*Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
This article was last updated Jan 31, 2013, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.
We recently posted an article that explained different ways to repair your credit. In it, we discussed long term goals that you can use to boost your credit score in the future. If you're anything like me though, you don't always want to have to wait a long time to see improvements. You want something done right now. Lucky for you and for me, there are some quick tricks you can use to bump up your score while going through the steps in our original article.
I have struggled with credit just as much as the next person, and all of the suggestions below have helped me regain my financial independence. Now it's time for you to do the same. Here are five quick ways to clean up your credit.
A Note before We Start…
Before I get too far into this, I need to make one thing clear. Improving your credit is going to take a long time, no matter what. Even though the tips I provide here will work quicker than the ones in this other article, they're still going to take a while to go into effect. Most changes that you make in your credit don't show up on your history for 30-60 days, and some take even longer than that. I once paid off a car loan that took six months to get off my credit. Six!
I can't be a miracle worker and wave a magic credit wand over your score. The tips here are purely meant to give you the quickest results possible. If you're looking for something that will take you from a 550 to a 700 over night, let me know when you find it.
With that out of the way, let's get to those tips!
1 – Pay off a Small Debt
Got a small bill that you keep putting off? Get it taken care of. I know the $100 you owe to JCPenney may not seem like much right now, but it is something that is preventing you from having the best score possible. I once saw a 30 point jump in my score because I paid a past-due Walmart card that had been sitting on my credit for ages. It was only $221. The sooner you get rid of little bills like that, the better off you will be.
2 – Work out a Payment Plan
If you can't make the payments that a lender or creditor wants you to make, figure out something you can afford. For instance, a family member of mine had about $10,000 in outstanding medical bills from 20 years ago, when her son was first born. She decided to call the hospital the year before last to work out a plan and hopefully get that debt off her credit. Not only were they about to settle to $3,000, but they worked out a $10 a month plan until she could pay everything off. She started making those staggeringly high payments, and sure enough, her credit score skyrocketed. You don't have to be a billionaire to see positive changes.
3 – Open a New Credit Line…Maybe
I know some people reading this will disagree with me, but hear me out on this one. One of the main factors that determine your credit score is the amount of debt you are in. It's not necessarily the value of the debt, but the percentage it represents of your available credit. If you add a new line of credit to the mix, you effectively lower your debt percentage as a whole. Let me demonstrate…
Let's say you have 3 credit cards at the moment, all with $1,000 spending limits. You owe $500 on each of them, so your debt to available credit ratio is 50%. If you get a new line of credit that's also $1,000, you change the equation. You now owe $1,500 out of a possible $4,000, making your new percentage 37.5%. That's a big difference!
Keep in mind that opening a new credit account will also lower the average age of your credit, which will have a negative impact on your score. If you had all of those accounts for 10 years and you add this new one in, the average age for your credit lines would drop to around 7 years (30 total years/4 total credit cards). Your credit balances account for twice as much of your overall score as your length of credit, which is why I still think this is a good idea. Just don't go overboard with the open accounts.
4 – Use a Credit Card
This probably sounds counter-productive when you're trying to improve your credit score, but again, hear me out. If you use a credit card and pay it off regularly, you're going to build positive credit. Rather than paying for everything in cash or with your bank card, you can pay with a credit card and then pay the balance back. Do this before the payoff period (usually 25 days), and you can avoid getting charged the APR, or any fees that could potentially increase your bill. You're going to spend the money anyway, so why not get some credit out of it? You may even snag some rewards points along the way.
5 – Get Your Act Together
Now it's time for some tough love. If you're reading this article, it's probably because you made some "unwise" financial decisions. I've made plenty of them myself, so don't feel bad. It happens. The point now is that you have to re-evaluate what you did wrong and immediately reverse it. One of my biggest problems back in the day was the fact that 90% of my money was going out in bills…no lie. I sold a car, moved into a cheaper place, and instantly saw an improvement in my credit. When you have the ability to pay for everything around you, getting your credit score up is a lot easier.
Even though you can't put a magical bandage on your credit, you can take some simple steps to see changes as soon as possible. They may not be as fast-acting as you want them to be, but they will make a difference. Start focusing on your budget, your bills, your business, and your bank account, and everything will just fall into place.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.
*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.