But many people don’t think about their credit scores unless they need them for something, such as a car loan, a mortgage or even an apartment – so they’re in a bit of a hurry.
We’re not denouncing the slow-and-steady approach (which remains the only way to break into the 800+ range). But if you’re looking to break into the 700+ club (which allows you to get noticeably better terms on mortgages and other loans), there are several ways to get there efficiently, often in a year or less.
Fix credit report errors
Credit-boosting effect: Almost immediate
Correcting credit report errors is the low-hanging fruit of score building – fix a derogatory error or remove a delinquent account that’s not yours, and see your score jump. The FTC found in 2013 that one in five consumers had errors on their credit reports.
The problem is, consumers are often so score-focused that they don’t pull their credit reports, says Julie Marie McDonough (aka The Credit Lady), author of “How to Make your Credit Score Soar.” McDonough is also a real estate broker and works with clients trying to fix their credit before buying a home.
“When we sit down with someone to build or rebuild, the first thing we always ask them is if they’ve pulled a credit report in the last 30 to 60 days,” McDonough says. “And probably 90 percent of the time, a consumer will tell us, ‘No, but I can tell you what my FICO score is.’”
Fortunately, fixing errors isn’t the arduous process many consumers think it will be.
“The credit bureaus have made it a lot easier to dispute things right online,” McDonough says. “The process is better than it’s ever been.”
If you’re brand new to credit, open some cards
Credit-boosting effect: Mid-700s in three to six months (assuming no derogatory info)
If your credit is a clean slate (no bankruptcies, delinquencies or collections), you can go from zero (no credit history) to mid-700s in months, based on McDonough’s experience.
The key is establishing credit.
“The fastest way is revolving credit – credit cards,” says Constance Carter, certified credit expert and author of “Keeping Score: What you Need to Know to Make your Credit Score Grow.” Carter also leads workshops and at-home credit-themed parties.
Worried you’ll get denied, due to having no credit history?
McDonough suggests starting with the bank you already have a checking account with, a department store card or a gas-station credit card. You’ll probably get a higher interest rate and a lower limit, compared with prime credit customers. But all you have to do is make a small purchase every month (so you’re not eating up a lot of your available limit) and pay it off on time.
Because amounts owed (the lower the better) and payment history count for 30 and 35 percent of your FICO score, respectively, “65 percent of your FICO score is going to start looking awesome,” McDonough says. “You’re going to be able to achieve a high-600 or low-700 score in just the first three to six months.”
Consider becoming an authorized user
Credit-boosting effect: Varies, depending on how primary account owner behaves
If you have a relative who is responsible with credit and who is willing to add you as an authorized user, their positive behavior will immediately be reported on your credit reports and factor into your FICO scores.
“But the key is don’t get on someone’s credit card unless you really trust them,” Carter says. “Make sure that person has great credit. I’ve seen folks become authorized users on accounts with late payments, and that will negatively affect them.”
Before trying to piggyback as an authorized user, read our comprehensive guide of the credit implications.
Fix your utilization
Credit-boosting effect: Increases of as much as 100 points in two billing cycles
Perhaps you’re not new to credit, but your already-established credit isn’t so great. When you look at what makes up a FICO score, you’ll see how you can quickly make changes. Payment history makes up the biggest chunk, and credit mix and length of credit history are also small pieces. Then there’s “amounts owed,” which should be your target.
“There’s nothing you can do about history,” Carter says. “History has already happened. You can’t do anything about length of credit history except wait. But there’s absolutely something you can do about credit utilization.”
In FICO’s algorithm, you are rewarded for using up less than 30 percent of your available credit limits (preferably even less) and penalized for maxing out.
“Sometimes people have great credit profiles, but they’re just maxed out and their scores are low because their utilization is so high,” Carter says.
If you don’t have the cash on hand to pay your balances down, the trick is to make your credit limits higher. That doesn’t necessarily mean getting new cards. Carter and McDonough suggest asking your current issuers for credit-limit increases.
“Flip the card over, dial that 800 number and say, ‘I’ve been making my payments on time every time,’ McDonough says. “Then say you’ll be making a large purchase soon and would love to use the card to make it, but need a line that will accommodate that.”
If the issuer agrees to raise your limit, your utilization will drop, and you should see a quick increase in your score. Not the next day, McDonough says, but certainly within two reporting cycles (at most, 60 days, depending on when your card reports to the bureaus).
“I’ve seen scores go from 620 all the way up to 720, an increase of 100 points in just a 60-day period,” McDonough says.
Get fresh, positive information reporting
Credit-boosting effect: Into the 700s a year or two after bankruptcy discharge
Credit scoring algorithms favor fresh information over older information. And, while the credit world isn’t exactly kind to those with bad credit, especially those with bankruptcies, it’s possible to get an FHA mortgage two years after a bankruptcy is discharged. Since terms for these loans are better the higher your score is, you’ll want to use those two years to your advantage.
Therefore, Carter and McDonough say the worst thing you can do is hold still and wait for the bankruptcy to fall off your reports (10 years for a Chapter 7 bankruptcy). Instead, immediately populate your credit report with new, fresh, positive credit accounts. If you can’t get approved for regular cards, consider a secured card, which allows you to make a deposit in exchange for a credit line.
“Otherwise we’ll pull their credit three years after the bankruptcy, thinking ‘OK they’re ready [to apply for a mortgage]’ and they haven’t done anything,” Carter says. “Nothing is growing, nothing is happening.”
Those who replenish their reports with new positive information, meanwhile, can break into the 700s as soon as a year after discharge, Carter says.
McDonough, for example, helped a client with a bankruptcy and a 580 credit score. Within two years, he’d managed to rebuild to 720 by infusing his report with new accounts, on-time payments and low credit utilization.
“When he met me, he thought there was no way,” McDonough says. “He thought he had to wait 10 years.”