According to research done by Deutsche Bank, 25 percent of Americans have a FICO credit rating of less than 600. The recession has left many consumers depending on plastic and unable to face the repercussions of this dependency. As our economy improves, many are looking to qualify for loans that require higher credit ratings than they have. If you’ve had credit trouble, you know that it’s not easy to fix your credit in a short amount of time. Blemishes on your credit report are often there for no fewer than 7 years. But there are some things you can do to improve your credit score in a shorter amount of time.
Prioritize Your Pay Down
There are two kinds of credit debt: installment loans and revolving accounts. Installment loans include student, auto and mortgage loans and revolving accounts include credit card accounts. Even if you have more installment loan debt, you should focus more on your credit card debt first. Credit card debt is more egregious in the eyes of lenders who value gaps between the amount of credit you’re using and the credit limits you have. If at all possible, get your balances below 30 percent; balances below 10 percent are ideal.
Hold On to Older Cards
If you are weeding out your credit cards and trying to pare down the number of cards you have, don’t get rid of your older cards. Card history and longevity is important for credit bureaus. In order for cards to count toward your good credit, you must be using them. The older cards will carry more weight in a credit-scoring formula if they are in use, according to Craig Watts, executive at Fair Isaac where FICO scores were created.
Contact Credit Card Companies
Credit card companies may seem like rigid bad guys who refuse to work with card holders, but actually you can sometimes make a request for the removal of a bad mark on a report. Even if a blemish has been shifted to a collection agency, you’ll still want to contact the credit card company to make a change to your report. One of the most severe blemishes you can have on your card is called a charge-off. A charge-off means you have been more than 180 days late in paying your bill. These are the marks that will stay on your credit report for 7 and a half years. Sometimes you can negotiate with your creditor who will agree to remove the negative entry from your report.
Form an Alliance
If you have little to no credit history or you have a bad credit history but a spouse or loved one has good credit, become an authorized user on his or her account. The person who has good credit and card balances below 10 percent will add to your credit card score. Do not become an authorized user on a card that has a high balance to credit line ratio.
Earning a high credit score takes discipline, time and focus over the years, but if you’re in a pinch and you need to qualify for a loan that requires a higher credit score than you have, consider what you can do to change your credit card rate in a short amount of time
About the Author: Lewis Layton is a freelance writer for several finance blogs. Credit scores affect our lives when making major purchases, applying for a job or obtaining a loan. Find out just how high your score should be at Creditfox, where you can find answers to credit score questions.