7 ways to improve your credit score fast
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Checked your credit score recently and wished it could be even just a bit higher? Many of us are in the same boat.
You may be wondering where to start, so here are 7 ways to improve your credit score that can have a direct impact.
What is a credit score?
Your credit score is a 3-digit numeric composite of your financial history, specifically focused on your habits of borrowing and repaying money. Lenders use your credit score as a factor in determining whether they should let you borrow money. A high score suggests healthy financial behaviors and a good repayment history, whereas lower scores reflect missed payments or a higher-risk borrower. The higher your score, the better.
Ways to improve your credit score
Keep in mind that your credit score will be in flux throughout your lifetime, so best to treat smart financial behavior like a marathon, not a sprint. But, you can still make an impact quickly—here are some tips for getting started.
1. Pay down outstanding debts
Lenders like to see borrowers take on healthy “risks” like installment loans, and these can help boost your score to a degree. But what can cause your score to dip is taking out too much debt and/or not repaying it back on time. If you have outstanding debts, focus on paying down the loans or credit cards with the highest interest rates first.
2. Follow up on missed or late payments
Payment history is the top factor in your credit score. If you’re not paying your bills on time, changing your payment habits will have the biggest immediate impact. A good habit to explore and assist with this can be setting your bills to auto-pay so you won’t accidentally forget a due date.
3. Pay bigger bills more often
This tip ties into your credit utilization ratio, or the number that reflects how much of your total credit limit you’ve spent already (or used). If you regularly carry a large balance on a card, you can keep your credit utilization ratio lower by making a payment twice a month instead of one large lump sum on your regular due date. Aim for a ratio below 10% of your total credit limit if you can.
4. Raise your credit limits
Raising your credit limit is another way to lower your credit utilization ratio and boost your score. If you’ve been paying your credit card off responsibly, the provider may be open to raising your card limit. While the 10% ratio is ideal, you can try to aim for 30% first.
Keep in mind that this suggestion is geared towards those with responsible spending habits. If you’re one of the many who struggle with overspending, taking on more debt may just threaten your credit score more.
5. Negotiate a lower rate
Sometimes, it’s possible to lower the rate on outstanding balances. If your lender agrees to a lower interest rate, you can reallocate the funds you’re saving each month to your principal balance, or to another loan with a higher interest rate.
6. Consider your credit mix
Lenders like to see a healthy mix of credit types, such as installment loans (mortgages, student loans, and auto loans) and recurring credit card payments.
If you have only one credit card but you use it responsibly, consider getting a second and managing purchases across both cards to lower your overall credit utilization ratio. The Varo Believe Secured Credit Card can help you start building your credit today, and comes with no minimum security deposit, no annual fee or interest, and no hard credit check to apply. Qualifications apply*
Depending on your circumstances, it could be worthwhile to assess the potential benefits of a home or auto purchase on your overall credit score.
7. Be thoughtful when applying for new credit
This may be a no-brainer, but if you’ve already reduced your score by requesting too many credit lines, you shouldn’t count on additional credit to improve it. It’s smart to be intentional about applying for new credit only when it makes sense for your overall credit situation.
If you have many lines of credit open already, it’s probably best to focus on paying down balances and keeping them low. Consider applying for new lines of credit only if you currently have a limited number, and if it makes financial sense for you both now and in the long run.
Remember, raising your credit score may take time. But, armed with a few tips and a shift in your overall spending mindset, you can positively impact your score both in the immediate future and in the long run.
*To be eligible to apply for the Varo Believe Card, you need to have received Qualifying Direct Deposits of $500 or more in the past 90 days to your Varo Bank Account. A Qualifying Direct Deposit is an electronic deposit of your paycheck, pension or government benefits (such as Social Security) from your employer or the government. Tax refunds or government stimulus payments, person- to- person payments (such as Venmo) and funds deposited using a Varo routing number are not considered a direct deposit.
Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.
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