If you’re looking to increase your bad credit score, or start your credit history, there are a number of things you can do. Usually, building credit takes time, but there are a few simple things you can do within 30 days that can help.
Understanding Your Credit Score
To start working toward a better credit score, you first have to understand what goes into it. Let’s break down how your FICO credit score is calculated. FICO isn’t the only credit scoring model available, but it’s the one most commonly used among lenders.
Your credit score is determined by five categories, each with different weight:
- Payment history (35%) – History of how you’ve handled making payments.
- Amounts owed (30%) – Considers the overall amount you owe across different types of credit accounts and the ratio of how much credit you have available compared to how much you’re using.
- Length of credit history (15%) – How long you’ve been using credit.
- Credit mix (10%) – The different kinds of credit you’re using.
- New credit (10%) – Starting a new credit account.
Now that you can see the categories that determine your score, we can look over some quick credit improving methods you may be able to use, including using our credit boost partner if you’re seeking professional assistance.
Increase Your Credit Score with Credit Cards
Credit cards are a form of revolving credit. Revolving credit sets a limit on how much you can borrow, and has a minimum payment that’s due each month. Here are some ways a credit card may be able to help you improve your credit score quickly:
- Raise your credit limits – If you qualify to raise your credit limits, you’ll have more available credit. This can help lower your credit utilization ratio, as long as you don't start spending more.
- Reduce amounts owed – A good rule of thumb for credit cards is to keep the amounts you owe at 30% or less of your credit limits. Being over this credit utilization threshold is when it’s said to negatively impact your FICO score in a big way. Having multiple maxed-out credit cards can harm your credit score.
- Keep credit cards open – Don’t close out your older, or seldom used, credit cards. Once you close a line of credit, it can increase your credit utilization ratio and/or decrease your credit history, both of which can lower your credit score.
- Make your payments on time – The biggest factor in calculating your credit score is payment history. By making your monthly payments on time every month, you can establish a solid payment history. This can take time, but the sooner you start this practice, the sooner you’re going to see results.
Review Your Credit Reports and Credit Score
Negative marks on your credit reports can stay for seven or 10 years. To see if you have anything passively harming your credit score, request your credit reports from the three major credit reporting bureaus: TransUnion, Equifax, and Experian. You can get each of your reports for free, once every 12 months.
Carefully review these reports to see if there are any mistakes or inaccurate outstanding accounts. Each report is likely to have different information, so comparing all three helps you know where you stand.
If you find a mistake, you can dispute this with the credit reporting agency and, if it’s inaccurate, get it removed from your credit reports in order to increase your credit score. If you submit a dispute to a bureau, it has to be investigated and resolved within 30 days.
Next, you should get your credit score. This can be obtained for a small fee through the credit bureaus or a number of online services like our trusted partner. You can also see if your bank or credit card provider offers free access to it, as more and more of them do these days.
Have Rent and Utility Payments Reported
There are unique ways to boost your credit score fast, such as having your rent and/or utility payments reported to the credit bureaus. This raises your credit score without you having to do much of anything, outside of signing up for a service and continuing to make payments on things you're already paying.
Rent is one of the largest expenses for many people. It only makes sense that your credit score reflects that you keep up with it. Our trusted partner will report your rent payments to the three credit bureaus so you can get the credit you deserve.
Mix Up Your Credit
Ten percent of your credit score is determined by credit mix, sometimes called credit variety. If all you have is revolving credit, adding an installment loan, such as a car loan, could increase your credit score. Paying on an installment loan can improve the payment history aspect of your credit score – as long as you’re keeping up with the payments.
On the flip side, while having a good credit mix can improve your score, opening up many new credit accounts in a short period of time can decrease your score. Research has shown that borrowers who open multiple new accounts rapidly pose a greater risk, so 10% of your credit score is determined by your new credit.
If you can help it, don’t open too many accounts in a short time span. So, don’t open multiple credit cards in 30 days in an attempt to increase your credit utilization. It’ll probably have the opposite effect you’re looking for!
Improving Your Credit Score with an Auto Loan
Building your credit score can take time. There are few quick things you can do to bump it up, but the majority of your credit score is determined by payment history and amounts owed.
An auto loan could be a great way to improve your credit score in terms of credit utilization, credit mix, and payment history. Car loans are usually large amounts, which can increase your max credit and credit utilization. Adding an installment loan can add to the mix of credit on your credit reports, and can be a great way to start your credit history. If you keep up with the payments, you can build a solid payment history since installment loans typically last a few years. And remember, how long you’ve used credit affects your credit score, as well.
If you’re looking to improve your credit score with an auto loan, but you aren’t sure where to begin, start with us at Auto Credit Express. We’ve gathered a network of dealerships with special financing that can lend a hand to bad credit borrowers. To see if there’s a dealer in your local area that can get you on the road to better credit, fill out our simple and free car loan request form.