Your credit score is such a crucial piece of your financial life. You’ll need a great credit score to help you achieve many of the financial goals you probably have, from a good rewards credit card to a low interest rate on a loan for a mortgage or a vehicle. There are also other less obvious places where a good credit score helps you, such as when you go to get a new cell phone or when you’re buying car insurance.
Building your credit can be a long process where good behavior helps increase your score gradually over time. It’s true that achieving good credit can take years, but there are steps you can take to give your score a boost fast.
Review the list to see if you can take advantage of any of these ideas and watch that score climb (and save you money in the long run!)
Reduce Your Credit Utilization Ratio
Several factors determine your credit score. Your credit utilization ratio is a very influential metric because it is part of a factor that makes up 30% of your score. Credit utilization is simply how much credit you are using divided by the total amount of credit you have access to.
If you charged $10,000 to your credit cards and your total credit limit is $50,000, your utilization would be 20%. Credit bureaus use your statement balance in this calculation, so you still have utilization even if you pay off your balances in full each month.
A general rule of thumb is to use up to a maximum of 30% of your credit card limit. Some experts suggest keeping it below 10%, if possible. Most credit cards report your credit utilization once a month to the credit bureaus. In many cases, your most recent statement balance is the number that goes onto your credit report.
Some great tips to keep your credit card utilization ratio below 30% include only charging essential purchases like gas and groceries (or those purchases that earn bonus points through the credit card), splitting your purchases between multiple credit cards, and making extra payments during the billing cycle to keep that ratio down for months when you make large one-time purchases.
Request Credit Limit Increases
Periodically, request an increase to your credit limit. Each credit card company will have a different process but it’s typically very easy and very quick. Most credit cards will let you do this online. By increasing your credit limit, you lower your utilization.
Two things to keep in mind when doing this. First, don’t request an increase on a brand new card. Many companies will not increase your limit if it’s new. You’ll need to wait at least six months.
Next, when you request an increase, you want to make sure you do it in a way that doesn’t require a hard inquiry on your credit report. If you request a relatively small increase, the company will usually approve it automatically.
If you ever request an increase and the company wants to ask for more information, decline the request. It doesn’t make sense to take the credit score decrease from a hard inquiry.
Make On-Time Payments
If you tend to miss your payment due dates, stop. Your payment history is the number one most influential credit score factor with a weighting of 35% of your total score. Even if you can only make the minimum payment, your account remains in good standing and you avoid late fees.
Sign Up for a Credit Boost Service
Having a credit card and installment loans are not the only ways to increase your score. Credit boost services like Experian Boost report your monthly bill payments like utilities or your cell phone plan to the credit bureaus. You can receive credit by linking your bank account.
Consider Getting a Credit Builder Loan
Credit builder loans can offer a small credit score boost as you lend money to yourself. You make monthly payments into an interest-bearing certificate of deposit (CD) for up to 24 months. The bank reports your monthly payment to the three credit bureaus. When the loan term ends, you receive the CD balance minus administrative fees.