12 Quickest Ways to Fix Your Credit Score

Quickest Ways To Fix Your Credit Score

For all that credit can be a powerful tool, it can also be the means by which we get ourselves into a whole heap of trouble. And knowing the quickest ways to fix your credit score will be invaluable if you ever find that you’ve gotten in over your head in credit card debt. For example, consider Karen, a marketing professional from Washington, DC, who casually swiped her way into $25,000 of credit card debt while trying to reinvigorate her flagging business.

It wasn’t until Karen realized the extent of her debt that she noticed an additional consequence of her bad financial habits: her credit score had dropped to a measly 584. In over her head, Karen sought the help of a Certified Financial Planner (CFP) who helped her get a handle on her finances and her credit back on track.

For those who aren’t able — or inclined — to see a financial services professional, there’s still plenty of hope. You can do a lot to fix a floundering credit score, especially if you have the dedication and discipline to stick to your credit improvement plan and build better financial habits. In the article that follows, we’ll take a look at how to go about doing this was some valuable tips, including familiarizing yourself with how credit scores work, rebuilding your credit on your own, and how to seek professional help.

1. Determine Where You Stand

As with most things in life, you need to know where you stand to effectively plot your course forward. When it comes to credit scores, this means taking a long, hard look at your credit reports. Pretty much everything in the consumer credit world is based on the information in your credit reports, of which you have three worth noting: one each from credit reporting agencies, Equifax, Experian, and TransUnion.

Each credit reporting agency collects information about your financial behaviors from your creditors and certain public records, which collectively makes up your credit report. Creditors and scoring agencies use the information in your credit report to calculate your credit score and determine your credit risk. You can get your three reports (one per bureau) for free once a week through AnnualCreditReport.com.

annualcreditreport.com screenshot
You can check all three of your consumer credit reports for free once a week at AnnualCreditReport.com.

Negative marks and accounts on your credit report, such as delinquent payments, defaulted debts, or bankruptcy discharges, increase your credit risk, and thus will have negative impacts on your credit score. As you go through each credit report, it’s important to note the negative items on each report, as well as checking for any inaccuracies or errors.

It’s crucial to check all three reports. The information on your credit reports may not be the same on each individual report.

Credit reporting agencies are mostly dependent upon information reported to them by your creditors, and not all creditors report to all three (or any) of the credit bureaus. At the same time, the bureaus are separate entities, and are not required to share credit information between them.

2. Know How Your Score is Calculated

Of course, once you know what’s on your credit reports, it’s of the utmost importance to understand how, exactly, each account is impacting your credit score. With so many apps and credit cards offering free credit scores these days, it’s easy to become obsessed with that three-digit number without developing any notion of how it really works.

The two major scoring agencies are FICO and VantageScore, and each scoring system operates with a range of 300 to 850, with 850 being the best credit score. Each scoring agency uses the same basic factors to calculate your score, though they weigh the factors differently in their calculations.

FICO score factors
This graphic breaks down the factors that go into your FICO credit score.

Regardless of scoring model, the most influential factor of your score is your payment history, which is more than A third (35%) of your FICO score and considered to be “extremely influential” to your VantageScore. Due to this factor, delinquent payments and defaulted accounts can drop your credit score by dozens of points. Always make your full payments by the due date to avoid detrimental credit score impacts.

Of almost as much importance as how you pay your debts is how much debt you already have — and how much you could have. In fact, the percentage of your current debt already being used and the total debt you already have are worth 30% of your FICO score (combined), and considered to be “highly influential” and “moderately influential” to your VantageScore (respectively). Keep your balances low and only take on necessary debt to do well here.

The age of your credit accounts is also “highly influential” to your VantageScore, and is worth 15% of your FICO score. Keeping old credit accounts open — provided they’re in good standing — and being careful about opening new credit accounts will ensure this factor doesn’t damage your credit score. Stinginess when considering applications for new credit accounts will help your new credit factor (10% of FICO), as well.

Payment History40%
Depth of Credit21%
Credit Utilization20%
Recent Credit5%
Available Credit3%
Source: VantageScore

Finally, scoring agencies look at your credit mix, which is worth 10% of your FICO score and considered with your credit age in VantageScore calculations. Maintaining a variety of credit types, including both revolving and installment credit lines, can help you with this factor.

3. Fix Your Credit Report

Armed with the knowledge of which accounts on your credit report are responsible for your low score, you can get to work on the process of fixing the problems. The most obvious place to start is to address any inaccurate, mistaken, or fraudulent information on your credit report. Even something so simple as a misreported balance can have negative impacts on your score, so it’s important to ensure everything on your report is as it should be.

While you can certainly file credit report disputes yourself, you may prefer to hire a professional to deal with the problem. This can be especially helpful if you have a number of issues to dispute. A reputable credit repair company can contact the credit reporting agencies and information furnishers on your behalf, as well as following up on each contact to check that progress is being made.

To enable a positive credit repair experience, it’s important to understand what credit repair can do — and what it can’t do. Credit reporting agencies are required by the Fair Credit Reporting Act to address credit report errors that are disputed by consumers, but they’re under no obligation to remove accurate information.

In other words, credit repair can remove mistakes, fraudulent information, and unsubstantiated accounts, but that’s about it. Credit repair won’t eliminate legitimate negative marks and accounts, such as substantiated debts and authorized credit inquiries — only time can do that. Hard inquiries will fall off of your report within two years, while other negative accounts can last seven to 10 years.

4. Pay Down Your Balances

Since your credit score is heavily influenced by both your total debt and the proportion of your available credit you’re using, a simple (though perhaps not easy) way to improve your credit score is to pay down your existing debt. This is particularly effective if you currently have credit cards with high utilization rates, which is the ratio of your credit card balance to your credit limit.

Ideally, your utilization rate should be below 30%, both overall and for each revolving credit line. For example, consider an imaginary consumer, Imogene, who has three credit cards carrying balances as described by the chart below. As demonstrated, while Cards A and B are at good utilization levels on their own, the high rate of Card C gives Imogene an overall utilization of 35%, which can impact her score by several points.

Card ACard BCard COverall
Credit Limit$2,500$1,000$3,000$6,500
Utilization Ratio0.140.150.580.35
Utilization Rate14%15%58%35%

So, for Imogene, a simple way to improve her credit score will be to pay down her balance on Card C, thus lowering her utilization rate to the ideal range. Of course, that’s only the case if her other debts stay at their current levels (or lower). And she shouldn’t skimp on making at least her minimum payment for the other cards, as that will have even larger negative impacts.

5. Negotiate with Your Creditors

One major mistake of many consumers is assuming that if they can’t make a payment, they simply need to accept the inevitable consequences, both financial and to their credit. Fortunately, that’s not always the case, as the vast majority of creditors are perfectly willing to work with you and help you avoid delinquency — particularly if you’re proactive about the problem.

Indeed, the sooner you contact your creditors, the better your chances will be of negotiating a lower interest rate or payment plan. Specifically, you’ll fare the best if you contact your creditors before you miss a payment, or at least as soon as possible afterward. Creditors don’t typically report late or missed payments until they’re more than 30 days past due, so you may have some wiggle room to work out a compromise.

Even if you’re already dealing with credit consequences from delinquent payments, you can likely still contact your creditor to work out a way to make your payments more manageable and avoid future credit damage. Your creditors would much rather work with you to establish a payment plan than have to chase you down to get their money back — or, worse, have to charge off the debt entirely.

6.Request a Credit Limit Increase

Since your credit utilization rate is based on both your current balances and your total available credit, you don’t necessarily need to pay down your balances to improve your rate. Instead (or in addition), you can request credit limit increases from your creditors. If you have more credit available, your current debt will equal a smaller percentage of that available credit, thus improving your utilization rate.

Before you go running off to the phones and online banking accounts, however, it’s important to note that requesting a credit limit increase might have a negative impact on your score, as well. This is because creditors tend to use hard credit inquiries to investigate your credit risk before agreeing to increase your credit limits.

table displaying time items can stay on credit reports

Those hard inquiries are taken into account through the new credit factor when calculating your score. While one or two hard inquiries won’t have significant credit impacts, a series of inquiries on your report can have more serious results. That’s because too many requests for credit make other potential creditors nervous, as each application represents, to them, your intention to take on more debt.

Hard inquiries will stay on your credit report for up to two years, though their impact will lessen as they age. To avoid stacking up too many hard inquiries, you should confine your credit limit increase requests to one or two cards. You’ll likely have the most luck getting an increase on a card you’ve maintained in good standing for a longer period of time rather than trying for increases on new accounts.

7. Consolidate/Refinance Your Debt

One reason many consumers end up overwhelmed by their credit card debt is the added costs from interest fees, which can rise above 30% when dealing with some subprime cards or a penalty APR due to missed payments. This is compounded further when consumers can only afford their minimum payment, which goes first toward any interest fees before paying down your balance.

When interest fees are the primary culprit of your debt woes, consolidating your credit card debts under a single, lower-interest loan may be the best solution. Personal installment loans tend to have lower interest rates than most credit cards, with set monthly payments based on your rate and the length of your loan.

The key to a successful consolidation loan is to receive a lower interest rate than you’re currently being charged for your debts. This can reduce your monthly payments and prevent additional credit damage from late or missed payments. You’ll also be able to choose the length of your loan, with longer-term loans providing lower monthly payments.

installment loan graphic

At the same time, don’t just jump at the longer loan to avoid high monthly payments. While longer-term loans mean lower monthly payments, each additional month you add to your loan length will also mean more paid in interest fees, increasing the overall cost of your loan. You should balance affordable monthly payments with a reasonable loan length for the best results.

8. Automate Your Payments

Few things directly represent your credit risk to potential creditors quite like your payment history — and few things have as much impact on your overall credit score calculation. Thankfully, delinquent payments won’t actually haunt your credit forever, falling off your report entirely after seven years.

Even better, the amount of impact negative items have on your credit score diminishes as items age, and new items have the most impact. This means your current and recent payment history will have more influence on your credit score than missed payments from several years ago — so it’s vital to be sure your current obligations are paid as agreed.

A super easy way to never miss another payment is to take advantage of automatic payments, a feature offered by the majority of banks and credit unions. Automatic payments allow you to select the date and amount of your payments for credit cards, loans, and other bills. Once you’ve determined a schedule, the technology makes your payments as directed each month, freeing you from last-minute phone calls or nick-of-time online payments.

As you build up a positive payment history, your past transgressions will have less and less impact on your credit score. You should see your score increase over time, with a nice little jump when your old delinquencies fall off your report.

9. Become an Authorized User

An authorized user is someone who is given access to a specific credit line that wasn’t opened under his or her name, usually a credit card account. For instance, pretend parent, Pete, might make his daughter an authorized user on his credit card account so that she may make purchases using the account while on school field trips.

Similar to paying down debt and raising your credit limits, this method of increasing your credit score once again relies on improving your all-important utilization rate.

Although you don’t have an obligation to the debt as an authorized user, your status as an authorized user on the account is often reported on your credit report as well as that of the primary account holder, including the available credit limit.

Assuming the primary account holder uses the card responsibly — maintaining a low balance and making on-time payments — the credit limit reported by the authorized card will increase your overall available credit, without adding significant new debt or a hard credit pull. Depending on the credit limit of the authorized card, your utilization rate can see a large improvement, which will likely be reflected by an increase in your credit score.

If you’ve been made an authorized user, or are considering adding one to your own account, be mindful of possible consequences. Authorized users are typically given a card under their own name that is connected to the account to make purchasing easier, and can charge items to the account as though it were their own.

At the same time, authorized users aren’t responsible for paying down the debt. In the case of Pete and his daughter, she could charge whatever she liked on the account — and Pete would have to pay.

10. Make More Than One Payment Each Month

Although some may have enough trouble making one payment each month that they’ll hardly want to bother with two, making multiple payments can have multiple positive impacts to your credit score — and your pocketbook. To be clear, however, we’re talking paying more than you’re required to each month, not simply breaking your payment in two.

This specific effects of this method vary with the type of debt, affecting installment and revolving debts in different ways. For credit cards, which are revolving debts, making multiple payments reduces the amount of interest you’ll be charged the next month, thanks to the way credit card interest works. In essence, each payment reduces your card’s average daily balance, on which your interest fee is based.

Additionally, for both revolving and installment loans, paying more than the minimum each month will reduce the total time you spend paying off your debt. Eliminating debt can positively impact your credit score.

credit score categories graphic
Eliminating debt can help consumers improve their credit scores.

The less time you spend making payments, the few interest payments you’ll be required to make — both of which frees up funds for paying off other debt or saving for retirement.

11. Add to Your Credit Mix

While a minor factor when compared to your payment history, the variety of credit types you maintain can still have a relatively major impact on your credit. Essentially, creditors like to know that you can handle various types of credit, including installment and revolving debts. For example, a recent graduate sporting only college loans won’t inspire as much confidence in a lender as one who has also successfully maintained one or two credit cards at the same time.

This can be particularly true if your credit history or current accounts are limited, either due to still building credit or going through bankruptcy. One way to add to your credit mix is to open a new credit card, which can be difficult — but isn’t impossible — to manage when trying to fix your credit.

Of course, anytime you intend to apply for new credit you should carefully consider the potential impacts of a new hard inquiry to your credit reports and scores. If your score is already suffering from other credit damage, adding too many hard inquiries to the pile can do more harm than the new credit card may do good — especially if you’re denied.

If you’re unsure of your chances of being approved and don’t want to risk a hard credit inquiry on a hopeless application, you can check for pre-qualification offers, instead.

Navy Federal prequalify screenshot
Consumers can use online tools to determine whether they prequalify for credit cards.

Provided by many major credit card issuers, pre-qualification uses a soft credit inquiry, rather than a hard inquiry, to estimate your credit risk and give you an idea of the cards for which you’ll most likely qualify.

12. Create a Focused Plan — & Maintain It

No matter which methods you use to address your individual credit problems, you need to start by putting together a focused financial plan. This means going through your credit reports — all three of them — line by line and determining which items can be addressed (and which can’t). You should also put together a solid budget, with designated funds for paying down debt and saving for retirement.

Of course, the most important thing is to maintain your plan (and budget) over the long term, which can take a lot of discipline. It’s one thing to put numbers in pretty columns on a spreadsheet or mobile app, and another thing altogether to pass up that pricey purchase or tempting treat out in the real world.

For Karen, sticking to the plan involved sitting down with her CFP each week to review her progress. Together, they were able to build a budget and make a plan that helped her get out of debt and improve her credit score. Today, Karen is debt-free, and her FICO score is a healthy 736 — firmly in the good credit category.