Takeaways
- Credit scores impact your ability to obtain the best financing options.
- Anyone can increase their credit score by implementing a step-by-step plan.
- Controlling your spending and decreasing debt will improve your credit quickly.
- Getting a great credit score can be tackled 100 points at a time.
- To decrease your borrowing costs, start by increasing your credit score.
What is a Credit Score?
A credit score is a number between 300-850 assigned to you based on your predicted ability to repay a lender. Credit scores are calculated by credit scoring companies who devise complicated mathematical models to determine your creditworthiness based on information in your credit report. Your credit score is a snapshot in time and can be improved or reduced based on consumer behavior.
Credit scores are processed when a lender requests your credit report. Lenders receive your credit score and credit report to determine your eligibility for different credit products. Companies issuing new credit cards, mortgages, auto loans, and other consumer debt products rely on your credit score.
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Credit scores determine your access to credit. Lenders have found a direct correlation between credit scores and repayment issues. Have a low credit score? This doesn’t necessarily mean you will have trouble with debt. You could be in the process of building your credit. Most consumers want to increase their credit scores for better credit cards and more favorable loan terms.
Increase Your Credit Score By 100 Points
Can you increase your credit score by 100 points? Absolutely. Starting with this goal will help improve your credit score meaningfully. It is easier to see improvements quickly for consumers with low credit scores. If you already have a high credit score, it may take longer for you to tweak your credit score and see meaningful results.
When Do Credit Scores Change?
Lenders report consumer information to three credit bureaus – Equifax, Experian, and TransUnion – every 30 days. Lenders do not always report to all three credit reporting companies. Make sure your credit card company submits to all three.
With a cyclical reporting cycle every 30 days, good credit habits begin showing up fast in your credit report. This updated information flows into your credit score. It may take one or several months for your score to evolve. How quickly your score changes depends on whether you are trying to build credit or fight for the last 50 points to reach a perfect credit score.
Credit scores range significantly from poor to perfect, with many grades in between. Raising your credit score by 100 points will pump you into a new score category.
7 Ways to Boost Your Credit Score
Here are seven proven strategies to improve your credit quickly.
1. Make On-Time Payments
Before doing anything else to improve your credit, you want to ensure you pay your bills on time. Any missed payments can linger on your credit report for up to 7 years. While concentrating on making short-term gains, remain focused on the long term. If you miss payments while trying to build your credit, you will offset all your hard work.
Continue to pay your bills on time. FICO and VantageScore assign on-time payments as the largest factor in their credit scoring system. If you have a high credit score, don’t expect to see much movement in your credit score because you have already been paying on time. However, if you have a low credit score, a series of on-time payments can dramatically alter your score.
Smart Money Impact Score: 10/10. On-time payments can make up more than 30% of your overall credit score, depending on what credit score you are using. Keep paying at least the minimum while you are improving your credit.
Your Time Commitment: Low. As part of your regular budgeting and payment cycle, making on-time payments to maintain or rebuild your credit should be par for the course. To make this process even more seamless, consider automating your financial ecosystem.
2. Catch Up on Unpaid Bills
Unpaid bills will decrease your credit score. Unfortunately, the length of delinquency matters. Bills that are over 30, 60, or 90 days old should be tackled first because they are acting as an anchor to your credit score. Paying these bills might take some financial planning.
Refer to your budget to see where there are unexplored areas of opportunity. You need to do two things: increase your income and cut expenses dramatically. By increasing how much cash you can allocate to your unpaid bills, you can pay off your debt quickly. consider slashing subscription services.
Smart Money -> 14 Wacky Ways to Cut Expenses Quickly
Smart Money Impact Score: 10/10. Strategically paying off your unpaid bill is a smart money move. Start with the most delinquent first, and progress toward your more current bills. This will clear your financial slate and get you to the point of being able to get ahead instead of playing catch-up.
Your Time Commitment: High. Plan to increase your monthly cash flow to allocate funds toward delinquent payments. Review your credit report to ensure all delinquent payments are cleared. Getting up to speed on your payments will give your payment history a makeover and show lenders your willingness to get a great credit score.
3. Keep Balances Low
Credit utilization is the second most heavily weighted component of your credit score. Credit utilization is a metric used to determine how much of your overall available credit limit you are utilizing. There are two key inputs, but we focus on your total unpaid debt balance.
Smart Tip:
According to personal finance experts, you can use up to 30% of your available credit limit before it becomes an issue. The lower you can keep your outstanding balance, the better.
The goal is to have your credit card company or loan provider report low balances to the credit bureaus. Because this happens every 30 days, focus on making strategic payments throughout the month (in addition to your regular payments) to whittle down your balances. Paying off your debt can take various strategies, and two popular methods include the snowball method and the avalanche method.
Smart Money Impact Score: 10/10. Low debt balances will help increase your financial flexibility and credit utilization while positively influencing your credit score. Keep paying at least the minimum while you are shredding debt along the way.
Your Time Commitment: Low/Medium. On-time payments should be part of your monthly budgeting cycle. Making additional debt payments to decrease debt can take more planning. Extra debt payments of only $100 monthly can make a lasting difference. Try automating your extra payments to remove decision fatigue.
4. Increase Your Credit Limit
The amount of available credit to you is the second critical component of credit utilization. With a good credit history, requesting a credit limit increase can be a quick lever to pull.
From start to finish, requesting a credit limit increase only takes minutes, and many credit card companies offer this service online. To observe your credit limit increase might take a couple of business days. Your lender might inquire about additional income sources and other new debt, like mortgages, you regularly pay.
Smart Money -> Ultimate Guide: How to Increase Your Credit Limit
Smart Tip:
With a good credit score, you might already be pre-approved for a higher credit limit. Check with your lenders.
Smart Money Impact Score: 10/10. Increasing your credit limit will improve your credit utilization without having to do anything else. This is an easy win. Increasing the credit limits on your credit cards can single-handedly improve your credit score. The challenge will be to not increase your spending in proportion to your credit limit increase.
Smart Money -> 5 Ways to Curb Excessive Spending
Your Time Commitment: Low/Medium. Some credit card companies allow you to increase your credit limit online. Others might require you to call your lender to boost your credit limit. Don’t know how to start the conversation? Don’t worry: Here is a Smart Money script for increasing your credit limit.
5. Don’t Close Unused Accounts
Closing unused credit accounts while trying to improve your credit score is counterproductive. Length of credit history is one of the factors credit scoring companies analyze, and they typically look at the average length of credit in your portfolio.
If you have a dormant account, keep it open. Don’t add debt to this account while you are trying to increase your credit utilization. Sometimes it is what you don't do that can improve your credit score the most.
Smart Money Impact Score: 10/10. The length of your credit history certainly matters. While it is not the largest factor in your credit score, decreasing the average length can be detrimental to your progress. You want to keep all the momentum on your side but keep active lines of credit open.
Your Time Commitment: Low. Inaction can sometimes be as effective as action. You don’t need to do anything besides keep the status quo with your already active accounts.
6. Dispute Credit Report Errors
At least annually, you should check your credit report for errors. If you find errors, dispute them.
Monitoring your credit report is a detective control. It is designed to catch errors after they have occurred. Sometimes lenders provide incorrect information to credit bureaus, including information that may not even be yours. Additionally, there may be information on your credit report that is too old to still be included.
Smart Money Impact Score: 7/10. Each year you can request a free credit report from AnnualCreditReport.com. Vetting the information in your credit report for accuracy is good financial hygiene.
Your Time Commitment: High. Healthy credit is built on action - making on-time payments, paying off debt, increasing your credit limit, and understanding how to maintain healthy credit. Monitoring your credit report and credit score will only further your financial education. Being educated on the inner workings of your credit score is a smart money move.
7. Monitor Your Credit Score
Patrolling your credit score should be part of your regular financial habits. Many credit card companies and banks offer free credit monitoring services. For example, Chase provides VantageScore 3.0 to some Chase credit card holders.
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Smart Money Impact Score: 6/10 If your credit score decreases, you need to know why. Monitoring your credit score is a detective control. In other words, it is designed to find errors or problems after they have occurred. For a more upstream approach, consider monitoring your credit report too.
Your Time Commitment: Medium. Policing your credit score will help you keep abreast of any changes to your credit. If you are trying to progress up the credit card scoring system, knowing where you stand today is important. Check in on your credit score each month to make sure you are making progress.
Smart Summary
Increasing your credit score by 100 points or more requires a mix of action and inaction. Focus on the high-impact areas for improvement based on your financial situation. If you are rebuilding credit, ensure you make on-time payments and reduce your overall debt burden. For those looking to tweak their high credit scores, increase your credit limit and monitor your credit report for accuracy. High credit scores will give you the best access to the best credit cards and decrease your cost of borrowing. High credit scores can increase your net worth and positively impact your financial health.
