Raising Your Credit Score

Let’s say you want to buy a house but your credit score is somewhere around 675 instead of 720 which will get you the best rate on a home loan.  If you want to raise your credit score quickly, there are some steps you can take that can guarantee a great home loan or any other credit line for that matter.

The mantra for getting a great score is pay your bills on time, keep account balances low, and take out new credit only when you need it.  People who do that faithfully have very high scores. It usually means you're being conservative and cautious about credit. It's not a toy and it shouldn't be a hobby.

That's good advice, to be sure, but these actions take a long time. What if you're house hunting and you just need a few extra points to bump you over the line to the great rates?  As we’ve said before, the first place to start is with your credit report.  Check it over and find out what your credit score is right now.

You will want to concentrate mostly on correcting any errors by taking the steps we’ve outlined above.  Look for errors such as accounts that aren't yours, late payments that were actually paid on time, debts you paid off that are shown as outstanding, or old debts that shouldn't be reported any longer.  Negatives are supposed to be deleted after seven years, with the exception of bankruptcies, which can stay for as long as 10 years.

After repairing errors, the fastest route to a better score is paying down balances on credit cards.  There's really no silver bullet, but over 60 day’s time, it is possible to increase your score 20 points by paying down your credit lines.

Had a few late payments in your past?  If you find yourself in some financial difficulties, you can protect your score by making sure your payments don't go 60 days past due.  Some lenders don't report 30 days past due, but they all report 60 days past due. 

Even if you've paid your bills late in the past, you can improve your credit score by paying every bill on time from now on.  Forget about grace periods.  If you want to have a really good record with the credit agencies, pay your debt before it's due and keep your balances low.

One thing you shouldn't do if you're just trying to boost your score is close unused accounts.  If someone tells you to close unused accounts to improve your score, they're pulling your leg.  It won't help you and it can actually hurt you.

Closing unused accounts without paying down your debt changes your utilization ratio, which is the amount of your total debt divided by your total available credit. You appear closer to maxing out your accounts.  That's why your score can drop. It doesn't mean people shouldn't close them, but don't close them to improve your score. 

If you do cut up cards, though, leave the oldest one open.  The length of your credit history is another factor in your score. If you close the account of the credit card you got when you were a freshman in college and leave open the ones you just got within the last couple years, it makes you look like a much newer borrower.

Another strategy for bringing up your score is to transfer balances from a card that's close to being maxed out to other cards to even out your usage.  You can also just spread out your charges between a few cards.  Try to get the usage on all of them at 20 to 30 percent instead of a bunch at zero and one at 80 percent. You're not spending less; you're just shifting it around to different cards.

Transferring the balance to a card with a lower utilization could help, but it's much better to actually pay down the debt if you have the cash kicking around.

If you're really into finessing the system, check your credit report to see what day of the month your creditors send updates on payments to the credit bureaus. They're rarely on the same cycle as your payment due date.

That's why you can pay off your card every month and your credit report will show you carrying a balance. Then, make your payments several days before the reporting date.

All of these strategies generally take at least 30 days because lenders don't report payments more than once a month.

If you're in the throes of qualifying for a mortgage and need a score boost in a hurry, you can speed the process along with rapid rescoring. If you've got legitimate negative information on your credit report, such as late payments or accounts in collections, you're out of luck. But the process of rapid rescoring can help increase your score within a few days by correcting errors or paying off account balances.

You can't do this one yourself; you'll need a lender who is a customer of a rapid rescoring service. Generally, the service will run roughly $50 for every account on your credit report that needs to be addressed, but it could save you thousands on your loan.  If a consumer can find a lender who is a customer of a rapid rescoring service, new information can be posted within 72 hours.