In 2011, 62.3 percent of people had a credit score between 749 and 300, according to the MyFICO blog, managed by the Fair Isaac Corporation. Most people in that range fell between 650-699 (12.1 percent) and 700-749 (15.5 percent).
Those are decent credit scores. Within that range, you would get approved for most credit products with acceptable interest rates. I should know. I bounced around between 650 and 749 for most of my adult life – until I decided to boost my OK credit score into greatness two years ago. Today, I fall into the 800-850 range, shared by 18.3 percent of the U.S. consumer population last year. With that credit score, I get the best offers and the best rates on almost everything.
It wasn’t easy, but I learned a few tricks to boost a credit score quickly along the way. Here are my favorites.
1. Dispute errors…even the small ones
Your first step: Order a copy of all three credit reports from the major players – Equifax, TransUnion, and Experian. You can order one free copy per year from each credit bureau through AnnualCreditReport.com. Order your reports, print a copy, and start reviewing.
Look for the big errors first, things like accounts that don’t belong to you, paid balances that are showing as unpaid, and credit limits that are reported incorrectly. Highlight each one of these errors and then dispute them with the credit bureau. You can file a dispute online through each of the credit bureaus’ websites:
- Equifax: Online Dispute
- Experian: Dispute Your Credit Report Online
- TransUnion: Initiate a Dispute on Your Credit Profile
After I disputed the big stuff, my financial adviser told me not to sweat the small things like credit inquires or incorrect dates. I didn’t listen. Instead, I disputed everything, thinking every point mattered. If a creditor pulled my credit without my permission, I disputed it. If my credit card company reported my balance higher than it should have been six months ago, I disputed it. In total, I raised my credit score 88 points by disputing every little error.
By law, the credit bureaus must investigate valid claims and remove inaccurate information, but if you run into trouble, complain to the Consumer Financial Protection Bureau.
2. Add missing accounts
Once I cleaned up my credit history, I started looking for ways to build it. I did this by looking for credit lines that could have been included in my file, but weren’t. For example, I’ve had a cell phone in my name for 10 years, but those payments didn’t appear on my credit report. So I made a list of every company I paid monthly, contacted the companies, and asked them to report my payment history to the credit bureaus. Below are the types of companies that were willing to report on my behalf:
- Wireless provider
- Cable and Internet provider
- Utility company
- Telephone company
Keep in mind, however, that no company is required to report your payments, on-time or not, and many utility companies won’t. So when you approach companies like those above, you’re asking for a favor, not making a demand. To learn more about utilities reporting to credit agencies, see "The Movement to Put Utility Payments on Credit Reports" from the New York Times.
3. Pay down your highest balance
If you’re carrying balances on several credit cards, it’s tempting to pay off your smaller balances first, thinking that will motivate you to attack the larger debts. But if you’re trying to boost your credit score quickly, you should start by paying off the credit card with the lowest available credit limit. For example, say you have two credit cards. One credit card has a $1,600 limit with a $400 balance, which means 25 percent of your available credit is being used. The second card has a $1,000 limit with an $800 balance, meaning 80 percent of your available credit is being utilized. In this case, the second credit card is doing worse damage to your credit score because of its higher utilization ratio. Pay it off first and your credit score will improve faster.
4. Pay by your report date, not your due date
Obviously, if you want good credit, you’ll pay your bills on or before their due date. But if you want to maintain a high credit score, it may be a good idea to pay some earlier – before balances are reported.
For example, say your credit card company reports your balance to credit reporting agencies every month on the 10th, but your bill is due on the 20th. At the first of the month you charge $5,000, but pay your bill in full on the 20th. As far as you’re concerned, you’re not carrying a balance: you got your bill and paid it by the due date. But if someone checks your credit on the 15th, the credit reporting agency will report you have a $5,000 balance.
I called my creditor and asked what day they reported my payment history, which turned out to be a week earlier than my due date. From that moment on, I’ve made my credit card payment before the reporting date, not the due date. That means if my credit is pulled, I always show a zero balance on my plastic.
5. Blend your credit
Three years ago I applied for an auto loan and was denied because I didn’t have a good mix of credit types. Lenders like to see that you can manage different types of credit and handle multiple accounts at once, but I only had two major credit cards. So I applied for a small installment loan (one with fixed payments and an established due date) from my bank and paid it back over 12 months. Adding installment credit to my already established revolving (credit card) credit lines boosted my credit score by about 30 points.
6. Keep using your credit cards
Several years ago I heard a nugget of financial wisdom, “When you’re rebuilding your credit, tear up your credit cards.” Now, if you’re struggling to manage your spending habits, this is sound advice, but if you’re just trying to raise your credit score, cutting up your credit cards can be more harmful than helpful. For example, I spent nearly a year trying to improve my credit score. During that time, I put a small amount on both of my credit cards each month and then made sure I paid the balance on time. While I was disputing errors and working on building up new credit, I was also adding 12 months of on-time payments to my existing credit score.
The bottom line – every month counts. If you can manage your credit cards, keep using them.
7. Ask for a credit line increase
Your credit utilization ratio, mentioned briefly above, is something lenders use to see how you’re managing your available credit. For example, if you have a $15,000 available credit limit and a $400 balance, you’re utilizing little of your available credit, so you look strong. If you carry that same $400 balance on a card with a $500 credit limit, you’ve borrowed nearly as much as you can, making you appear more risky.
While paying off your balance is the best solution, I found a quick fix that improved my credit score while I was paying off debt. I simply called my credit card company and asked if they would increase my available credit limit. They agreed and raised my limit, which lowered my overall credit utilization ratio and gave me a 15 point boost.
8. Protect your credit (once you have it)
Once your credit score is in the prime range, do everything you can to protect it. When you have several late payments, collection accounts, and charge-offs, one mistake won’t hurt you too much, but when you have a near-perfect credit score, even one late payment will cause a big drop. Make sure you pay your bills on time, don’t max out your credit cards, and never co-sign for someone else’s debt. If the co-signer doesn’t pay the bill, your credit could end up worse than ever before.
Angela Colley is a writer for Money Talks News, a consumer/personal finance TV news feature that airs in about 80 cities as well as around the Web. This column first appeared in Money Talks News.