For the fastest positive impact on your credit score, you should be looking to fix any errors on it. Once that’s done, you can start effecting other positive changes, but it will take time to see results. How long it takes will depend on what your current credit score is. Anyone with a rating that’s under 700 can really benefit from some positive changes to their financial habits.
Your best bet is to focus on due dates. Make sure everything is paid on time, and you will start to see positive effects from that in about six months. That’s how long it takes to create a track record that can have an effect on your credit score. You may want to set up bill payment alerts or even automatic payments on some of your bills. If you missed the deadline on a payment or two, you don’t need to worry too much. These will only create a minor ding on your score and not seriously impact it. Just be sure to keep paying on time every month.
How much you are using of your available credit compared to how much available credit you have is what makes up the credit utilization ratio. This accounts for the second largest factor on your credit score. Lenders are looking for borrowers that don’t accrue huge balances and who will be able to pay off their balances in full on a regular basis. Your most recent balance will tell you how close you are getting to your max balance. If you can keep your credit utilization under 30%, then you will enjoy a major boost to your credit score over time. Creditors aren’t just looking at how much you owe on one card, but all your cards together and their relative limits and balances.
Are you not sure whether to pay on a credit card or a student loan with some extra money? You should definitely choose the credit card. If you can get rid of a few thousand dollars of credit card debt, you may see an increase of 100 points. If you get rid of ten times that amount in student loan debt, you won’t see hardly any change in your credit score.
How long you have had your credit history accounts for some of your score as well. You may not be able to make much of a difference here, but you can demonstrate responsible spending by using your cards every so often and paying them off right away. If you don’t qualify for a credit card, then you can get a secured credit card that will be backed by a bank deposit and not your credit score.
Some of your score is determined by how much new credit you accrue. You can experience a dip on your score if you open too many new accounts close together. That can seem like risky financing. You want to keep from applying for several credit cards at once, as that can hurt you as well. Store credit cards can hurt your credit score even more, so be careful about what cards you choose and why.
Finally, the credit scoring formula will also account for the mix of credit you use. Credit cards, auto loans and mortgage all create a nice mix when you add them up. You don’t want to open an account for the sake of improving your credit mix, though. That looks like risky behavior as well.
Need help challenging errors on your report?
Get expert advice from our Credit Strategists for free.