How to Raise My FICO Score by 100 Points
There are many ways that improving your credit can make your life easier. Whether you want to take out a loan, get a new credit card, apply for a mortgage, you can either save or lose a lot of money, depending on your credit score.
Are you not sure where you stand and how to start the process? Follow our tips to get a better chance at lower interest rates, better car insurance rates, or skipping utility deposits. Even if you don’t need good credit now, you will thank yourself in the future.
FICO, originally Fair, Isaac and Company, helps credit score services make better decisions and evaluates their customers’ creditworthiness. Your credit score will be within a range of 300 and 850. The higher the number, the better for you.
You might have heard these numbers uttered multiple times. However, they can still be very confusing to an average person. Here are short explanations of what FICO scores mean:
- 850-800: This is an excellent score that qualifies you for premium rewards credit cards and other perks. Not a lot of people attain this result. If you do, you will have a lot of opportunities available to you.
- 799-740: This is a very achievable goal and a very good range. If you get to this point, you can count on great offers and rates. But you can always do better.
- 739 – 670: This is an okay area. While you shouldn’t have much trouble here, you can make a few tweaks like consolidating loans. It should not take you a lot of time to drive this number up.
- 669-580: This is where you should reconsider your spending habits. Credit card companies consider users in this bracket subprime. At this point, you should start making a real effort to improve your score.
- 579-300: Most likely, you will be denied for a loan with this score, and you will find it troublesome to get an apartment in a decent condition. However, there are ways out of this situation if you take it seriously.
On average, Americans have a score of around 780. This indicates moderately responsible behavior from most consumers. However, you never know when your scores will take a toll. Most of the time, it creeps up on you without you noticing. Fortunately, you can always turn the situation around.
Prior to a unified credit score system, the process of getting approved for a loan, credit card, apartment, etc. moved much more slowly. Now, companies have an unbiased representation of your credit history. Here is how do you benefit, if they see a high number on your report:
- You are more likely to get approved for credit cards and loans. Consumers with excellent credit scores can complete an application with confidence. Most lenders will gladly accept you as a borrower.
- You get lower interest rates. Save money on more favorable interest rates. Then you are free to choose what to do with that surplus: remove any existing debt or use it to pay for other expenses.
- You have more negotiating power. You have more leverage to negotiate a better deal for yourself. Since you are such a desirable potential customer, companies will be more inclined to accept your conditions.
- You are offered higher credit limits. Banks and credit card companies are more willing to let you borrow more money. Since you can demonstrate that you can be trusted to pay everything off, they have no reason to doubt you.
- You are easily approved for rental houses and apartments. Landlords often use credit scores to screen tenants. You will avoid the hassle of finding a landlord that doesn’t base their decisions on credit scores.
Let’s say you are within the range of “bad credit”. An extra 100 points will bring you to an excellent score and open up incredible opportunities. The earlier you get into an improved financial routine, the earlier you will enjoy the benefits.
Even if you are already in a good enough score bracket, you likely have room to grow. When you have a so-called cushion of points, you don’t have to worry about natural score fluctuations. Here are the most useful tips to make your score grow quickly.
You might think there is no harm in getting rid of a credit card you no longer use. However, there are two reasons to keep them open: debt-to-credit ratio and credit history.
The debt-to-credit ratio is how much you spend with your credit card relative to your limit, and it affects your FICO score immensely. This percentage gets automatically increased when you close credit cards.
Next, credit bureaus analyze your cards to figure out the overall length of your credit history. So, closing them will have a negative impact on your credit score. Specifically, 15% of your score is determined by your credit history. You want to increase the average length of time you’ve had credit. Make sure to use it at least once every six months to keep the account active.
An essential step in raising your credit score by 100 points is lowering your credit utilization. You should get as close as possible to 30% or less utilization. This way, you make sure that lenders don’t see an increased risk of you overextending your balances. Here are some solutions:
- Make multiple credit card payments. It is the easiest way to keep your utilization below the preferred threshold. Even if you rarely use your card, spread your purchases evenly throughout the month.
- Make payments using different credit cards. Instead of having one card with a large percentage, keep several cards with minimal utilization.
- Check with your card issuer when they report information to the credit bureaus. If you notice your utilization getting high before the end of the billing cycle, you can improve it. For example, postpone your purchases until later.
- Increase your card limit. The math is simple: if you have a $5,000 limit with a 50% utilization rate, extend it to $10,000 and make it 25%. Depending on what the lender will agree upon, you can lower the rate even more.
The biggest portion of your score, which is 35%, is impacted by your payment history. If you miss even one payment, you are risking a lot: your score can plummet by dozens of points, your APR can skyrocket, and add to your monthly mortgage payment, etc.
If you automate your payments, you will make your life significantly easier. This way, you will never forget to pay recurrent bills and receive penalties or face other unfortunate consequences. Also, you will no longer have to waste your time every month. After all, it is not something you can always find time for.
An additional perk is that you can set up automation for other tasks in your personal finances. On top of ensuring your bills are paid on time, you can make investments, put money into savings, make contributions to charities, etc.
It may come as a surprise, but you can get missed payments removed from your credit report. Otherwise, they could stay there for seven years and affect your creditworthiness for this entire time. Here are some ideas of how you can make that happen:
- Ask for goodwill/forgiveness adjustment from your creditor. This trick is only going to work if you have established a good relationship with them. If you submit a request letter explaining why you have missed a particular payment, they might cooperate.
- Offer a removal of late payment in exchange for you enrolling in the autopay program. Not only will you be asking them to forgive something, but you have leverage. This arrangement is great for creditors as well, since they receive assurance of future timely payments.
- Dispute on-time payments that were inaccurately reported as late. It is not uncommon to find inaccuracies in late payment entries. In this case, you have legitimate grounds for removal.
A secured credit card can truly kickstart your journey to a nearly perfect credit score. This arrangement is especially useful for consumers who struggle to obtain a regular card. This type of credit card is backed by a cash deposit from the cardholder. It means that lenders don’t take your score into consideration.
In many ways, it works like a debit card. You deposit money into your account, and you are not allowed to use any more than that. The critical difference between these two types of cards is that a secured one gets reported on your credit history. Therefore, you don’t risk anything but make a positive impact on your score.
One of the worst things you can do to your financial situation is to have immense debt that you fail to address. A specialized company like Debt Quest can assist you with the process of escaping your debt. We will take care of your debt in a step-by-step manner:
- Figuring out how much you owe. As shown by an interesting study, most consumers don’t even know the amount of debt they have. You might have guessed that it is not recommended to ignore it.
- Deciding on your priorities. You can’t tackle everything at once, so you need to establish which debts are most relevant to minimize.
- Making a plan of action and sticking to it. The company gives you the necessary tools to improve your financial state. But then, your improvements will rely on your commitment.
- Negotiating a lower interest rate or other alleviations. With just a few phone calls, a company can help you save significant amounts of money.
- Lowering your expenses and increasing your income. Smart budgeting and additional sources of income always drive your progress forward.
Obviously, if you’re struggling with a low score, you want to improve it as fast as possible. But in all fairness, do you know the real answer to the question “how fast can I raise my credit score by100 points”?
Despite all of the optimistic prospects, you have to be reasonable. The lower you are currently positioned in the range, the harder this journey will be. You need to accept that bad scores don’t offer incredible opportunities for building credit. However, if you use our tips and stick to them, you will make this possible.
But if you are already starting with a good score, you don’t necessarily need a full 100 points to improve your financial position. Carry on with the right habits and adopt new ones to make your score even better. Since you are in no rush, you will make improvements without even noticing.