What Can I Do To Improve My Credit Score As Quickly As Possible?

Knowing that your credit score is not up to scratch you are thinking: How do I improve my credit score? We discuss how credit scores are calculated and give you hints on the best actions to take to improve your credit score.

Credit Scores, also known as your FICO are calculated based on information on credit reports maintained by the 3 credit bureaus (Experian, TransUnion and Equifax). The FICO scoring model is based on a weighting allocated to 5 different categories of information:

35 percent = Payment history. Do you and have you paid your bills regularly and on time?

30 percent = Amounts owed. This is your utilization ratio, comparing what you owe to your available credit.

15 percent = Length of Credit History. Bear this in mind before closing old accounts.

10 percent = New Credit Accounts. Maintaining a positive recent history can impact your score positively.

10 percent= Types / Mix of Credit. A spread of different types of credit is generally viewed as positive.

Your first port of call is the Annual Credit Report website to get your free credit report. Don’t be taken in by other websites that want you to pay for a monthly monitoring service before you get your report.

Print your reports and use a highlighter to mark any errors in your reports and another color to mark accurate information that is negatively affecting your score. It is believed that as many as twenty five percent of reports include errors of some kind. Now list the errors, ranked in terms of their impact on your score.

Be sure to tackle the biggest problems first to ensure the best and fastest cooperation from the bureaus. Check for items that should have been removed by their expiry date of seven years and challenge these. Having identified issues you want to dispute you only have to challenge it by sending a credit challenge letter to the credit bureau. They have to get the account issuer to provide corroborating evidence. Many companies are not always able to provide the information and in that case the negative issue will be removed from your report. Start with the oldest accounts for the best chances of success.

Similarly list the items that negatively affect your score in order of impact based on the scoring model mentioned earlier. Prepare a budget and stick to it, do not spend more than you earn. Your priorities should be the following:Make sure that you pay your bills on time, don’t wait for demand letters before paying.

Reduce your credit card and other charge account balances. Don’t be tempted to close your accounts as your utilization ratio is based on all credit available to you and closing a credit card account could have a negative effect, but once you’ve paid it up do not use the credit. Keep your oldest accounts up to date, but do not close them as they provide a record of a long credit history.

Open new charge accounts to build a good recent credit history. Having paid down existing debts and removed negative items from your reports you have to get positive activity onto your reports. This could be difficult as lenders will be hesitant to provide credit to people with a poor record. Lenders such as “rent to own” stores and secured credit card providers will give you easy access to credit and this will in turn boost your score. But only if you use the credit wisely and pay your bills regularly. Irresponsible behavior will only decrease your scores again. Fixing financial mistakes made over a long period of time is not a quick or easy process and having done it once, you should hopefully not have to ask the question “how do I improve my credit score” again.