How to Improve Your Credit Fast - Part 1

There may be ways to build your credit fast if your score is lower than you'd like. Depending on what's holding it down, you may be able to tack on as many as 100 points relatively quickly.

Scores in the “fair" (630-689) and "bad" (300-629) areas of the credit score ranges could see dramatic results.

Is 100 points realistic?

If you’re struggling with a low score, you’re better positioned to make gains quickly than someone with a strong credit history. Is a 100-point increase realistic? Rod Griffin, senior director of public education and advocacy for credit bureau Experian, says yes. “The lower a person’s score, the more likely they are to achieve a 100-point increase,” he says. “That’s simply because there is much more upside, and small changes can result in greater score increases.”

Here are some strategies to quickly improve your credit:

1. Pay credit card balances strategically

The portion of your credit limits you're using at any given time is called your credit utilization. A good guideline: Use less than 30% of your limit on any card, but lower is better. The highest scorers tend to have credit utilization in the single digits. You want to make sure your balance is low when the card issuer reports it to the credit bureaus, because that's what is used in calculating your score. A simple way to do that is to pay down the balance before the billing cycle ends or to pay several times throughout the month to always keep your balance low.

Impact: Highly influential. Your credit utilization is the second-biggest factor in your credit score; the biggest factor is paying on time.

Time commitment: Low to medium. Set calendar reminders to log in and make payments. You may also be able to add alerts on your credit card accounts to let you know when your balance hits a set amount.

How fast it could work: Fast. As soon as your credit card reports a lower balance to the credit bureaus, that lower utilization will be used in calculating your score.

2. Ask for higher credit limits

When your credit limit goes up and your balance stays the same, it instantly lowers your overall credit utilization, which can improve your credit. If your income has gone up or you've added more years of positive credit experience, you have a decent shot at getting a higher limit.

Before you make this request, plan how you'll keep your spending habits steady and not max out that extra available credit. If those higher limits are a temptation, this might not be the best strategy for you.

Impact: Highly influential, because utilization is a large factor in credit scores.

Time commitment: Low. Contact your credit card issuer to ask about getting a higher limit. See if it's possible to avoid a “hard” credit inquiry, which can temporarily drop your score.

How fast it could work: Fast. Once the higher limit is reported to credit bureaus, it will lower your overall credit utilization — as long as you don't use up the extra "room" on the card.

3. Become an authorized user

If a relative or friend has a credit card account with a high credit limit and a good history of on-time payments, ask to be added as an authorized user. That adds the account to your credit reports, so its credit limit can help your utilization. Also called "credit piggybacking," authorized user status allows you to benefit from the primary user's positive payment history. The account holder doesn’t have to let you use the card — or even give you the account number — for your credit to improve. Make sure the account reports to all three major credit bureaus (Equifax, Experian and TransUnion) to get the best effect; most credit cards do.

Impact: Potentially high, especially if you a have a thin credit file. The impact will be smaller for those with established credit who are trying to offset missteps or lower credit utilization.

Time commitment: Low to medium. You'll need to have a conversation with the account holder you're asking for this favor, and agree on whether you will have access to the card and account or simply be listed as an authorized user.

How fast it could work: Fast. As soon as you're added and that credit account reports to the bureaus, the account can benefit your profile.

4. Pay bills on time

No strategy to improve your credit will be effective if you pay late. Worse, late payments can stay on your credit reports for 7½ years. If you miss a payment by 30 days or more, call the creditor immediately. Pay as soon as you. Ask if the creditor will consider no longer reporting the missed payment to the credit bureaus. Even if the creditor won’t do that, it’s worth getting current on the account ASAP. Every month an account is marked delinquent hurts your score.

Impact: Highly influential. Your record of paying bills on time is the largest scoring factor in both FICO and VantageScore credit scoring systems.

Time commitment: Low. Prevent missed payments by setting up account reminders and considering automatic payments to cover at least the minimum.

How fast it could work: This varies, depending on how many payments you've missed and how recently. It also matters how late a payment was (30, 60, 90 or more days past due). Fortunately, the impact of delinquent payments fades over time, and adding more positive credit accounts can help to speed that up.

Next week, in Part 2, we will look at more strategies — Dispute Credit Report Errors, Deal With Collections Accounts, Use a Secured Credit Card, Get Credit for Rent and Utility Payments and Add to your Credit Mix.

(Partially Reprinted from www.nerdwallet.com)