Rescoring in Thirty To Sixty Days
Rebuilding your credit can be an agonizing and slow process but by following the advice below can create shortcuts that can dramatically increase your score in as little as two months.
Pay off your credit cards and lines of credit …one of the fastest ways to boost a score is to lower your debt utilization ratio. This is the difference between the amount of revolving credit that is available to you and the amount you are using.
The best way to pay off revolving debt is not with another loan, which would likely show up on your credit report and cause more damage. You are typically better off paying down the debt out of your current income using cash that is sitting in a savings account or selling stocks or other investments.
A riskier strategy might be to take out a 401k loan. These loans don’t show up on your credit report. However the problem is that if you lose your job you typi8cally have to pay the money you borrow back quickly or you will incur taxes and penalties on the balance.
Whatever you do don’t cash out a 401k or withdraw money from an IRA to pay off credit card debt. A few points difference on your credit score is not worth the short and the long-term costs you’ll pay for prematurely withdrawing that money.
Use your credit cards as little as possible …this tactic for raising your score plays on the fact that the FICO scoring formula likes to see a big difference between your balances and your limits – the more evident that gap is the more likely it is that you will have better credit. The FICO formula really doesn’t care if you pay off your balances in full every month or carry them from month to month. All that matters to this formula is how much of your total credit limit you are using at any time.
Focus on correcting the biggest mistakes on your credit reports …to repair your credit fast get rid of bankruptcies, collections or charge-offs on your report that you don’t own. If an account you closed is reported as open, however, you will probably want to leave it alone. Having an account reported as closed on your credit file might hurt your score.
Don’t ignore a collection because it is small or because it is listed as paid off. These are serious negative marks that can significantly lower a credit rating. Fix this kind of thing first before you fix errors like the misspelling of your boss’s name as the credit scoring formula does not even consider small details like that.
Try to convince your creditors to report or update positive accounts …the most efficient way to do this is to get an account that’s in good standing reported by the creditor. Sometimes this results in an immediate positive bump up of your score.