While we tend to think of credit scores as static numbers, that’s just not the case. Credit scores – and the factors used in calculating those scores – change frequently. A recent survey by VantageScore Solutions and Consumer Federation of America (CFA) found that Americans have had trouble keeping up with changes in credit score reporting and the implications those reports may have.
“The good news is that a large majority of consumers know the key factors used to calculate scores and the creditors who use these scores,” CFA Executive Director Stephen Brobeck said recently. “The bad news is that consumer knowledge has lagged behind recent changes in the credit score marketplace.”
Educate yourself on credit scores and credit reporting agencies and you’ll be in a great position to improve your credit score quickly. To substantially raise your credit score in six months is difficult. In general, it takes nine months or a year of making payments on time and performing some simple credit-related tasks to improve your credit score substantially. If speed is of the essence, though, here are five tips to help you incrementally improve your credit score in six months:
1) Do the things you’re supposed to. We all know the two most important factors affecting your credit score are your ability to make payments on time and the amount of debt you’re carrying on your credit cards and in your credit accounts. Spend the next six months paying down your balances, and be particularly careful to pay ALL of your bills on time.
2) Spread your balances out across multiple cards. This might not allow you to capitalize on the lowest interest rates, but it should help you quickly improve your credit score. Having a large amount of available credit but still carrying a high balance on a single card can actually hurt your score. Ideally, your credit card balances should be less than 25 percent of the total available credit for that specific card. Spreading your debt out, therefore, can raise your credit score.
3) Limit the number of accounts you carry with a balance. FICO high achievers have an average of just three credit cards (or accounts) that carry a balance. If you have more than three credit cards with balances, do your best to consolidate the debt. If you can spread your balances across three credit cards without using more than 25 percent of the available credit on each card, you’ll be in great shape.
4) Don’t apply for new credit. It may be appealing to open a new credit card account out of the hopes of doing a zero- or low-interest balance transfer, but every time you apply for new credit, your credit score will get dinged. If you’re serious about improving your credit score quickly, use only the resources you currently have available.
5) Don’t close any of your credit card accounts – even if they’re not carrying balances. The age of your credit accounts plays a big role in your credit score. If your oldest credit card is a tattered Target card, keep the account open – even if you plan to never use it again. Credit reporting agencies consider the age of your oldest account when factoring your credit score.
Last but not least, try to educate yourself on ways to improve your credit score. If you can avoid using credit repair services, you’ll be much better off in the long run. “Consumer protection officials agree (credit repair services) often overpromise, charge high prices, and perform services, such as correcting credit report inaccuracies, that consumers could do themselves by just contacting the lender and the credit bureaus,” the CFA says.
You may also consider talking to your local bank to see if they can offer any low-interest options to help you pay off your debt faster. Many banks offer so-called signature lines of credit that do not require collateral and typically charge interest rates that are lower than rates charged by credit card companies.
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Tags: credit cards, debt, personal finance
Another thing I have really noticed is that often for many people, low credit score is the consequence of circumstances over and above their control. Such as they may are already saddled with illness so they have high bills going to collections. It might be due to a job loss and the inability to work. Sometimes divorce proceedings can truly send the funds in a downward direction. Thanks for sharing your notions on this blog.