When it comes to having credit cards, January and February are probably people’s two least favorite months.
January’s credit card bills are jammed full of charges for holiday gifts and entertainment expenses in December.
February’s Mastercard and Visa bills are met with a frown because they’re filled with charges consumers made in January because they were paying their January credit card bills.
And the dance goes on.
The purpose of this article isn’t to scare you about credit card debt enough to get you to find a pair of scissors and cut your cards up. Of course, it’s better not to have any credit card debt and a credit score of 850 – in a perfect world.
But, our society and economy are driven by credit. In acceptance of that, here are seven ways to quickly improve your credit score.
Use your credit cards strategically.
Most of us have more than one credit card (the average American has four). Many people will use just one card until they reach their credit limit and then move on to the next card. This strategy only hurts your credit score.
A practice that credit bureaus reward you for is using less than 30% of your limit on any one card. Those card users with the highest credit scores typically use less than 7%.
You can do this by paying down the balance before the billing cycle ends and before the card issuer reports it to the credit bureaus. One way to do this less painfully is paying against your balance several times throughout the month.
Ask for higher credit limits.
When your card issuer raises your credit limit, and your balance remains the same, it lowers your percentage of credit used, which can improve your credit. If your income has risen or you’ve had more years of positive credit experience since you received your card, you have a good chance of getting a higher limit.
Dispute credit report errors.
Mistakes being found on credit reports are more common than you think. If there is a mistake on just one of your credit reports, it could be pulling down your credit score.
You are entitled to one free credit report from the three major credit bureaus each year. Go to a AnnualCreditReport.com and request yours so you can check for mistakes. If you find any, dispute them. This can help you quickly improve your credit.
Don’t ignore bill collectors.
Collection agencies get paid by credit card issuers (and other lenders) for collecting unpaid debts. When you don’t respond, they will report your delinquent status to the three credit bureaus.
Work with the collection agency to pay off your debt as soon as possible. If possible, negotiate a reduced settlement amount. By cooperating with them and paying as agreed, you may be able to persuade the collection agency to stop reporting the debt once you’ve paid it. It may take a few months, but it can bump up your credit score.
Use a secured credit card.
Another way to positively impact your credit is using a secured credit card.
Secured cards are backed by a cash deposit you pay upfront, which becomes your credit limit. You use the secured card just like a regular credit card, and your on-time payments will help restore and build your credit.
The goal is not to have another credit card; it’s to build a record of keeping your balances low and making payments on time.
Get credit for rent and utility payments.
Rent reporting services can add your on-time rent payments to your credit reports. As a result, would-be creditors may see a long history of consistent payments, which can help your credit score.
On-time phone and utility bill payments added to your credit score by Experian Boost can also help. You link your bank accounts to Boost, which then scans for streaming services, like phone, utility, and rent payments. You benefit when a creditor pulls your Experian credit report and sees your additional payment history.
Pay your bills on time.
We saved this one for last because it’s not just the most obvious; it’s the single biggest determinant of your credit score.
Late payments can stay on your credit report for up to 7 ½ years if you pay late. Call the creditor immediately if you miss a payment by 30 days or more. Ask them to consider no longer reporting the missed payment if you pay it by an agreed-upon date. Every month an account is marked delinquent hurts your credit score.
A final thought
Misusing credit can haunt you financially and mentally for years. The stress of being chased by creditors and denied credit can be damaging in many ways. However, following the seven steps above can help restore and rebuild your credit faster than you may think and provide you with much-needed peace of mind.