5 Steps to Help You Improve Your Credit Score
Having a higher credit score will make you more creditworthy in the eyes of lenders, and the rates you may be offered will be lower than that of someone whose score is not as high.
For instance, a difference in interest rates of two percent on a $10,000 loan could cost you $200 annually.
Keep in mind there is no quick fix; no magic bullet.
And anyone who guarantees they can help you raise your score should be looked upon with a dubious eye.
But, if you are diligent, and keep tabs on your spending and payments, you can improve your score enough for it to make a difference when you consider paying for college with loans.
To boost your credit score quickly, in say, 6 months, try these steps.
Other than paying down your credit cards, you should be able to do most steps in the first week.
For paying down your cards, give yourself three months to pay down as much on your cards as possible.
How to Boost Your Credit Score
1. Make On-Time Payments
The easiest and most important factor to maintain your credit score is your payment history.
It makes up 35 percent of your score and is simply based on making payments on time.
Even one missed payment can cause your score to drop.
What do you do if you’ve already missed a payment?
Your missed payment will impact your score less and less as time goes by as long as there is evidence that you’ve been making payments as a whole.
Even a few months of on-time payments can boost your score.
2. Don’t close your oldest credit card
Another relatively effortless way to add a gold star to your credit history is to maintain a credit history.
That is, making sure you do things that will have a positive impact on your credit history, thus extending the length of your credit history.
A lengthy credit history accounts for 15 percent of your score.
So, don’t close your oldest card, even if you’re no longer happy with an annual fee.
Keeping it open and in your name will add to your credit history.
Just see if you can get the fee waived with a quick call to customer service.
3. Develop a strategy as a couple or individually for paying down credit cards
Individuals and couples should focus on reducing balances to improve scores.
A good strategy is to start with the cards with the lowest limits.
Your credit rating is based partially on the percentage of your limit you are using on each card.
Thus, paying down a $500 card to $125 is relatively the same as paying down a $5,000 card to $1,250.
Couples can add on a strategy to improve the credit of both spouses or partners by working together to pay down the card with the longest credit history.
Once the card is below 25 percent of the limit, add your spouse or domestic partner as an authorized user.
Bonus: Paying off credit cards reduces your expenses and reduces your assets that will be assessed on both the EFC and the CSS Profile.
4. Review your credit report and challenge inaccuracies
You’re entitled to a free credit report from annualcreditreport.com from all three credit bureaus.
As you go through the process, you’ll be able to log in to each and click to dispute any inaccuracies by writing a one- or two-sentence explanation.
What might constitute an inaccuracy?
This could be anything from a misreported late payment, an account you didn’t know about, to a collections account you already paid off.
These inaccuracies can come back to haunt you later on, so make sure you go through your report carefully to spot anything that doesn’t look correct.
5. Pick the right time to borrow money and apply for new credit
Very Important: Don’t apply for any new credit or loan products before you apply for private student loans.
That is, be cautious about future borrowing.
Applying for new credit affects ten percent of your score.
Many parents in our Paying For College 101 Facebook group panic when they think the time to apply for loans is fast approaching.
The advice we give them is to calm down, and not bother to apply at a time that is way earlier than they have to.
The time to apply for private student loans is during the short time period right before you are ready to borrow those loans.
What parents can do ahead of time is get their paperwork ready and research lenders; know their rates and the features of the loans they offer.
What if you want to find out your rate early?
Call the lender and ask for score ranges for different percentage rates.
If you want to see your current score, order a credit report at myfico.com.
Summary Of The Fastest Ways To Raise Your Credit Score
Speedy tips to boost your credit:
- The faster you dispute inaccuracies on your credit report, the faster disputes can be fixed.
- View and download your free credit reports from annualcreditreport.com.
- Don’t close older credit cards. It can reduce your score.
- Pay down your credit cards with the lowest limits first. A small payment will pay off a larger percentage of the card.
- Don’t apply for private loans until you’re ready to borrow them. You may reduce your credit score unnecessarily.
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