You don’t need to be told how important your credit rating is; it is practically the most important tool in your financial tool chest. A good credit rating unlocks doors and financial benefits — better credit cards, better loan terms, job opportunities, and more.
That said, not everyone has a great credit rating. Whether it is because of late payments or overuse of credit cards or some financial or life setback, bad credit is, for many people, something they face at one point or another in life.
But fear not. If you have a middling to poor credit rating, there are things you can do about it, and pronto, too. It might surprise you to learn that you can boost your score fairly quickly — often in a matter of months.
Here’s how.
1. Pay down credit card balances
Probably the quickest way to raise your credit score is by reducing your credit utilization ratio, especially by paying down your credit card balances. This ratio represents the amount of credit you have used compared to your total available credit. A high ratio — say anything above 30% or so — will negatively impact your score.
Most people have high credit utilization ratios because they have high credit card balances. So the obvious answer is to work to lower those balances.
Actionable tip: Typically, there are two ways to reduce credit card debt:
- The avalanche method
- The snowball method
The avalanche method is where you pay off the debts with the highest interest rates first. The snowball method is when you pay off the cards with the smallest balance first. Financial guru Dave Ramsey advocates for the snowball method, as it provides a psychological boost by piling up small pay-off victories that motivate you to keep going.
2. Correct any errors on your credit report
Literally billions of pieces of credit information are added to credit reports every year. And given that, not all of that info is accurate. When inaccurate or bad information is found on your credit report, it definitely negatively affects your credit score. Common mistakes include incorrect personal information, loan accounts that do not belong to you, or outdated balances.
So the move here is to review your credit reports, look for inaccurate information, and then write to the relevant agency (either TransUnion, Experian, or Equifax) and request the inaccurate info be deleted.
Actionable tip: Request a free copy of your credit report from each of the three major bureaus via AnnualCreditReport.com. Review them for inaccuracies and dispute in writing any errors directly with the credit bureau. Be sure to send proof as to why it is inaccurate.
Correcting even one mistake could improve your score within 30 days.
3. Request a credit card limit increase
If your overall credit utilization ratio is bad, then increasing your credit limits on various credit cards can improve your credit score, and without paying down any debt.
Actionable tip: Contact your credit card issuer and request a credit limit increase. This typically works best if your income has increased or your credit score has recently improved. But note: Do not use the extra credit you’re extended, as doing so would defeat the purpose of raising your limit.
4. Become an authorized user on someone else’s credit card
Whether you have bad credit or you are young and have little or no credit history, one easy way to raise your credit score is to have a family member or close friend with good credit add you as an authorized user on one of their credit cards. This allows their positive credit history to be added to your credit report.
Actionable tip: This is not a small ask, so make sure that the person of whom you request this 1) will likely say yes, and 2) has a solid credit history. And remember, you are not asking to use their card, only to “borrow” their solid credit rating.
You don’t even have to have to be issued one of these cards to get the benefit of a better credit rating. Just being on the account can help raise your score.
By taking any or all of these four steps, you can start seeing improvements in your credit score in as little as 30 days.
You can do it!