Learn how to improve your credit score quickly, A credit score is something most individual, as well as small business owners, are worried about at all time, no matter where they are in the world. This is something that, to a great extent, will determine your professional and economic success or failure. No matter how you start in life, it is extremely important that every individual knows how to gradually increase their credit score over time.
First of all, it helps to know exactly what your credit score is, and how it can help your career or economic solvency.
What is your Credit Score?
Your credit score is the number which determines just how “creditworthy” you are, i.e. it is the measurement that lenders use to determine the amount of risk in lending you money or doing business with you. A credit score is also called a FICO Score – created by the former Fair Isaac Corporation to determine the risks of an individual.
In other words, a Credit Score determines just how risky you are as a borrower, and whether any institution is taking a large risk in lending you money. It measures your “creditworthiness” – which means that institutions use this number to determine if they can trust you to return their money. Rather than trusting word of mouth or their gut feeling in determining your “creditworthiness”, the Credit Score uses a foolproof calculation to make the decision.
How is your Credit Score Calculated?
Previously, the actual formula to calculate the FICO Score or the Individual Credit Score was unknown to anyone but the corporation. However, it is now known that credit score takes into account some of the most important components of our financial history, such as:
- The entire Payment history;
- The amount owed by the borrower;
- The length of their credit history;
- The types of new credit; and
- The Types of credit used.
There’s no one factor that entirely decides your credit score; these five components are taken into consideration to do so.
To calculate your individual credit score, the formula takes into account whether you have always paid your credit accounts in the past, on time and consistently; besides, the formula also takes into account all your bankruptcies, deliquesces and other collection history. Your credit score also knows the length of time that you have taken to pay back your previous credits, and whether you have faced any kind of problems or delays in paying them back.
What are Good or Bad Credit Scores?
Credit scores usually range from 300 to 850; the higher the number on the score range, the better your credit score. Any score from 740 and above is considered to be extremely good credit score, whereas anything below 579 is considered to be poor.
Credit scores from 300 to 579 is regarded as very poor credit score; you might have trouble getting a personal loan if your credit score is under 500. On the other hand, credit score from 740 to 850 is excellent and will give you a lot of options on deals and loans.
If you want to take out a loan but your credit score is on the lower side, there’s nothing to despair. It is fairly possible to improve your credit score if you want to. This can be done quite fast too, if you follow some specific steps.
How can you improve your Credit Score Quickly?
Almost no one has the credit score they want, since it is very easy for your credit score to drop suddenly. The road to improvement can be a lengthy one, but that’s only if you don’t know what you need to improve. If you are aware of the problem you need to address, you can increase your credit score more quickly.
#1
Of course, the first step to improve your credit score quickly would be to know your credit score. Although the borrower isn’t usually supposed to know their own credit score, it is not impossible. You can see your credit scores from some reliable sources online (I have discussed two such sites later in this article), so that you know just how much you need to improve.
#2
Secondly, your low credit score might be a result of faulty credit reports. There is a chance that about 5% of total credit reports have errors that affect the final score, and there’s a way to rectify that. So, if you find any kind of errors in your credit report, you can dispute these errors. These errors can be anything from a payment reported late that you have made on time and inaccurate credit limits, to wrong account numbers or adverse information more than 10 years old.
To dispute, you will need all the evidence you have of your real payments and loan details, and this dispute can be made online, by a phone call or via writing. You will also need all your personal details for filing the dispute, i.e. your social security number, government issued ID, address or copies of utility bills.
#3
If there is no error on your credit score, the third step to improve your credit score quickly would be to know the main reason behind your low credit scores. Credit scores are calculated by placing the most importance on your payment history. Therefore, if you have always been late in paying your dues, this could be one of the vital reasons behind your score. This is not something that you can rectify very fast, especially if you have a long history of late payments in the past.
To rectify this matter, it is very important that you pay all your dues as soon as possible. You need to pay all your bills on time at least for a few months, and at the same time, get going on any missed payments in the recent past. Your credit score will gradually start increasing when you start to make your payments on time. If you have a long history of missed or late payments, your credit score can still increase over time if you start making payments on time, but it will take longer. The history of late or missed payments will stay on your credit report for 7 years, and then disappear.
#4
Most people with debts only end up paying the minimum amount, which almost never makes a significant difference to the main debt. If you want to increase your credit score while you have debt, your fourth step would be to reduce the amount you owe. The amount of debt of a person makes significant damage to your individual credit score.
This is not an easy step for anyone, since payment of loans and debt take a large amount of money. But it is one of the fastest ways of increasing your score, if you can just manage enough cash to reduce your debt by a few percentages.
#5
Another trick that you can try is to have fewer accounts open while you have the same amount of loan or debt. Instead of having a number of different loan accounts from different banks, it is a better idea to bring the whole amount down to a single (or two) accounts, and keep on paying the minimum interest.
#6
If you have loans under different accounts, you can also – instead of bringing them all into one account – try paying off any one of them completely. Don’t close the account once you have paid your loan off. A fully paid account actually adds positivity to your credit report and can increase your credit score.
Old debt like student loan or timely paid credit card bills are good for your credit report in the long run, because it shows that you have a history of paying your loans.
#7
Finally, be patient. You might want to drastically increase your credit score, but that will not always be possible. You need to show your lenders that you are responsible and reliable, and you can do so only b patiently paying your bills on time and maintaining your debts punctiliously. If you are diligent, your credit score will definitely increase over time.
Get Help improving your Credit Score Quickly
If you are new to this and you want to increase your credit score, here are two sites that can help:
Your Score and More
With the help from this site, you can learn your credit score simply by creating an account and giving your personal details. Besides, you can use this site to see your full report, just the way a lender would see whenever they assess you as a borrower. You can see all the late payments you have made in the past, your account balances, as well as the amount you owe.
Most importantly, signing up for website gives you three layers of protection from credit attacks. With this protection, identity thieves won’t be able to access your credit information or use your money to make purchases.
IdentityIQ
This is another safe and reliable site that can help you improve your credit score quickly, you can see your credit score and report, and also verify if there is any error on the reports. IdentityIQ will send you credit reports every month, so you can be on top of your financial situation at all times.
Besides, your credits will be automatically monitored at all times, so that you will be given insights into the kind of positive changes you can make into your accounts to increase your credit score. IdentityIQ will also monitor your account for criminal activities and help keep your accounts safe from thieves. Most importantly, you can make up to $1 million in identity thief insurance offered by the website.
The whole business of credit scores and credit reports may seem confusing if you are new to this world, but it is nothing complicated. Credit scores are an excellent way to keep in touch with your financial situation, and it is very easy to gradually make an improvement on your credit score if you are patient and diligent. Both these sites can help you with your credit score, as well as maintaining it and keeping it safe.
