National Credit Education Month is here, and it’s the perfect opportunity to take control of your credit. A good credit score opens doors to better financial opportunities, from lower interest rates to easier loan approvals.
Need to boost your score fast? Whether you’re planning a major purchase like a car or home, hoping to refinance, searching for a new apartment, are building credit from scratch, or are rebuilding after a financial setback like bankruptcy, there are several strategies that can deliver noticeable improvements in just 90 days.
Understanding your credit score
Your credit score is a three-digit number ranging from 300-850 that’s determined based on the information in your credit report, which summarizes your credit history and borrowing behavior. There are several things noted in your credit report that influence your credit score.
This includes payment history (on time, late, or missed), credit utilization ratio (how much of your available credit you’re using), amounts owed, length of credit history, new credit, credit mix (types of credit you have), public records (bankruptcies or liens), and credit inquiries. While the weighting of these factors varies slightly depending on the specific scoring model (FICO or VantageScore), payment history and amounts owed are generally the most significant.
A 90-day credit score improvement plan
While there are no magic bullets for instantly and dramatically improving your credit score (solid, significant improvements generally take time) there are still tactics that can provide you with a quick boost. Here are a few actions you can take:
Review your credit reports & dispute errors
Mistakes on your credit report can have a negative impact on your score. Checking your reports is the only way to identify and correct these mistakes. You can access free weekly credit reports from the three credit bureaus (Equifax, Experian, and TransUnion) at annualcreditreport.com. Remember to check all three reports since the bureaus all act independently and may have different information. These requests are “soft inquiries” so they will not lower your score.
Look for mistakes like incorrectly reported late payments, someone else’s information mixed with yours, or outdated negative items. If you spot an error, dispute it immediately:
Whether your score will improve, and by how much, will depend on the type of error(s) you find. Some disputes, like an incorrect address, may not affect your score, while others, such as removing a falsely reported late payment, can lead to a big improvement.
Lower your credit utilization ratio
A big part of your credit score (typically accounting for 30% of your FICO credit score and 20% of your VantageScore) is credit utilization. Your credit utilization ratio is the percentage of your available credit that you actually use. It’s calculated as (Current Balance / Credit Limit) x 100. For example, a $200 balance on a card with a $1000 limit is a 20% utilization ratio. It’s best to keep your credit utilization ratio under 30%, but the lower, the better.
The best way to lower your credit utilization ratio is to pay down your balances. If you don’t have the funds available to do this, consider debt consolidation. If you consolidate multiple high-interest debts (like credit cards) into a single loan with a lower interest rate, you might be lowering the percentage of your available credit that you’re using.
Another option may be to request a credit limit increase on your cards. For example, a $500 balance on a $1,000 limit means you’re using 50% of your available credit. Increasing that limit to $2,000 would lower your utilization to 25%. Many issuers allow online requests for credit limit increases, while others require a phone call.
Use caution with this tactic. If you’ll be tempted to spend more just because you have a higher limit, this strategy might not be right for you. Be aware that some issuers may perform a “hard pull” on your credit report, which could temporarily lower your score slightly. Also, recent account openings, a history of late payments, or very high balances could lead to a denial until you demonstrate more responsible credit management.
The impact on your credit score depends on the size of the increase. If it’s enough to bring your utilization below 30%, you should see a decent improvement. However, paying down your balance to near zero will generally have a greater positive effect.
Pay on time
No strategy to improve your credit will be effective if you pay late. Making on-time payments is the single most influential factor in determining your credit score. Every payment you make on time, whether it’s a credit card bill, loan installment, or other debt obligation, contributes positively to your payment history. Consistent timely payments over months and years builds a strong track record that lenders highly value.
The impact on your credit score can potentially be huge. While a single on-time payment might not cause a dramatic jump in your score, even one missed or late payment can have a major negative impact.
Add to your credit mix
Diversifying your credit mix by adding new accounts in good standing can give your credit score a boost. Ideally, you want a combination of revolving and installment debt. If you currently only have credit cards (revolving debt), consider a loan (a credit-builder loan can be a low-cost option).
Make sure any loan you choose reports to all three credit bureaus. Or, if you primarily have loans (installment debt) but few credit cards, a new credit card could be beneficial. If you don’t have a good credit score, consider a secured credit card. This type of card requires a cash deposit, which then becomes your credit limit. You use the card like a regular credit card, and responsible, on-time payments help build your credit.
The impact on your score varies, but opening a loan is generally most helpful for those who currently only have credit cards. Individuals with limited credit histories or few accounts also stand to gain more from adding a new account.
Become an authorized user on someone else’s credit card
Becoming an authorized user on a responsible cardholder’s account can be a quick way to increase your credit. Even if you don’t use the card, simply being listed as an authorized user on an account with a high credit limit and a strong payment history can benefit your credit. Make sure the account reports to all three major credit bureaus, which most credit cards do.
The impact on your score here will vary. If you are new to credit and have a thin credit file, it can potentially give you a big boost. However, for those with established credit who are trying to offset missteps or lower credit utilization, the impact will be smaller.
Things to avoid while improving your credit
“Pay for Delete” agreements
A “Pay for Delete” agreement is an arrangement you make with a debt collector where they agree to remove a negative item (like a collection account) from your credit report in exchange for you paying the debt. It’s essentially a negotiation tactic where you leverage payment as a way to get the negative mark removed.
If that sounds like it’s too good to be true – it often is. Many debt collectors are unwilling to enter into “Pay for Delete” agreements. They may have policies against it, or they may simply prefer to keep the negative listing on your report. Even if a collector initially agrees, they may not follow through and remove the listing after you make the payment, and getting the agreement in writing may be tricky. This is because this practice technically violates federal law under the Fair Credit Reporting Act, which requires that a consumer’s credit history must be reported accurately, for better or worse. Your best bet is to avoid this method.
Closing credit accounts
Closing a credit card account can have a negative impact on your credit score in two ways. First, it increases your credit utilization ratio. For example, if you have two cards with $5,000 limits each (totaling $10,000 available credit) and carry a $2,000 balance, your utilization is 20%.
Closing one card reduces your total available credit to $5,000, instantly bumping your utilization up to 40%, even if your spending habits remain the same. Second, closing a credit card, especially one of your older accounts, can shorten the length of your credit history, another factor that influences your credit score.
Applying for multiple lines of credit
You may think that opening many new lines of credit will increase your credit utilization ratio, and therefore your score. However, each time you apply for a credit card or loan, it counts as a “hard inquiry” which drops your score slightly.
Opening multiple lines of credit in a short amount of time can significantly lower your credit score, as lenders may interpret this as a sign of financial distress or increased risk, making it harder to qualify for loans or credit in the future.
Illegitimate credit repair companies
Be wary of companies that promise to magically fix your credit. Many credit repair companies engage in misleading practices, and some are outright scams. While a few legitimate operators might exist, they’re hard to find. These companies often charge hefty fees for services you can access for free (such as disputing credit report errors), make unrealistic guarantees about raising your score, and may even suggest illegal or unethical actions.
Improving your credit score is a marathon, not a sprint, but as this article has shown, you can make significant progress in 90 days.
Working good credit into your daily life
While instant fixes are a myth, consistent effort and smart strategies can lead to noticeable positive changes. National Credit Education Month is an excellent opportunity to take a proactive approach to your financial well-being. By focusing on the key areas outlined – disputing errors, managing credit utilization, paying on time, diversifying your credit mix, and avoiding negative marks – you can take control of your financial health and unlock better opportunities.
With dedication and the right approach, a good credit score is within your reach.
