Before knowing how to improve your credit score fast, let us get into the depth of it.
The word ‘credit score’ is not new to anyone of us these days.
Irrespective of whether you belong to financial industry or not, credit score is familiar to all of us.
This is because of the immense importance it has on our lives, to be precise financial lives.
From building portfolio to getting loans, credit score leaves a major impact and is extremely crucial to your financial health.
People nowadays, are extremely dependent on credits.
Therefore, it is imperative that you fully understand personal credit reports as well as your credit score.
In this article, we will discuss about the ways to improve your credit score fast and why it is important for you.
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What Is a Credit Score?
Using credit signifies that you are borrowing a sum that you promise to repay within a stipulated time.
Credit score is actually a statistical method of determining the chances of repaying back the money you’ve borrowed.
The credit bureaus issuing these scores have distinct evaluation systems, depending on several distinct factors.
Primary factors of calculating your credit score is credit payment history, current debt, credit history time, and distinct credit mixes.
It also brings into consideration how frequently you are applying for a new credit.
Since, your credit score is calculated on distinct criteria, 3 major US credit bureaus issue different scores.
Nevertheless, the factors they are based on are the same information on your credit report.
Those 3 major credit bureaus are Equifax, TransUnion, and finally Experian.
You might also come across the term FICO score while referring to your credit score, although these terms are synonymous.
FICO is the acronym of Fair Isaacs Corporation, which is the software creator of credit score rating.
You credit score can vary anywhere between 350 (high risky) to 850 that is considered low risky.
More Information on Your Credit Score Rating and How to Improve Your Credit Score Fast
You can improve your credit score fast only when you are fully aware of it.
Alongside using FICO or credit scores, majority of the countries that include US and Canada, improvises a scale of 0-9 for your credit score.
When it comes to this scale, two of either words I & R precedes each of the number.
I denotes installment credit such as home loans or automobile financing.
R stands for Revolving credits such as a credit card.
Each distinct creditor issues their own rating score for distinct individuals.
For example, you may have a R1 rating for your Visa, while have R5 for MasterCard.
It happens when you ignore or delay your MasterCard bills for months.
While R & I are rating systems are still used, the current trend is to shift from this multiple credit rating scale.
That is why FICO, which is a single digit rating score is used.
You can refer to this score to improve your credit score fast.
However, the scale goes like this:
R0 / I0: You are new and do not have sufficient credit data for assessing your risk rating.
R1 / I1: You repay back by a month.
R2 / I2: You repay back by 2 months.
R3 / R3: You repay back by 3 months.
R4 / I4: You repay by 4 months.
R5 / I5: You didn’t repay for 4 months, but officially is not ‘9’
R7 / I7: You struggle to make payments.
R8 / I8: The item was sold to collect the debt.
R9 / I9: You are officially declared bad debtor and payment collection is impossible.
How Is Your Credit Score Made Up?
Prior to knowing how to improve your credit score fast, you should know what it is made of.
When you are borrowing money, the lender passes the information to the credit agency.
This is detailed in the form of a credit report that shows how well you could handle your debt liability.
Going through the information that is provided in the credit history report, issuing bureaus can then make up your credit score.
These are based on five distinct important factors.
- Past Credit performance
- Current debt level
- Timeline of the credit
- Distinct types of credit taken
- Pursuit frequency for new credit
Regardless of the fact that these five aspects are preferred while making credit score, they do not have equal weight.
Hence, it is easy to assume that your credit score is dependent on the repayment of your previous credits.
There are several ways how to improve your credit score fast, however, the most important factor is repayment.
Having a history that states you repaid back your debt fairly and quickly will improve your credit score fast.
There are few other factors to improve your credit score fast such as having less debt.
You should not have too much indebtedness, be it your credit cards or huge pending dues.
You need to have a long credit timeline and history.
The most important thing you can do is to refrain from frequent pursuit of credits.
Keeping these on mind will help you to improve your credit score fast.
The formula for calculating credit score is fairly understandable, however, Federal Trade Commission like a secretive approach.
Why Your Credit Score Is Important When It Comes to Improving Your Credit Score Fast?
The importance of your credit score cannot just be explained in words.
It is one of the most important aspects of your financial health.
Your credit score will simply follow you everywhere and be of immense use at times.
Your credit score will play a significant role during major financial periods throughout your life.
A myth is that credit score is only useful when it comes to borrowing a loan, however, its importance is far beyond.
Keeping a good credit score not only help you get approved for loans, but showcase your financial character.
Be it for a new credit card, mortgage loan or even telephonic hookups, they check your credit rating.
The importance of credit rating is immense when it comes to the financial world.
Credit rating enables stores for accepting checks from you.
It helps banks in issuing you a new debit card or credit card after looking into your credit rating score.
Corporations are better able to manage their operations with the help of credit rating.
Your credit rating score shows the lenders how much risk you pose to them after lending the money.
In accordance to financial theories, if you have higher credit risks, an additional risk premium is added.
This risk premium is added to the price on which you are borrowing the money.
If you have a lower credit score, lenders won’t shun your applications, provided the score is not awful.
However, they will charge you a hefty price on the borrowed sum, which is more than the normal rates.
Difference in Interest Rates
A person with a better credit score is not charged with that much hefty price.
Hence, you can relate how important is your credit score and why you need to improve your credit score fast.
The below mentioned table shows how different credit score holders pay distinct interests on the same mortgage.
This distinction in the interest rates eventually leaves a drastic effect on your monthly repayments.
This repayment includes both the interest rates and the principal amount.
You can therefore, see how your credit score can have a deep impact on your mortgages in distinct ways.
Credit Rating Is Very Fragile: Know How to Improve Your Credit Score Fast
It is very important for you to be fully aware of your credit score as well as credit.
This is because, if you are not aware, you can eventually harm your credit score.
Let us get into the business with a short story for better understanding of your credit and the score.
Paul, a regular Joe made an application for a travel reward card, however, never heard back from the CC agency.
Because the card had a high limit, Paul simply presumed that he wasn’t eligible and never thought about it again.
After a year passed, he went to the bank for inquiring on a mortgage.
The bank representative pulled up the credit report for Paul and sees a bad debt from that same CC Company.
The credit report stated that the company made efforts to collect back the money from Paul over a year’s course.
Eventually they placed it as a bad debt and gave R9 rating.
This is the worst rating one can get for being a bad debtor.
Of course, all of this came in as a surprise for Paul, since he never knew about it.
However, it stood out that there was a simply clerical fault in this case.
The apartment suit number of Dave was missing on the address, the company had in papers.
It was revealed that Dave was approved for the card, however, he never received one.
Moreover, none of the communications could reach Dave since of the address error.
However, the credit card agency charged Dave for the annual fee, however, couldn’t collect it.
Dave never knew even the debt or the card existed at the first place.
The annual fee was charged for a year with interest prior to being written off as a bad debt.
Finally, after a lot of hurdles, Dave could finally solve the problem.
The CC Company acknowledged their fault and sent notice to the credit bureau.
Moral of the Story
Although the annual fee was a mere amount of $150, the error caused Dave a lot of problems.
He was on the verge of not being approved for the mortgage loan.
Since, all the data nowadays are sent through computers, errors like this can easily happen.
This kind of error due to wrong information can bring a lot of harm to your credit score report.
Hence, it is always imperative that you check your credit score rating or credit report timely to avoid this.
Not knowing your current debt status and other reports, can apparently lead you into a dark abyss.
How to Improve Your Credit Score Fast?
When you think of how to improve your credit score fast, remember it is a marathon process.
You are to run a marathon but not sprint.
The time is worth when it comes to improving your credit score fast and any hurry can ruin it.
A bad credit score can cost you tons of money over the course of your life, leading to serious stress.
Many people suffer due to poor credit scores and there are many ways to improve your credit score fast.
Here is how to improve your credit score fast and reap the perks that come with it:
- Improve Your FICO Score
- Make Loan Payments on Time
- Do not Over Extend
- Bill Payment
- Know your Credits
1. Improve Your FICO Score
When it comes to improving your FICO score, you should always regularly check credit report and set reminders.
It is also important to pay back the debt in due time, if possible before the due date.
Your credit payment history contributes to the FICO score for more than 35%.
It has the most significant impact when you try to improve your credit score fast.
Rapid resourcing is one of the most common methods to help improve your credit scores.
Rapid resourcing is actually updating and rectifying the credit information, which is then sent to bureaus.
You need to get the help of a credit lender for this service as Credit bureau allows only them for this.
2. Make Loan Payments on Time
It is very important to ensure that you are repaying back the loan on time and not delaying.
Repaying back the loan on time helps you to improve your credit score fast.
If you want to know how to improve your credit score fast, this is the best method you need to adopt.
You need to also ensure you are repaying back the correct amount.
3. Do not Over Extend
You should always avoid overextending the credit, if you want to know how to improve your credit score fast.
Unsolicited cards coming in through mails are tempting, but won’t assist to improve your credit score.
4. Bill Payment
You must never neglect your overdue bill payments.
If you have problems in repaying, let your creditors know.
Request them for repayment arrangements so you don’t have to miss out on the payments.
If you let them know, they might be flexible and you don’t run into the risk.
5. Know Your Credits
It is always important to know your credits.
You should always be aware of what your credits are.
Distinct credits from financial organizations may have an adverse effect on your credit score.
You should always try to minimize the current debt.
This is the key on how to improve your credit score fast.
Reaching your debt limits are considered poor and have adverse effects.
You should also refrain from applying for several frequent credits.
This signifies your financial status is in jeopardy and that you are a high risk debtor.
The aforementioned steps are how to improve your credit score fast.
However, you need to understand one thing and that is, it takes time.
You cannot improve your credit score fast by overnight.
Give it ample time to improve your credit score fast and once you do it, it is worth the time.
If you want to know how to improve your credit score fast, remember credit timeline is important.
A long, good credit history is much better than a short credit history.
Discuss with experts how to improve your credit score fast and then go by the suggestions.
Your credit score is very important these days and neglecting it can have detrimental effects.
You should always be aware of how your credit score is calculated and give special focus to it.
Research online and go through several credit bureau sites to ensure you are streamlined and following everything.
Your credit score is the ultimate decider for your financial requirements.
Now that you know how to improve your credit score fast, don’t wait.
Start following everything today and build a better credit report tomorrow.
It’s now or never.