It may seem like a huge goal, but it’s achievable if you follow a few tips to build your credit.
- It is possible to dramatically increase your credit score in a year or less.
- Two ways to quickly increase your credit are to dispute any errors on your credit reports and to pay off your credit card balances.
- Also, be sure to pay your bills on time and keep new credit applications to a minimum.
Building credit is generally considered more of a slow and steady process than one where you see rapid improvements. It doesn’t always have to be this way, however. Depending on your current credit profile, it might be possible to raise your credit score by 100 points or more in 2023.
That’s a significant difference that could put you in a much better financial situation. For example, if you go from a score of 600 to 700, you could get much lower interest rates on loans and qualify for credit cards with more benefits.
Raising your credit score by 100 points is not something that happens. You will need strategies that will give you a boost in the most important factors. Here’s exactly what you can do to get those kinds of results.
Check your credit report and dispute inaccurate information
Your credit report is a document containing all the information that a credit bureau has about you. It uses this information to calculate your credit score, so it’s extremely important that everything is accurate.
There are three main credit bureaus: Equifax, Experian and TransUnion. You have a credit report with each, which means you need to check all three reports. You can request a free copy at AnnualCreditReport.com, and free copies are available weekly until 2023.
If you find errors in a credit report, dispute them with the credit bureau. This includes negative information that should have already disappeared from your credit report. You can correct credit report errors with each credit bureau by filing a dispute online.
Get your credit card balances as low as possible
If you have large balances on any of your credit cards, paying them off could dramatically increase your credit score. One of the most important factors used to calculate your credit score is your amounts owed. It is also called your credit utilization rate.
This is the ratio of your credit card balances to credit limits. For example, if the combined credit limit of all your cards is $5,000 and their combined balances are $3,000, you will have a credit utilization of 60%.
Credit utilization below 30% is recommended, but the more you can get, the better. Credit reporting company FICO found that people with the highest credit scores use about 7% of their credit. The good news is that your credit usage is updated every month, so if you pay off your credit cards, it can have a positive impact within a month.
Make payments on time and be current on all overdue accounts
The most important part of your credit score is your payment history. When you pay on time with bills reported to credit bureaus, like credit cards and loans, it improves your credit. Payments that are 30 days or more late, on the other hand, can seriously hurt your credit. And accounts that go to collections or are debited are even worse.
One-time payments are not one of those things that will cause your credit score to rise significantly. Instead, the goal here is to avoid anything that will negatively affect your credit.
If you have a flawless payment history, be sure to continue it in 2023. If you have overdue accounts, do your best to start paying them again so you’re current. This always benefits you, because how long your account is overdue matters. Being 30 days late is better than 60 days, which is better than 90 days.
Be selective about new credit applications
When you apply for new credit, such as a credit card or loan, an in-depth investigation is added to your credit report. This has a small impact on your credit score, normally only a few points. If you’re approved for a new credit card, it can also reduce the average age of your account, another factor that can negatively impact your credit.
Neither are big hits to your credit, so there’s nothing wrong with applying for a credit card or a loan that could help you financially. However, when trying to dramatically increase your credit score, do your best to avoid anything that will set you back. Be selective about what you apply for, at least until you’ve met your credit score goals.
To sum up, there are several strategies you can use to boost your credit score in 2023. Disputing credit report errors and paying off your card balances can both have a big positive impact on your credit score. It’s also important to make payments on time and to be selective in your credit applications, as they help you avoid negative marks that weigh on your credit.
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