How Fast Can I Raise My Credit Score?
If you’re looking to raise your credit score, you might be wondering how fast you can do it. The answer depends on a few factors, but with some effort, you can see a significant improvement in your score in a relatively short period of time.
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The Credit Score Range
Credit scores range from 300-850. The national average is 711. People with scores in the 720-850 range are considered to have “excellent credit.” You’re in good company if your credit score is in the 720-850 range. Experian research found that one in six people in the United States fall into this elite group.
300-579: Very Poor
If your score falls in this range, it means that you have very poor credit. Creditors are unlikely to approve you for a loan or line of credit, and if they do, you can expect to pay a high interest rate. You may also find it difficult to get approved for an apartment or rental home. If you’re looking to improve your score, you’ll need to start by paying your bills on time and making sure that all of your debt is reported to the credit bureaus. You should also avoid opening any new lines of credit, as this will only add more debt to your plate.
580-669: Fair
A fair credit score is generally in the 580-669 range. You might be able to qualify for some credit products with a fair credit score, but you’ll likely pay higher interest rates than if you had good or excellent credit.
Credit products geared toward those with fair credit often have less competitive terms and higher costs than those for people with good or excellent credit. For example, people with fair credit who are approved for a credit card may only be able to get a card with a small credit limit and a high annual percentage rate (APR).
If you have fair credit, you can take steps to improve your score and make it easier to qualify for the credit products you need with more favorable terms.
670-739: Good
A credit score in the high 600s is considered good, but it’s not as good as it could be. You probably have some room for improvement, which could help you get better deals on loans and credit cards.
If your score is in this range, you might be able to get a good interest rate on a conventional loan, but you probably won’t qualify for the best offers. You might be able to get a lower-rate subprime loan, but that probably isn’t a good idea unless you have a specific reason (like a short-term need) and a plan to improve your score quickly.
You should be able to get most credit cards, although you might not qualify for the best offers. You might also see higher rates and fees than people with better credit.
740-799: Very Good
You have very good credit if your score falls in the 740-799 range. With a score in this range, you’re likely to be approved for loans and credit cards with the best interest rates and terms. A score of 799 is near perfect, and 800 is considered perfect.
If your score is in this range, you’re doing well, but there’s always room for improvement. You may want to consider taking steps to improve your credit so you can qualify for even better rates and terms in the future.
800-850: Exceptional
An Exceptional credit score is in the 800-850 range. This puts you in good standing with all lenders, and you will have no problem getting approved for loans and credit cards. You will also qualify for the best interest rates and terms on these products.
How Credit Scores are Calculated
Credit scores are calculated by credit reporting agencies using the information in your credit report. They take into account factors such as your payment history, credit usage, and credit age. The scoring models may also consider public record information and inquiries from creditors.
Payment history
One of the most important factors in your credit score is your payment history. This includes whether you’ve made all of your payments on time, and whether you’ve been late or missed payments. It also takes into account any public records, such as bankruptcies, foreclosures or suits. Payment history makes up 35% of your FICO score.
Credit utilization
Credit utilization is one of the most important factors in credit scoring, and it refers to the amount of your credit limit that you’re using.
For example, if you have a credit card with a $1,000 limit and you charge $500 on it every month, your credit utilization would be 50%.
Ideally, you want to keep your credit utilization below 30%, but the lower the better. That’s because a lower credit utilization shows that you’re good at managing your credit and not maxing out your cards.
There are a few ways to lower your credit utilization:
-Pay down your balances: This will automatically lower your credit utilization ratio.
-Request a higher credit limit: If you have a good history with your lender, you can ask for a higher credit limit. This will give you more room to spend without increasing your credit utilization ratio.
-Spread your balances across multiple cards: If you have multiple cards, try to spread your balances out so that no one card has a high balance. This will help keep your overallcredit utilization down.
Length of credit history
One of the main factors influencing your credit score is the length of your credit history. The longer you’ve been borrowing and repaying loans, the better your score will be. If you’ve only recently started using credit, you may have a lower score than someone with a similar income and financial history who has been using credit for longer.
Types of credit
Credit scoring models typically consider five types of credit:
-Revolving credit, such as credit cards
-Installment loans, such as auto loans
-Mortgages
-Consumer finance company accounts
-Retail store accounts
Different types of debt are given different weights in the scoring process. The general rule is that revolving debt, like credit cards, count more than installment debt, like auto loans. Mortgage and other loan payments are not factored into your credit score, but the debt itself is part of your “credit utilization.”
New credit
Opening a new credit card or taking out a loan affects your credit score. But the effects aren’t always negative. In fact, opening a new account can actually help improve your credit score in the longterm – as long as you manage your account responsibly.
Here’s how adding new credit affects your score:
Inquiries: Every time you apply for a new line of credit, an inquiry is made on your credit report. This can lower your score by a few points. But inquiries only stay on your report for two years, and they have little impact after the first year. So if you’re planning to apply for a loan or credit card in the near future, don’t worry too much about these inquiries affecting your score.
Credit mix: Lenders like to see that you can manage different types of credit responsibly. So having a mix of different types of accounts – like loans, lines of credit and credit cards – can actually help improve your score.
Payment history: Payment history is one of the most important factors in calculating your credit score. By making payments on time and in full, you’re showing lenders that you’re a responsible borrower. This can go a long way in improving your score.
Age of credit history: A longer credit history is generally better for your score than a shorter one. So opening a new account can actually help improve your score over time – as long as you manage it responsibly.
Ways to Raise Your Credit Score
There are a few things you can do to help raise your credit score. One way is to make sure you make all of your payments on time. This includes your credit card payments, utility bills, and any other type of loan you may have. Another way to help raise your credit score is to keep your credit utilization low. This means you shouldn’t max out your credit cards or have a high balance on them. Try to keep your balances below 30% of your credit limit.
Check your credit report for errors
The first step to raising your credit score is to obtain a copy of your credit report from all three credit reporting agencies — Experian, Equifax and TransUnion. Review your reports carefully to look for any errors that may be dragging down your score. If you find any errors, you can file a dispute with the credit bureau to have the error removed. Note that this process can take some time, so it’s best to start early.
In addition to checking for errors, take some time to familiarize yourself with the information in your credit report. This will help you understand what factors are influencing your score and what steps you can take to improve it.
Make all payments on time
One of the most important things you can do to improve your credit score is to make all payments on time. This includes credit card payments, utility bills, student loans and any other recurring monthly payments. A history of on-time payments is one of the biggest factors in determining your credit score, so this is one area you really need to focus on.
If you have missed any payments in the past, now is the time to start catching up. Getting current on all your payments will improve your credit score over time and make it easier to qualify for new lines of credit in the future.
Keep credit balances low
One of the key ways to maintain a good credit score is by keeping your credit balances low. This is because your credit utilization ratio (credit balances divided by credit limits) is factored into your credit score. A higher credit utilization ratio indicates to lenders that you may be overextended and are more likely to default on your loans, which could lead to a lower credit score. Therefore, to help keep your credit score high, it’s important to keep your credit balances low.
Use a mix of credit types
One of the best ways to improve your credit score is to show that you can manage different types of credit responsibly. A mix of revolving credit (like credit cards) and installment credit (like auto loans) is the ideal combination. Lenders like to see that you can handle different types of debt, and it can help improve your score.
Limit new credit applications
One of the most common questions we get is, “How fast can I raise my credit score?” If you’re looking to improve your credit score, there are a number of things you can do.
One of the quickest ways to begin boosting your credit score is by limiting new credit applications. Whenever you apply for a new line of credit, lenders perform a hard inquiry on your credit report. Although a single hard inquiry might only lower your score by a few points, multiple inquires can have a bigger impact. If you’re planning on applying for a mortgage or other loan in the near future, try to limit inquires by only applying for new lines of credit when absolutely necessary.
