A good credit score is an important necessity, but unfortunately, many of us, took a hit in the recession which caused the usually above average credit score to drop down. Improving credit score in a really short time of 30 days is possible, all you need to do is set your mind to it, plan, re-plan, make a secondary plan and execute it with the highest possible efficiency. 30 days is a short time to improve credit score and report, hence it is essential to take some fast measures and improve the score.
About FICO Credit Sores
Before we get to the improve credit score tips part, let us get to know the primary constituents and mechanism of a credit score. Your FICO credit score is calculated by a certain formula and program which is used by credit rating agencies such as Experian, TransUnion and Euifax. Understanding credit report score and history is relatively simple. The report and history contain information related to your financial activity.
This information is fed into the FICO formula, using the following percentage weights, in order to get your credit score.
- Payment History (15%)
- Amounts Owed (30%)
- Length of Credit History (15%)
- New Credit (10%)
- Types of Credit (10%)
These are factors that affect credit score. The mechanism that makes this system work is known as reporting. Lenders and creditors, such as banks and credit card companies, constantly keep reporting your payments and non payments to credit rating agencies, thereby updating your score after every payment or non-payment.
The output always ranges within the credit score rating scale, that is, from 500 to 850. The best possible score on the credit score scale, that is, 850 will get you the lowest interest rate possible on any loan, and the lowest APR on credit cards. There are two rules that you need to keep in mind when you improve credit score and ratings.
One, non payment of installments or bills of any kind brings down the score, whereas payment of installments and bills tends to hike up the score. Two, unnecessary and reckless borrowing brings down the score, whereas important and essential loans when borrowed and managed with great payment schedule, tends to bring up the credit score count.
Ways to Improve Credit Score
If you are really stuck in a bad situation, and want to know how to improve credit score in 30 days or really fast, then besides following these tips, it is necessary that you avoid all kinds of loans, credit cards and anything that connotes borrowing or spending.
Stop Unnecessary Expenses
The first and the easiest step is to stop all unnecessary payments. Pay off and stop all credit cards that you do not use fully, or have a credit limit and APR that is not very nice. This will cut down all APR and the other fess that you are currently paying. Along with that, negotiate some APR's that are being imposed, for secure or really old credit cards.
Pay off Selected Accounts
One of the best ways to improve credit score is to pay off all the small and selected accounts such as, cash advance and payday loans, credit card debts, tabs, etc. When you owe money to lenders, an unnecessary interest keeps on accumulating on this account, hence wipe them out and reduce the total amounts owed. It is also advisable that you pay off any unsecured loans too, as these debt when unpaid tend to bring down the credit score drastically.
Sell Unwanted Assets to Generate Quick Cash
If you are planning to improve credit score in 30 days, then, there are a lot payments, that you will be completing. Hence, sell off anything that is unwanted in the house. Simple things such as a garage sale, selling it off to a junk yard, or simply scrapping it would get you decent amount of money.
Pay off all Short Term Debts
Short term debt should be paid off immediately. There are two ways in which these debt tend to affect your personal finances and score. When unpaid, a lender or creditor reports these debt to the credit rating agencies thereby bringing down the score. Secondly, small loaned amount has a pretty high interest, which keeps on multiplying or increasing as the debt go unpaid.
Check All Accounts and All Credit Reports
There is also possibility that there is something wrong with the credit report. It may be a printing mistake, technical error or a wrong reporting. As per the Fair Credit Reporting Act, you can initiate a proper credit dispute with the company and get the mistake corrected. For this you need to keep on checking your report at regular intervals.
Refrain from Spending and Make Important Provisions
The focus should be on smaller, short term accounts, debt and loans. Since these debt are small and short term, they can be paid off pretty quickly, and it also reduces negative reporting. Due to these two reasons, it is essential to focus on such accounts to raise credit score in 30 days.
In the long run, however, larger more essential and important loans have to be managed in a better way. An easy precaution is to make a provision in the bank such as, a fixed or a recurring deposit beforehand. Keep the sum accumulated in the account till the due date of the installment. This way you never fall back on installments, plus you also get a bit of an extra interest. This process, when executed in a very disciplined manner, will help you to get a really good credit score in the long run.
'How to raise your credit score', has become a common question after the recession, as unhealthy economic situations led to the fall of reports to some really bad credit score ranges. The best way to come out of such a mess is to have a simple approach to repayment, spend less and borrow thoughtfully.