Although it may seem like having a bad credit score is the end of the world, all hope is not lost. The best way to improve your credit score is to develop better purchasing habits over time - but the downside side is just that: it takes time. So, if you’re looking to improve your credit score as fast as possible, follow these tips.
1. Credit Score Management Counseling
Consider credit score management counseling. Most direct lenders will provide you with specific software that will give guidance on raising your credit, such as the Score Wizard from Homesite. Mortgage Score Wizard will assess your current credit situation and provide you with personalized suggestions on how to improve your credit score.
2. Credit Card Balance
Keep your credit card balance below 50% of the limit - high outstanding debt can negatively affect a credit score. Credit card utilization is defined as your total open credit card balances divided by your total open credit card limits, and is used in credit scoring algorithms. Those who keep their credit card utilization score as low as possible ultimately have a higher credit score.
Keep number of inquiries down. Every time you check to see what your credit score is, the score decreases. Only check your credit score when absolutely necessary, or if you haven’t recently. In general, inquiries don't affect your credit score as much as other factors - one inquiry will decrease your score by an average of five points. However, frequent inquiries will add up and decrease your credit score. According to MyFICO.com, people with six inquiries or more can be up to eight times more likely to declare bankruptcy than people with no inquiries on their credit report.
4. Collection Accounts
Ignore collection accounts that are more than two years old. Because you have already recovered from the credit damage, paying this could actually bring down your credit score. After your mortgage is closed, you can go back and tend to these accounts.
5. Credit Report Errors
Check for errors on your credit report. If you find any, you can dispute them at no cost. It is recommended that you avoid credit repair companies because they will dispute things about your credit report on your behalf, whether the information is accurate or not, and will charge you for what would otherwise be free. Instead, consider hiring an attorney to handle your credit repair needs. Law firms that specialize in credit counseling and credit repair have your best interests in mind and are the most trustworthy source to use.
6. Paying Bills
Payment history information usually accounts for about 35% of your credit score, so paying your bills on time will have a huge positive impact on your credit score. Having late payments on any bills could damage your credit score to varying degrees. Try to keep up this habit every month, as even one late payment can make drastic changes to your score. How much your score decreases will depend on how late the bill was paid, how often you make late payments and what your credit score is.
You are entitled to one free credit report each year, but don’t be fooled by the fancy jingles and luring advertisements of many credit report companies - only one website provides your official credit report for free. You should find a direct lender that has your best interests at heart. If you do, they will do whatever it takes in order to get the best rates, while working with you one-on-one in order to improve your credit score.