In this post you will learn the 5 steps to increase your credit score super fast or tank it! Like it or not, your credit score matters. It is not only important for your future if you want to buy a home or make some other big purchase – but these days there are several other non-financial reasons why your credit score matters to other people as well.
5 Steps to Increase Your Credit Score SUPER Fast!
Your credit score is based upon 5 different credit behaviors – each making up a percentage of the whole score.
In order to know the 5 steps to increase your credit score, you should also know the five credit behaviors that the credit bureaus track in calculating your credit score.
These credit behaviors are:
- Payment History – 35%
- Credit Utilization – 30%
- Length Credit History – 15%
- Mix of Credit – 10%
- New Applications for Credit – 10%
I track both my and my husband’s credit scores regularly.
By regularly monitoring our scores and our reports, we are not only being proactive about preventing identity fraud, but we can be on top of our progress.
I personally use several different trackers to get an overall big picture of our progress.
On CreditKarma, I can check both my TransUnion and Equifax for FREE.
Who doesn’t love f-r-e-e?
At freecreditreport.com I check my Experian for FREE as well. You can get one credit bureau score and report for free. If you want all three, there is a recurring fee.
Also, I am able to check my FICO-8 at my bank and my FICO-9 with my Capital One credit card.
Your Payment History
Creditors (and others) want to know that you are a good credit risk. That’s why this behavior makes up the largest percentage of your credit score.
ACTION => If you want to improve your credit score, then you must take care to make on-time payments from this point forward.
This one factor, plus time, is one of the best ways to show your credit-worthiness.
The greater the distance between your good payment history and a missed payment – the less relevant the missed payment becomes.
Miss a payment and it’s a double whammy.
You will not only tank your score, but you also start the clock over again – which SUCKS.
Your credit card utilization is how much of your open lines of credit have you used.
For instance, if you have $5,000.00 of credit, split between two cards, and you have charged $2,500.00 of those balances, you have an overall 50% utilization rate.
If each of those cards has a $2,500.00 limit and one of them is maxed out at $2,500.00 and the other has a zero balance, your overall utilization rate of 50%; however, for one of the cards it is 100% – which is not preferable.
It is ideal to keep EACH line of credit below a 30% utilization rate.
In the latter scenario, to get down to a 30% utilization rate for the maxed-out card, you would need to pay off $1,750.00 as soon as possible.
($2,500 x .30 = $750.00, $2500 – $750.00 = $1,750.00)
It is not unusual to see a 30-point jump, or more, by doing this one step.
- Monitor your credit line/credit card balances and make sure each line does not exceed 30% of credit limit.
- Do so as quickly as possible.
- Request a Credit Limit Increase. I know. I know. This seems counter-intuitive; but if you increase your credit limit, you instantly decrease your credit utilization.
Likewise, you will tank your score, sometimes drastically, by charging up your cards and increasing your utilization rate.
Length of Credit History
How long you have had credit is also important. Now if you are young and have no credit, then start small.
Another way is to become an authorized user on someone else’s account.
Obviously, choose well. But also, be worthy of their trust in you to not do anything to damage their credit if you use the account you have been authorized to use.
ACTION=> It takes time – start small if you have no credit now or become an authorized user on someone else’s account.
DON’T CLOSE OLDER ACCOUNTS. This may cause an immediate dip in the length of your credit history.
Keep accounts with a zero-balance open. If you really feel like you need to close them – expect a dip in your score or close a newer account over an older account.
Mix of Credit
This one does not count as much towards your overall score, as it accounts for 10%. It is also pretty self-explanatory.
Creditors want to see different types of accounts.
Not all credit cards and not all auto-loans, but a mix.
ACTION => Mix it up!
New Applications for Credit
How often you apply for credit is tracked by each of the credit bureaus.
But there are a couple of important facts you should know. It only counts for each type of credit you apply for in any given 30-day period.
For instance, if you want to finance a vehicle but are shopping dealerships to see who will give you the best deal, each pull from each dealer in 30 days is only counted as one.
Also, only hard pulls count. This is an actual application for credit. A “soft” pull does not.
A soft pull is a simple inquiry. An example would be when you check your own credit.
The good news? Only the last 24 months really matters. Pulls of your credit fall off after that time frame.
The more you apply for credit – the more perceived risk you are to a lender.
ACTION=> Be aware of when you last applied for credit.
DON’T apply for too many lines of credit throughout a given 24-month period.
Though it will not count as much as some of the other credit behaviors, it all adds up.
And if you are trying to improve your credit score – it is best to make sure you are improving in all areas.
By employing each of these behaviors in a positive score – you WILL see your score increase.
In 2017 I had a credit score of 576. EMBARRASSING!
But that was before we got serious about changing our financial future – before we found the FIRE movement (Financial Independence Retire Early).
Once we decided we were going to become Financially Independent – we knew we also needed to improve our credit score.
Part of our goal to reach Financial Independence is through real estate and if we hope to achieve that goal, it may require a mortgage.
So, we set out to systematically improve our credit while we paid off our debt.
AND IT WORKED.
My credit score is currently at 756 and it continues to improve. (You see that big dip there. I had a few large repair bills that increased my utilization rate and waited until payday to pay it back down. Don’t do that. See Credit Utilization above.)
This is the highest it has ever been.
My goal is to see the 800’s.
I am confident I will get there….in time.
If you need help creating a financial foundation, we can help. You can click HERE or see enter your email address in the form below.
P.S. This was part 3 of a series dedicated to your credit score. Click here to read => WHY YOUR CREDIT SCORE MATTERS and WHAT MAKES UP YOUR CREDIT SCORE.
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