1 Fast Way to Increase Your Credit Score
Implementing the right credit behaviors can lead to your credit score increasing fast, even for people with thin credit files, or who've had a few dings on their credit history. It's just a matter of focusing on the behaviors that can move the needle the most for your FICO credit score in the short term.
In the video segment below, The Motley Fool analysts Nathan Hamilton and Michael Douglass talk about credit utilization and how paying off debt faster can help to raise your credit score quickly.
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Michael Douglass: Trisha asks, "I'm helping some family members who've received what I think is some bad credit advice as they're trying to improve their credit score to prepare for buying a house. They mentioned carrying a credit card balance and thinking about closing some old accounts. What are some steps that they can do to increase their score quickly?" First off, carrying a credit card balance, not a way to improve your credit score. I think we mentioned that earlier. Don't do it. I think as well, closing some old accounts, generally for credit score purposes, that's not a good move, because your average age of account is one of the things they want to look at. They want to see that long-term relationship. So, that's something you want to see as well. On the flip side, let's talk about some things you can do to improve your credit score quickly. Obviously the two biggest levers are credit utilization and payment history.
Nathan Hamilton: Yeah, payment history accounts for 35%. There's not so much you can do in the near-term about it. We're talking FICO scoring models here with the percentages. Credit utilization accounts for 30% of your score, and that is something that, if you are able to bring your utilization down quickly, you can improve your score quickly, all else held constant. You can see the effects impact your score within a month or two when you are bringing down your utilization ratio significantly. So, that is probably the single best tip if you're looking to increase your score fast. That's the easiest way to do it, but it's probably also the most difficult, because if you are having a problem with debt, it probably comes down to lifestyle choices and spending, and those forces are hard to counteract.
Douglass: Yeah, absolutely. But also necessary, particularly if you're in the market for buying a house, because frankly there's a lot of costs of homeownership that are hidden. You have repairs, a roof leaks, a basement floods, stuff happens and that can cost a lot of money. I had a friend and there was some water in her basement, what ended up there was black mold, it was $60,000. That stuff happens. And obviously, hopefully, that's a fringe case.
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