Your credit scores affect many facets of your life, from mortgages to auto loans to employment.
So, whether you are looking for a forever home, a new job, or a new credit card, having good scores will be vital for your financial success.
If your credit scores are less than stellar, unfortunately, there are no fast fixes or magic potions to raise your credit scores instantly. But, there are several steps you can take to quickly improve your credit. It can take as little as 30 days for some people to improve their credit. For others, it may take several months or years, particularly if they have glaring issues in their credit reports.
If you are reading this article, then your credit score is probably not where you want it to be. While it may seem impossible to build it back up, with some patience and consistency, your credit will surely go back up eventually. In the meantime, let’s go over several tips and tricks you can leverage today to bring your score up as soon as possible.
- Five main components make up your credit scores, including your payment history, amounts owed, length of credit history, new credit, and credit mix.
- Some steps you can take to remedy your credit scores in 30 days or less include paying down revolving balances, disputing errors on your credit reports, and keeping your credit accounts active.
Breaking Down Your Credit Scores
Five factors affect your credit scores. Before diving into various ways to improve your scores, you need to understand each factor and how they impact your scores to help you prioritize your efforts.
Payment History (35%)
Your payment history records how often you pay your bills on time. If you want to maintain positive payment history, you need to make on-time payments in full every month. Missing even one payment or making a single late payment can hurt your credit significantly.
Amounts Owed (30%)
How much you owe and the percentage of your available credit used, or credit utilization ratio, makes up a significant portion of your credit scores. The consensus is to keep your credit utilization below 30% of your total available credit to show that you are responsible with credit, however I like to keep mine below 10-15% to be safe. For example, if your combined line of credits amount to $20,000, then you should not be using more than ~$6,000 at a time.
Length of Credit History (15%)
The longer your credit history is, the better. If we compare your credit history to job applications, similar to impressing the hiring team, you need to show lenders that you have experience managing credit responsibly. Once they check your credit history, they will then determine whether to give you a loan or not. The average age of your credit accounts affects your overall score, so avoid closing old accounts or applying for too many new credit accounts, and keep all your credit cards active if possible.
New Credit (10%)
When you apply for new credit, that can cause your score to drop up to five points. Sending out multiple credit applications simultaneously can cause a negative compounding effect. That is because when you apply for new credit, the lenders will pull a hard inquiry on your credit reports to check your credit, which stays on your credit report and could hurt your score if you have too many in a short period.
Credit Mix (10%)
Having a good mix of revolving credit accounts, such as credit cards, auto loans, student loans, and mortgages, can show lenders that you have experience working with different types of credit. However, this is not an invitation to go crazy on credit applications. Bolstering your credit mix should not be your main reason for applying for new credit.
Your credit report and score reflect how well you can handle these five factors. At a high level, if you have a score of 800+, you have exceptional credit. If your score is 670+, you have good credit. If your score is between 580 to 669, you have fair credit, and if it is below 580, then you have poor credit.
Note that there are different types of credit scores, and they can fluctuate every month depending on how often lenders report your account activity and which credit bureaus lenders use. Generally, you do not need to worry if your score rises or drops by several points. However, if a big change occurs, that is when you should get concerned.
How Often Are Your Credit Scores Updated?
Although some services show you updates to your credit scores every week or month, that does not mean your scores have necessarily changed. Your credit scores get calculated based on the information that creditors report to the three major credit bureaus – Experian, Equifax, and TransUnion.
Creditors will usually report to the bureaus once every 30 to 45 days, but they may not report to all three bureaus at the same time. So, for example, your credit score may get updated with recent reporting on Equifax, but not the other two bureaus. With that said, if there is new information from your creditors or if you have a lot of accounts with different creditors, you may be able to get updates more regularly.
Here’s How to Improve Your Credit Score in 30 Days
While it may be difficult to get your score up to where you want it to be within a 30-day timeframe, here are six credit-positive moves you can make to push your score up quickly. While everyone’s situation will be different, taking these steps can help move the needle in your favor.
1. Pay Down Revolving Balances
If you have the means to pay off some of your debt, do it strategically. Given that amounts owed make up a third of your credit scores, you need to focus on lowering your revolving balances quickly.
When we say revolving balances, we do not mean installment accounts, such as your mortgage payments or auto loans, as those have a lower impact on your scores. This tip is more geared towards the amounts owed on your credit cards and other high-interest debt.
If you are unable to tackle your credit card debt right now, at the very least, you should aim to bring your balance down to less than 30% of your credit utilization before the billing cycle ends. Alternatively, you can make several payments throughout the month to keep your utilization ratio low.
When your credit card issuers report to the credit bureaus, you want to make sure your overall balance is low since that is what gets used to calculate your score. Although this step may not be feasible for everyone, this is the fastest way to boost your credit.
If you have trouble making on-time payments, set calendar reminders or automate your payment process. You can also add alerts on your credit card accounts to give you a heads up if your balance becomes too high.
2. Remove Recent Late Payments
Here’s some bad news – a single late payment can lower your credit score by 60 to 110 points, depending on your current credit score. For example, if you have a 680 credit score, a 30-day late payment can cause your score to drop by 60 to 80 points. On the other hand, if you have a 780 credit score, your score can drop by 80 to 110 points. In other words, a single late payment can make the difference between a person with a 780 score vs. a 680 score.
If you want to improve your credit score, you need to avoid making late payments. Whether it’s your rent, utilities, cellphone bill, etc., always make on-time payments in full. But, this is easier said than done, and it’s easy to miss a payment on accident.
With that said, there are several methods you try to can remove a late payment.
If you have been a responsible and steady borrower who happened to forget to pay a bill once, pick up your phone and call your issuer immediately. On the call, ask the customer representative to forgive your mistake and not report it to the credit bureaus. While you may still have to pay a fee, at least your credit will not take a hit. I have tried this one time at Bank of America and was able to get my late payment forgiven and the fee waived, but note that this will probably only work once or twice.
Another option is to send a goodwill adjustment letter to your creditor. As the name suggests, you are asking your creditor to remove negative data from your credit report out of kindness and compassion. In exchange, you will take full responsibility for paying your bills. This option is different from a dispute, which is for inaccurate information. If that does not work, you can attempt to negotiate with your creditor by agreeing to sign up for automatic payments.
Typically, you will have 30 days to make your payment before your creditor reports the late payment to the credit bureaus, though some lenders will give you 60 days. If you fail to pay your debt by the deadline, the late payment will stay on your reports for seven years.
3. Dispute Errors and Collections on Your Credit Report
According to the Federal Trade Commission, at least 20% of consumers have errors in their credit reports, including mistakes like inaccurate late payments and fraudulent accounts. So, even if you do not think there are any errors in your credit reports, it is worth taking a look for wrong information.
You are entitled to one free credit report from each of the three major credit bureaus once a year through AnnualCreditReport.com by federal law. While not every error will hurt your credit scores, derogatory information like false late payments and collections accounts can cause major damage. Because it is difficult to tell which errors are impacting your credit scores the most, make sure to review all three reports often.
You have the right to dispute inaccurate information with the credit bureaus under the Fair Credit Reporting Act. The Consumer Financial Protection Bureau provides dispute instructions for each bureau. If the credit bureaus find evidence that supports your claim, the information will get removed or modified, which should then improve your credit scores.
If there is a collection account report on your credit reports, do not just pay it off as a paid collection will not boost your score. Instead, negotiate a written “pay for delete” agreement with the collector to get the account deleted.
How much and when your credit score changes will depend on what you are disputing. For example, removing an inaccurate late payment can increase your score by a lot, while disputing a wrong address may not do anything. Some disputes may take a couple of days or weeks. Others can take up to 30 days, particularly if you get asked to provide additional information.
4. Focus on Utilization
Credit utilization makes up a large component of your credit score and is an area where you have more control. When you use up more of your available credit, your utilization ratio increases, which affects your credit scores. Reducing your balances is one of the most effective ways to build your credit back up. If you have no derogatory marks on your reports, such as delinquencies, that is a guaranteed way to raise your scores quickly.
There are two main ways to lower your credit utilization:
Decrease Your Credit Utilization
As we mentioned earlier, the fastest way is to pay down your credit card balances. If you can make a large payment on your credit cards in this billing cycle or pay them off completely, this will help lower your revolving debt and thus improve your credit utilization.
Raise Your Credit Limit
If you cannot afford to pay down your balances, your other option is to increase your available credit. For example, if you have $500 in debt and a credit line of $1,000, your utilization is 50%. But, if you can double your credit limit, your utilization drops to 25%, which puts you in a much better position in terms of credit utilization.
To raise your credit limits, request your credit card companies to increase your credit with a soft inquiry rather than a hard inquiry since that will go on your credit reports and cause your score to dip slightly. If you have good payment history and fairly low balances, you will have a good shot at successfully raising your limit. Once you get approved, avoid using up your new credit. Instead, try to keep your spending level the same so you do not cancel out the effects of boosting your available credit.
5. Keep Your Cards Active
If you are juggling multiple credit cards, it is easy to forget to use some of your cards. If you have been neglecting a couple of cards, charge small balances to them every few months to keep them active. For one of my credit cards, I charge my Spotify subscription to it every month to keep it active. Creditors want to see that you regularly use your available credit and pay off balances responsibly.
Your accounts may get closed due to inactivity if you do not use your cards for more than 6-12 months. Because your length of credit history gets averaged out across all your credit accounts, if one of your older accounts gets closed, that can cause your score to drop. So, keeping all of them active will add to your credit mix while maintaining your length of credit history.
If you struggle to use all your cards regularly, consider setting alerts to remind yourself to use your cards every once in a while. If you are worried about overspending or paying high-interest rates, try paying for something small and then paying the balance off right away.
6. Get a Balance Transfer Credit Card or a Peer-to-Peer Loan
If you struggle with constant credit card debt, apply for a balance transfer credit card or a peer-to-peer loan. Both tools can get used to pay off your existing balances and typically come with lower interest rates.
But, you should only apply if you think you have a good shot of your application getting approved. That is because your score can get impacted slightly when you send in applications for new credit. If your application gets approved, keep in mind that you need to pay your balance off before your promotional rate goes back up and avoid closing old credit cards.
The Bottom Line
Knowing what steps you need to take to boost your score in 30 days is helpful, but the road to good credit is a long game. You will need to work on building and maintaining your credit regularly. Luckily, building good credit habits gets easier over time. With some practice, it may become effortless to maintain.