Fast credit repair is possible if you’d like to get approved for a loan with a more affordable rate.
There are three credit reporting bureaus Equifax, TransUnion and Experian.
They all offer credit scores but they use their own algorithm to decide what your score will be. So your score may differ between the three.
It’s best to track your score using FICO as their ratings are more widely used. Plus, as your FICO score increases, your credit score from all three bureaus will increase as well.
Here are some tips for fast credit repair in a 3 to 6 month timeframe.
Fast Credit Repair
[A] – Obtain Credit Report
The first step to improving your credit score is to identify what your main issues are. You’re entitled to a free credit report from each bureau every 12 months. Simply go to AnnualCreditReport.com and order your report.
If you find any errors, it’s important to dispute those at the corresponding agency so that it won’t negatively affect your credit score. According to the Federal Trade Commission, 20% of those who disputed an error on their report increased their score.
[B] – Lower Debt to Income Ratio
The amount you owe has a 30% weight on your FICO score. Avoid maxing out credit cards and try not to spend more than what you make a month. This, along with a decent budget, will allow you to pay your balance in full.
This is a fast credit repair solution as having a low debt-to-income ratio is a big factor on how the credit reporting agencies calculate your score.
[C] – Monitor your Score
Monitoring your score on a month-to-month basis will allow you to track your progress. As you keep your debt low and pay your balances off in full each month, you’ll notice your score start to rise.
There are credit cards that offer a free FICO score dashboard to help you monitor. Citi and Discover are a few of the issuers who provide this service.
[D] – Establish good credit history
Credit history accounts for 35% of your FICO score. So the longer you have a credit card account open, the better.
Employing smart budgeting techniques like the envelope system or living on last months income will help you keep up with paying the card off every month.
[E] – Apply for Secured Loan
This option is for those who aren’t already in huge amounts of debt. Applying for a secured loan from your bank is another fast credit repair tactic that can be utilized.
Credit mix has a 10% weight in your FICO score. So having credit cards as well as open loans you’re paying off will allow your score to rise at a faster pace.
A secured loan from a bank will use your savings or CD as collateral for the loan. You’ll have to repay the loan on a monthly basis (with interest) which will improve your score.
Do not go overboard with spending as it’s crucial that you make your payments every month or you risk lowering your score.
Maintain healthy finance habits
With the above tips in mind, you’ll find an increased approval rate for loans and lines of credit that, otherwise, would’ve been unavailable to you. Simply maintain a healthy discipline in your personal finances and your credit will repair at a faster rate.