5 Tips for How to Improve a Credit Score in 6 Months
There are many reasons why your credit score may have fallen recently. Maybe your credit card debt has increased significantly, you had bills go to collections, or you’ve been late on payments.
Whatever the case, it’s important to know that a low credit score can affect a lot more than just your ability to get a good interest rate on a new loan. You could be charged higher premiums for car insurance, struggle to get approved for a mortgage, and even be denied for certain jobs.
Fortunately, there are avenues you can pursue to turn the situation around. Here’s a detailed breakdown of how to improve your credit score in 6 months.
1. Don’t Ignore Errors and Mistakes
Small, avoidable errors can dent your credit score significantly. If there are mistakes on your report, such as late payments reported when you made them on time or accounts that don’t belong to you at all, those items need to be addressed before they do any more damage.
If you find an error on your report, contact the company that provided the information and dispute it right away. You’ll need to provide proof of why the item is inaccurate and give them time to investigate before making a correction.
However, once that’s done, the item will be removed from your credit history and won’t affect your score any longer.
2. Pay Your Bills and Debt On Time
The fastest way to increase your credit score may be to pay down your revolving credit—bills and credit card balances in particular. This can improve your credit utilization rate, which measures how much of your available credit you are using. (The lower this rate is, the better.)
You can improve your credit utilization by paying off some of the balance or asking the issuer to increase your limit, but it’s important not to charge more once you’ve paid down a balance.
It’s not just about making timely payments and keeping balances low—the mix of debt you carry can also affect your score. Lenders like to see multiple types of accounts on consumers’ reports, including both installment and revolving accounts. Installment loans are those that have a fixed payment amount and term, such as an auto loan or mortgage.
Revolving accounts include lines of credit, such as credit cards. It’s generally good for borrowers to have at least one account of each type, but it’s also important not to borrow too heavily on any account because that can drag down your score.
3. Apply for New Credit Sparingly
If you want to build or repair your credit, it might seem like opening new accounts is an obvious solution. After all, if you have more cards, it stands to reason that your credit score would go up, right?
Not necessarily.
Opening multiple accounts at once can actually lower your score because it indicates that you might be having trouble managing your debt. Instead, focus on getting approved for a single card and then wait several months before applying for another one. In fact, if possible, consider holding off on applying for new cards until your score has improved.
Every credit application is recorded on your report and can temporarily drop your score by about five points. A flurry of applications suggests you’re desperate for credit and financially unstable, which will drag your score down further. Even if you’re not denied for the cards you apply for, multiple inquiries will lower your score systematically.
4. Don’t Close Unused Cards
If you’re working on improving your credit score, don’t close credit card accounts, especially those you’ve held for a long time. Your credit score is determined in part by the length of your credit history.
When it comes to closing accounts, you should always pay off the balance first and make sure there are no outstanding charges. Once that’s taken care of, you can contact the credit card company to officially close the account.
However, it may be worth keeping old accounts open even after paying them off because they have positive effects on your credit scores. Having a long credit history will help your credit rating, but closing an account will shorten the average age of all your accounts, which can have a negative effect on your score.
Also, try not to open or close many accounts within a short period of time. This may look bad to lenders and lower your scores in the short term.
5. Consolidate to a Single Debt
One of the fastest ways to improve your credit score may be to consolidate your credit card debt on a new loan or balance transfer card.
Consolidating your credit card debt can be a great way to lower your monthly payments and reduce how much interest you pay over time. But it’s also a good way to improve your credit score since it can help you eliminate or reduce the number of accounts reporting late or missed payments. It can also bring down your overall credit utilization rate, which is another major factor in determining your credit scores.
If you have high-interest credit card debt, consolidating that debt onto an even slightly lower-interest loan or balance transfer credit card can be a big win for both your monthly budget and your long-term financial health.
The Final Word
Improving your credit score can be a slow process. Depending on how low it is and why, it can take months or years to see significant improvement.
But if you need to raise your score immediately for a specific transaction, such as buying a home or car, paying off debt in collections, or refinancing your mortgage, there are a few tactics you can use to give your score a quick boost. The good news is that these strategies for increasing your credit score don’t take years to work. If you follow these five tips, you can learn how to improve your credit score in 6 months or even less.
Getting ready to purchase a new home and wondering if your credit score is where it should be? Contact a Home Loan Guide at Solarity Credit Union or visit our home loan page to try our payment calculator. We have a team of experts ready to help you explore how to build a great credit score as well as what loans you’re eligible for.
Whatever the case, it’s important to know that a low credit score can affect a lot more than just your ability to get a good interest rate on a new loan. You could be charged higher premiums for car insurance, struggle to get approved for a mortgage, and even be denied for certain jobs.
Fortunately, there are avenues you can pursue to turn the situation around. Here’s a detailed breakdown of how to improve your credit score in 6 months.
1. Don’t Ignore Errors and Mistakes
Small, avoidable errors can dent your credit score significantly. If there are mistakes on your report, such as late payments reported when you made them on time or accounts that don’t belong to you at all, those items need to be addressed before they do any more damage.
If you find an error on your report, contact the company that provided the information and dispute it right away. You’ll need to provide proof of why the item is inaccurate and give them time to investigate before making a correction.
However, once that’s done, the item will be removed from your credit history and won’t affect your score any longer.
2. Pay Your Bills and Debt On Time
The fastest way to increase your credit score may be to pay down your revolving credit—bills and credit card balances in particular. This can improve your credit utilization rate, which measures how much of your available credit you are using. (The lower this rate is, the better.)
You can improve your credit utilization by paying off some of the balance or asking the issuer to increase your limit, but it’s important not to charge more once you’ve paid down a balance.
It’s not just about making timely payments and keeping balances low—the mix of debt you carry can also affect your score. Lenders like to see multiple types of accounts on consumers’ reports, including both installment and revolving accounts. Installment loans are those that have a fixed payment amount and term, such as an auto loan or mortgage.
Revolving accounts include lines of credit, such as credit cards. It’s generally good for borrowers to have at least one account of each type, but it’s also important not to borrow too heavily on any account because that can drag down your score.
3. Apply for New Credit Sparingly
If you want to build or repair your credit, it might seem like opening new accounts is an obvious solution. After all, if you have more cards, it stands to reason that your credit score would go up, right?
Not necessarily.
Opening multiple accounts at once can actually lower your score because it indicates that you might be having trouble managing your debt. Instead, focus on getting approved for a single card and then wait several months before applying for another one. In fact, if possible, consider holding off on applying for new cards until your score has improved.
Every credit application is recorded on your report and can temporarily drop your score by about five points. A flurry of applications suggests you’re desperate for credit and financially unstable, which will drag your score down further. Even if you’re not denied for the cards you apply for, multiple inquiries will lower your score systematically.
4. Don’t Close Unused Cards
If you’re working on improving your credit score, don’t close credit card accounts, especially those you’ve held for a long time. Your credit score is determined in part by the length of your credit history.
When it comes to closing accounts, you should always pay off the balance first and make sure there are no outstanding charges. Once that’s taken care of, you can contact the credit card company to officially close the account.
However, it may be worth keeping old accounts open even after paying them off because they have positive effects on your credit scores. Having a long credit history will help your credit rating, but closing an account will shorten the average age of all your accounts, which can have a negative effect on your score.
Also, try not to open or close many accounts within a short period of time. This may look bad to lenders and lower your scores in the short term.
5. Consolidate to a Single Debt
One of the fastest ways to improve your credit score may be to consolidate your credit card debt on a new loan or balance transfer card.
Consolidating your credit card debt can be a great way to lower your monthly payments and reduce how much interest you pay over time. But it’s also a good way to improve your credit score since it can help you eliminate or reduce the number of accounts reporting late or missed payments. It can also bring down your overall credit utilization rate, which is another major factor in determining your credit scores.
If you have high-interest credit card debt, consolidating that debt onto an even slightly lower-interest loan or balance transfer credit card can be a big win for both your monthly budget and your long-term financial health.
The Final Word
Improving your credit score can be a slow process. Depending on how low it is and why, it can take months or years to see significant improvement.
But if you need to raise your score immediately for a specific transaction, such as buying a home or car, paying off debt in collections, or refinancing your mortgage, there are a few tactics you can use to give your score a quick boost. The good news is that these strategies for increasing your credit score don’t take years to work. If you follow these five tips, you can learn how to improve your credit score in 6 months or even less.
Getting ready to purchase a new home and wondering if your credit score is where it should be? Contact a Home Loan Guide at Solarity Credit Union or visit our home loan page to try our payment calculator. We have a team of experts ready to help you explore how to build a great credit score as well as what loans you’re eligible for.
