Credit scores – they’re basically report cards for adults. And for better or worse, your credit score dictates your creditworthiness. Banks, insurance companies, and private lenders will all use your credit score for determining whether or not you qualify for a loan. As you may already know, the higher your three-digit grade – which ranges from 300 to 850 – the better. Below, we’ll briefly talk about what qualifies as a good score, as well as teach you the fastest ways for bringing your credit score back to a respectable number.
What is a “Good” Credit Score?
At 751 or higher, you can expect to receive extremely competitive low-interest rates from lenders. Anything between 711 and 750, and you’re still looking at pretty low interest rates. A credit score of 651 to 710 qualifies you for moderate interest rates, while anything from 581 to 650 qualifies you for high interest rates.
Anything less than 580, and there’s a good chance that you’ll A) Be denied the loan, or B) You’ll receive the very highest interest rates legally allowed in the United States. If you can keep your credit score at a minimum of 711, then you’ll not only qualify for higher loans, but you’ll also pay far less in interest on them.
First and foremost, start by disputing errors through TransUnion, Experian, or Equifax. Mistakes happen, and if you can fix these foul-ups early, it’s definitely going to help you increase your credit score fast.
There’s no denying that when you got laid off last year, you may have had to stop paying your credit card bill. But there is a possibility that a creditor can “erase” any debt that went to collection. The catch? You will have to pay the balance in full on the spot. Make sure that your creditor agrees to this in writing before you make the payment. Otherwise, yes, you’ll be paying off your debt but it’s not necessarily going to increase your credit score.
Get a Credit Card
You’re probably thinking, “Wait a minute! Credit cards are what got me into this mess. Won’t getting another just makes thing worse?” It’s certainly possible, but it’s also the fastest way to increase your credit score. Just remember: don’t charge too much and always pay your bills on time. In other words, just be responsible.
Having trouble getting a traditional card due to a low credit score? Try a secured credit card instead. With a secured credit card, you pay upfront. So if you pay $200, and you now have a secured credit card with $200 on it. Think of it like a pre-paid debit card, except the main difference is that it has to potential to help (or hurt) your credit score. With these, the same advice applies: don’t max it out and make your monthly payments on time.
Increase Your Credit Limit
Be very careful with this one. It only works if you trust yourself to not overspend your new line of credit. Basically, just call your creditor and ask for an increase in your limit (i.e. making your credit card good for up to $5,000). The reason this tip works is because it lowers your debt-to-credit ratio (assuming that you don’t spend any more than you’ve normally been spending).
There’s no magic formula that’s going to increase your credit score overnight. The most important thing is that you stay persistent on these strategies and trust that they’ll work. While it’s impossible to say exactly when you’ll be back at a reasonable credit score, know that you can be back in the mid-600s within a year or two if you work hard, avoid taking on more debt, and follow the strategies above.