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Your credit score is one of the most critical factors when getting approved for any kind of loan. Potential lenders want to see how trustworthy you can be with money, so they look at this tangible number. If your credit score isn’t where you want it to be, there are steps you can take to improve it so that you’re not limited in the future.
According to Equifax, your credit score is a three-digit number between 300 and 850. Any credit score below 580 is considered poor, 580 to 669 is fair, 670 to 739 is good, 740 to 799 is very good, and anything over 800 is excellent.
Lenders will often view those with a score of 670 and higher as acceptable borrowers. The goal should be to constantly work on upgrading your credit score so that a low number doesn’t hold you back. Your credit score isn’t a fixed number, and you can improve it at any time.
What are three steps to help you improve your credit score by 200 points in 2024?
Step 1: Pay Down Debt
“Credit utilization rate, known as available vs. used credit, is a big factor in your overall credit score,” said Andrea Woroch, a family finance expert, author and regular TV contributor.
If you want to boost your credit score quickly, you have to get serious about paying off your debt. Paying off your debt and making timely payments will prove to potential lenders you’re reliable with money. You must also get into the habit of making every payment on time so that you don’t have your credit card company or cell phone provider filing a report with a credit bureau.
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Woroch explained, “To get the fastest and biggest boost, improve this ratio by paying down your balances. A [2020] study found that consumers see average credit score increases of 19 points when they [lower] their utilization rate by 10% or more [by paying] down their credit card debt by $500. Paying down more will give you a bigger boost.”
There isn’t a better solution to improving credit than paying down debt.But what if you’re struggling to pay down your debt? The good news is that there are tools like balance transfer credit cards that can help you out in your journey.
“Make a bigger dent in your debt balance and rebuild credit faster by using a balance transfer card,” Woroch suggested. “This ensures each payment goes further in reducing your debt, since you won’t incur interest fees for 12 to 21 months, depending on the card’s promotional offer.”
Step 2: Review Your Credit Report for Potential Errors
“Those who don’t check in on their credit reports could be overlooking a credit score damaging error,” Woroch said.
You could have inaccurate or outdated information on your credit report that’s hurting your credit score without even realizing it. For example, your credit report could have a loan that you never took out, there could be a late payment falsely reported or any other possible clerical error.
“If you notice an inaccurate item, write a letter to the credit reporting agency and the company that reported the error explaining why the info reported is inaccurate, and include supporting documentation such as payment or bill copies,” Woroch said.
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How Do You Review Your Credit Report?
- Request a copy of your credit report.
- Review everything on it, including your basic information and credit history.
- Ensure that all information is accurate.
- Report anything that seems off.
To resolve the issue, you must file a dispute immediately when you find an error or any inaccurate information on your credit report.
You may be required to prove your case with documents. It’s important that you keep copies of your bills, conversations with customer service staff and police reports for any fraud. For example, that fraudulent credit card could still be on your record despite the police report that you submitted. You never know what inaccurate information could hold you back from a better credit score.
Step 3: Open a New Type of Credit
“Opening a new credit card boosts your credit utilization rate,” Woroch said.
While you don’t want to get into the habit of opening up random credit cards, you can boost your credit score by adding another type of credit if you don’t have the best mix of credit at the moment.
Woroch added, “Just make sure you don’t rack up a balance. Instead, add one small, recurring bill to that account and set it up for autopay in the full amount each month so you don’t incur any debt, late payments or interest fees.”
You should know that this step is listed as the last option because you should go through the first two steps before resorting to this. It’s important to remember that applying for a new line of credit often leads to a hard inquiry, which tends to affect your credit score negatively.
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Since the goal is to build your credit score by 200 points in 2024, you should automate a few simple bills to this credit card and make your payments on time so that you can improve your payment history. The goal is to focus on improving your credit score over the course of the year.
Closing Thoughts
As you follow these three steps to improve your credit score, it’s essential to remember that it can take some time to see the results of your effort. Building your credit score up will take time and patience. There isn’t a simple solution that can improve your score overnight — you have to focus on building a credit history.
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