take to improve your score as quickly as possible.
Understanding Factors that Impact Credit Score
You need to know precisely what factors impact your credit score to improve your score.
Five major factors affect your FICO credit score that all major credit bureaus use: payment history, amounts owed, length of credit history, new credit accounts, and types of new credit accounts.
So what does this all mean? It means the percentage of the following categories will determine how likely you are to be approved for a loan or mortgage.
These categories can considerably impact your credit score because it’s essential to have good habits in these areas, so creditors feel confident lending you money. Keep reading below to learn more about whether some actions will help improve your scores while others won’t.
Payment History – 35%
Your payment history counts for a staggering 35% of your FICO score, making it the most important factor in your score.
Your history of late payments, collections, judgments, and charge-offs will adversely affect your score if they’re not paid off or settled.
It doesn’t matter whether you’ve taken out a new loan recently or have made on-time payments for years, the number of missed payments in your credit report is what counts against you.
Amounts Owed – 30%
At 30%, amounts owed are also important but not nearly as much as payment history. Typically speaking, the higher the balances on your credit cards, the more likely you are to have missed payments.
This can be especially true if you’re struggling with credit card debt. So it’s important that you don’t run up huge balances on your credit cards since this can hurt your score in the long term.
Length of Your Credit History – 15%
The length of time that accounts have been open contributes 15% of your credit score.
Because you’ve had these accounts for so long, there’s a good chance that you’re responsible with them.
But since it can be challenging to determine whether or not someone is responsible just by looking at their length of history, creditors need other factors (like payment history) to know whether or not they should trust the person with their money.
New Credit Accounts – 10%
The number of new credit accounts opened contributes to about 10% of your FICO score.
This includes any new credit cards or loans you’ve applied for recently, as well as any inquiries that have been made about your credit history.
Credit Mix – 10%
Finally, lenders are interested in whether or not you have both good and bad habits when managing your credit.
So getting a new credit card from the same issuer as an old one will help increase this factor in your score, while opening too many new accounts at once can hurt it!
6 Steps to Improving your credit score
By paying off any delinquent balances and making on-time payments, you can improve all of the factors that contribute to your credit score.
And as mentioned above, because these factors make up the majority of your FICO score, they will have a significant impact on determining if you’re approved for loans and other forms of credit.
With this in mind, here are six steps you can take right now to improve your chances of getting approved:
1. Pay off collections accounts
If any account(s) has gone to collections and isn’t settled yet (or hasn’t been paid off), it’s time to pay them! These outstanding accounts can continue hurting your credit score until they’re either removed from your report or paid off.
2. Pay off judgments
If a creditor or other lender has been successful in taking you to court and getting a judgment, you’ll need to pay it back as soon as possible! While there’s nothing you can do about the negative items on your credit report, paying off any outstanding balances will remove the liability from your name and improve your score.
3. Decrease your debt-to-credit ratio
To calculate your debt-to-credit ratio, simply divide how much debt is owed across all of your accounts by the total number of accounts open. Any easy way to lower credit utilization ratio is paying off your credit card balances. Credit card payments are one of the fastest ways to boost your credit score.
In order to reduce this percentage, focus on opening new accounts with low spending limits or that don’t require a security deposit (like store credit cards). Then make sure to keep the balances low to avoid increasing your debt-to-credit ratio.
4. Pay all of your bills by the due date
Even if it’s just the minimum payment due, paying off any credit card bill before it becomes overdue will help decrease the number of late payments that are hurting your score! This is also another effective way to increase your score quickly.
5. Don’t apply for new lines of credit too often
When you’re desperate to improve your credit score as soon as possible, applying for every loan and credit card available might seem like an excellent idea.
This can actually hurt you in the long run by dragging down your overall average account age and making too many inquiries into your credit history, which can raise a red flag with creditors.
Instead, focus on doing one thing at a time so you can improve each factor gradually.
6. Consider a credit monitoring service
The more you know about your credit score, the easier it will be to make sure you’re taking the proper steps to improve it.
If making this process as easy as possible sounds like something you want, consider using a free or paid service that provides daily updates on your current score and any changes that are made. Experian offers excellent services that alert you when any changes to your credit takes place.
Stay On Top of Your Credit
Once you’ve completed these tasks, it’s a good idea to continue to monitor your credit. Now that you’re aware of the factors that are helping and hurting your score, look out for any changes or errors that could be dragging down your overall rating. You can get a copy of your free credit report from Annual Credit Report.
And even after you’ve successfully repaired your credit, remember that it only takes a couple of missed payments to undo all of your hard work. So keep on making your credit card account or loan monthly payment on time.
So stay on top of things by devoting some time every week or month to making sure everything remains in good standing! The hard work in improving your credit can be undone by a tiny mistake.
Hiring a Professional
If you’d rather leave the legwork to someone else, you can always hire a professional to help improve your score for you.
And while credit repair service will cost money, it might be the best investment you’ll ever make if it means securing that loan or new line of credit.
Companies such as Credit Saint and Lexington Law have the tools you need to improve your score and get your finances on the right track.
One of the best things about hiring a professional is that they have the experience in resolving many issues in a shorter amount of time rather than doing it yourself.
These companies are also skilled at communicating directly with creditors and collection agencies, which could speed up the process exponentially!
However, just because these services do their legwork for you doesn’t mean you won’t have to continue monitoring your report and balance each month.
Can I Really get a 720 Credit Score in 6 Months?
Getting a 720 credit score in 6 months is possible, but you also need to be realistic. For example, if you have a credit score of 520, it may take longer than 6 months to get a 720 credit score.
However, if you have better credit, your credit rating can likely be boosted in 6 months or less with the right strategy and dedication. If you commit to following these steps over the next 6 months, there is a strong chance that you will see significant improvements in your FICO score!
Regardless of where your credit stands today, it’s important to remember that the factors controlling your credit score constantly change.
So be sure to monitor your account regularly and make any necessary changes as soon as possible!
Even if you can’t get a 720 credit score in 6 months, it’s still worth paying off your debt. Even if you don’t see a significant change in your report right away, continue making regular payments on all of your bills.
Paying down even one outstanding account will decrease those balances from being factored into your overall credit rating, which can positively impact over time.
And since some creditors only look at the most recent three years of payment history when calculating scores, making timely payments now could help increase your next rating as well!
Wrapping it Up
Many people have trouble getting a 720 credit score in 6 months, but it can be challenging. Getting a good credit score is not impossible.
If you really want to get your FICO score up fast, start with some easy ideas like bringing down high balances, paying off past-due items, and staying within your credit limits.
After that, if you still need help, try using some services designed to improve your score.
And finally, if you do everything right over the next 6 months, there is an excellent chance of seeing significant improvements in your credit rating. It may not be 720, but it will undoubtedly be much higher than what your score is today.
Improving your credit isn’t always easy, so don’t get discouraged when it takes time for results to show. A good score take time.
Just keep working hard every step of the way, and you will see results in your credit score!
