Improve A Credit Score Quickly

Posted on | September 18, 2008 | Leave a Comment

Your credit score is a number between 300 and 850 that shows lenders how risky a borrower you will be, based on your past history. In the overall breakdown of that credit score number, 35% is based on your payment history, 30% is based on how much credit you’ve been offered but haven’t taken, 15% is based on how long you’ve had a credit history, 10% is based on the amount of debt you’ve accumulated over the last year, and 10% is based on what kind of credit you have, such as installment vs revolving and secured vs unsecured. There are many ways to improve low credit scores, although it does take time and capital.

The history of identity theft shows us that criminal activity can cause a bad score but the most common way people get poor credit scores is to miss a credit payment or to pay late. At the time you may think, “Who cares if it’s just a few days late? They’re still getting their money.” However, once that lateness or missed payment is reported, a credit score can drop as much as 100 – 150 points according to one leading credit repair attorney and will take 24 months to be fully restored. To remedy the situation, be sure you bring all your credit accounts current, paying off late payments and always paying at least the minimum monthly fee, rather than waiting to pay it all at once. For many people, paying automatically through debit or setting a monthly cell phone reminder a week in advance are the best ways to ensure bills get paid on time.

Experts say there are three types of good debt that can actually improve a credit score, if approached wisely. One is a mortgage with a 20% down payment, which typically remains fixed and stable, while showing your ability to manage a big financial commitment. Another is a school loan, which often has guaranteed low rates and no interest payments due until graduation. Putting down 10% or more on a car loan also shows that you are responsible. Remember that a closed credit card account will still show up on your report, so it’s best to keep that account open once it’s paid off. Just make small charges and timely payments on it, such as using it to fill up your car with gas. Soon, your credit report will be seeing an influx of positive reports coming in, which can help counter-balance the negative reports.

The most recent activity will weigh the heaviest on your credit score. For example, 40% of a credit score is based on the last year, 30% on the last 13-24 months, 20% on the last 25-36 months and 10% on the last 37-plus months. The good news is that the negative credit will not stay on your report forever. After 7-10 years from the time your accounts are closed or satisfied, the information will be removed. Good credit, by contrast, will remain indefinitely on your profile. If you think you cannot make the adjustments yourself, then you may want to hire a credit counselor to go through your credit report, make the necessary adjustments, bring your files up to date and set you on a path to success.