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Seven easy hacks to quickly boost your credit score

Negative marks may stay on your credit report for several years, but it's possible to raise your score by 10-20 points starting this month.

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    Consumer credit cards are posed in North Andover, Mass (March 5, 2012). It's possible to quickly boost your credit score if you know the right techniques.
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Having a good credit score is important for everything from getting a good rate on a car loan to getting approval from a landlord for an apartment. But while it's easy to let your score slip by missing a payment or suffering from identity theft, it can take years to build that number back up.

However, no matter what happened, here are some easy ways you can see your score jump at least 10-20 points starting next month, and continuing as long as you keep cleaning up the past and practicing responsible credit behavior.

Get Current on Payments Immediately

While last month's missed payment may have caused a drop of 60-100 points (depending on how high your score was to begin with), making all of your payments on time this month — and keeping up with them — will likely help improve your score by 10-20 points in a couple months. Be aware that you would see steeper score drops (possibly over 100 points) if you paid late for two months or more, made late auto loan or mortgage payments, or paid more than one account late.

Keep your score improving by several points every month this year, until about a year of good payments has restored your credit.

Lower Your Credit Utilization

When you charge a card up to its credit limit, that's called "high credit utilization." If you don't pay it all off by the next payment due date, you might notice your score drop 55-110 points.

A recent VantageScore report showed that reducing your credit card balance from 50% to 30% of the total credit available on that card can improve your score by up to 50 points. The lower your balances, and the lower your credit utilization, the better your credit score. If you must charge something and can't pay it off by the next due date, spread the charges out across different card accounts to see a substantially lower drop of 30-80 points.

Don't Close Old Credit Card Accounts

The point is to decrease your credit utilization, or the amount of credit used compared to the amount of credit extended to you. If you pay off a card balance, leave the account open so the age of the account and its available credit limit can help increase your credit score a few points every month as time goes on. The VantageScore report showed that if you closed the account, your score could drop between 10 and 30 points, depending on your situation.

Get Your Card Limits Increased

If you already have good credit (above 661) and low or no balances, it's easy to decrease your credit utilization to get up to a 50-point bump. Just call up your existing credit card companies and ask for a credit limit increase. It's a simpler, faster way to increase the amount of credit extended to you and decrease your credit utilization, without getting the 10- to 20-point "hard inquiry" credit ding from applying for another credit card you may not need.

Don't Automatically Pay Off Collections

An account is in collections when the original creditor turns your account over to a collections agency after a certain amount of missed payments, a status that can remain on your credit report for up to seven years from the first missed payment. Paying off collections in full causes a score bump in some circumstances, but can be actually detrimental in others, according to credit expert John Ulzheimer.

Basically, if your debt is less than seven years old, you should explore options for paying it back. (That number varies by state and the type of debt.) That might mean paying in full. But you could also elect to settle a debt for much less than what is owed by working with the collections agency in exchange for a "paid" or zero-balance status report to the credit bureaus. If you have more than one collection on your credit report, paying off (or settling) the most recent one will help your credit score the most.

If a collections account is seven years old and has already fallen off your credit reports, it's no longer affecting your credit score.

However, if a collections account is older than seven years and has already fallen off your credit reports, it's no longer affecting your credit score. What's more, you can no longer be sued over this debt, and you can legally tell collections agencies to stop calling you. Paying in full could put that debt back on your credit score, but reporting agencies could be slower to note that you actually paid it off. Even worse, making partial payments could not only put it back on your credit report, but also extend the statute of limitations for creditors to take legal action against you.

Some new credit scoring models from FICO and VantageScore do not view medical collections or paid collections negatively, so you will see the biggest bump in your credit scores from these scoring models. However, most lenders still use older FICO scoring models that penalize you for the old account, even when it's paid off. And you can never know which scoring model a lender is using.

Become an Authorized User

Ask someone with excellent credit — like a trusted parent — to make you an authorized user on their credit card account. Then you can take advantage of that person's higher credit limit and good credit history for an immediate credit bump the next month. You don't even have to have the card; however, this hack works even better when you use the card in your name to make small purchases. When you pay it off completely every month before the due date, you'll establish a positive payment history.

Just watch out, because if the cardholder has a negative account history or incident, that will affect your credit negatively, too.

Check Your Credit Reports for Errors

A serious payment or collection error on your credit report could hold you hostage to a low credit score for a long time. That's why you should always check your credit reports for errors at least once per year at AnnualCreditReport.com. If you can't identify a collection or negative mark as yours (the payment dates, account numbers, or creditor is wrong or not recognizable), dispute the error with the credit bureau. Also dispute the error with the collection agency, which has to prove the validity of the debt or remove the record from your credit report. Unfortunately, this process could take awhile because the credit bureaus have 30 days to respond by law.

The sooner you find and dispute an error, the easier it will be to resolve. Send your dispute by mail, along with any documentation showing you paid the bill or that the debt isn't yours, and your score may increase substantially.

This article first appeared in DealNews.

The Christian Science Monitor has assembled a diverse group of the best personal finance bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

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