How to Increase Your Credit Score by 100 Points in 6 Months

Thursday, May 2, 2019, 6:00 AM | Leave Comment

Whether you are planning on buying a house or just want to better interest rate on a car loan, increasing your credit score is the key to getting better terms and better financing rates.

If you’re planning on increasing your credit score and you’d like to do it by at least 100 points in the next six months, start here with these five steps.

How to Increase Your Credit Score by 100 Points in 6 Months

  1. Make sure you know your credit score

    The first step to increasing your credit score is knowing what your score is currently. If you are under 600, increasing it to 700 will definitely get you better terms and interest rates. You may be able to qualify for certain loans that you couldn’t with a credit score of 600. If you have a credit score of under 500 or 480, increasing it by 100 points may or may not get you better terms, however, with a credit score under 450, you’ll have to work extra hard to even qualify for a loan. There are lenders out there that will loan on lower credit scores, but you’ll be making up for it in higher interest fees and stricter terms. Increasing it and waiting just a little bit is really the better option.

  2. Get a copy of your credit report and fix any errors

    Get a copy of your report from one of the three major credit reporting agencies, Experian, Trans Union, or Equifax. Technically, they are all owned by the same company, but they do have different scoring methods. You might be a 600 with one and a 590 with another. Go over the report and correct any errors that you might find. Perhaps they don’t show a payoff from a credit card 10 years ago or maybe they got your name wrong during a credit check. If there’s anything that cannot be corrected add a letter of explanation along with it and be ready to present it to creditors when you apply for a loan. There are some things that just cannot be corrected, even after he you’ve done your due diligence in trying.

  3. Read More: Questions to Ask When Getting a Home Loan

  4. Commit to paying every bill on time or early

    Starting now, pay every single bill including medical bills, utilities, loans, student loans, car payments, and any other monthly bill on time. Creditors will check everything including your rent payment and history. The longer your history shows consistent an on-time payments the higher your credit score.

  5. Pay off small loans first

    Make an account of all of the loans you have, their minimum payment, and the balance. Choose the lowest one first and pay it off as quickly as possible. Then, take the money that you use to pay off that loan and roll it into the monthly payment for the next loan. If you can get at least half of your loans paid off within six months, you can increase your credit score dramatically. Do whatever it takes to pay off that loan including getting a second job, selling some items, or asking for a raise. You want to get these loans paid off as quickly as possible. However, if it’s a credit card payment, don’t cancel the card so that it shows you still have available credit as long as you are diligent enough not to add any more to the balance.

  6. Related: Best Financial Advice for Home Buyers

  7. Pay off small balances before the due date

    If you are diligent enough to pay off any credit card purchases before the credit bill comes due, this will increase your credit score. Let’s say you put $20 on a credit card at the grocery store. As soon as you get home, put $20 towards that card and pay it off before you even get the bill. This will show creditors you are diligent in paying off credit cards as quickly as possible.

  8. Read More: 5 Ways to Get Free or Easy Money for a Down Payment

The key is consistency and diligence. If you work hard and are consistently paying off loans, paying things on time, and not adding to your debt, you will quickly raise your score making home loans more accessible and interest rates more favorable.

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