Are you looking for financing but your credit score doesn’t allow it? Here are some tips on how to improve a credit score in 30 days that can turn your situation around.
Good credit is an integral part of financial health. Borrowers with excellent credit enjoy many perks from lenders, including better credit limits, better terms, and fast loan approval. Therefore, if your credit is below average or poor, it would help to know how to improve a credit score in 30 days, especially if you plan to apply for credit soon.
While it may be difficult to raise credit score 100 points overnight, small positive actions can significantly improve the score margin within a short period. But before exploring the actions that help improve your score, let’s see what credit score is and how it works.
Table of Contents
What is a Credit Score?
A credit score is a numerical figure ranging between 300 and 850, and it represents the creditworthiness of an individual. It is typically based on the individuals’ credit report files in the three national credit bureaus (Experian, Transunion, and Equifax).
But how does a credit score work? Does credit score affect the loan amount or the type of loan you get? Or do student loans affect credit scores?
Well, borrowers have plenty of questions regarding credit scores and their impact on loans. And the truth is a credit score impacts the kind of loan you can get from a lender.
Since your credit score is the first thing most lenders check when you make a loan application, they determine the credit limit, credit terms, creditworthiness, and whether to approve your loan based on the credit score range.
Different types of loans will also require different credit scores to be approved. For example, you can get an auto loan even with a 600 credit score. That’s because it’s a secured loan.
On the contrary, you may not quickly get a good personal loan or another unsecured loan limit with that rate. You need to have very good or excellent credit scores to get better loan limits and terms.
Note: If you delay payment or default after you take out a loan, this will hit your score. Therefore, it’s safe to avoid missing or delaying payments to maintain a good score.
Here are the ranges from the lowest to the highest credit score:
- Poor – 300 to 579
- Fair- 580 to 669
- Good – 670 to 739
- Very Good- 740 to 799
- Excellent/Exceptional – 800 to 850
In some cases, the max credit score is 900.
Types of Credit Scoring Models
There are two major consumer credit scoring models. These include the FICO Score and VantageScore. But, while their scoring approach differs, their figures are nearly the same.
Here are the factors that determine your FICO score:
- Payment history- this represents 35% of your score
- Amounts owed – accounts for 30% of your score
- Length of credit history- represents 15% of your score
- Credit mix – accounts for 10% of your score
- New credit – makes up to 10% of your score
Here are factors influencing your VantageScore:
- Age of credit accounts (less influential)
- New accounts (less influential)
- Payment history (moderately influential)
- A mix of credit and experience (highly influential)
- Total credit usage, available credit, and balance (extremely influential)
How Often Does Credit Score Update?
Credit scores fluctuate from month to month based on two main factors:
- The frequency at which the lenders report the account activities to the bureau
- The bureau that the lender reports to
While a small drop in your credit score shouldn’t be a big issue, you should take note of significant changes. Significant drops in a credit score should signify something pretty big happening.
Why Did My Credit Score Drop?
Well, In as much as you want to learn how to improve a credit score in 30 days, understanding why a credit score drops is also crucial.
Some of the reasons why your credit score may drop include:
- Missing or late payment of bills
- Changes in credit utilization ratio
- Closing of a credit card
- Recent application of multiple lines of credit
- Mistakes in your credit report
- Derogatory remarks on your credit report
- You’re an identity theft victim
See related: Here’s the Best Financial Advice You Need to Know
How to Improve a Credit Score in 30 Days
If you wish to become financially literate and handle your finances, managing your credit score is paramount.
But to cut the chase here is how to improve a credit score in 30 days, without much hassle.
1. Make Timely Bills Payments
If you pay your bills on time, your credit score improves. This applies to all your existing bills including utility bills, mortgages, car loans, cable subscriptions, credit cards, etc. And, this one demands financial discipline.
Since creditors report payments delayed for more than 30 days to reference bureaus, a single delayed payment can drop the score by 60 to 110 points. Unfortunately, that information doesn’t get off your credit report until seven years are over.
However, you may consider negotiating with the original creditor to have the late payments removed from your credit report. Alternatively, ask for a goodwill adjustment or agree to sign up for automatic payments to clear your name.
2. Always Check your Credit Report Information
You can get your credit report from one of the national credit bureaus or personal finance companies like CreditKarma. Knowing your credit information can help you point out what actions have helped or hurt your credit score.
Checking your credit information doesn’t hurt your score. Therefore, it would help if you look, to get insights on areas to work on for a credit boost.
3. Consolidate or Pay off High Credit Balances
The credit utilization ratio represents your entire credit cards balance divided by your credit card limit. And since this ratio accounts for 30% of the FICO score, your credit score may drop if this rate goes beyond 30%.
Therefore, consolidating or paying off high credit card balances can help boost your score within 30 days. Consider the Tally app, which helps you tackle credit card debt most optimally. This app is free to use, and the best in helping organize and clear credit card debts.
4. Reduce New Credit Accounts
Taking out new credit can affect your credit score. Firstly, the score drops by five points due to the hard inquiry that lenders make on your credit report.
Secondly, a new credit account lowers the average age of credit. Since the age of credit makes up 15% of a FICO score, it will result in a significant drop.
5. Challenge any Credit Report Errors
Going through your credit report thoroughly can help identify if there are any errors. If you find any inconsistencies or inaccurate information like transposed figures or a negative entry, you can file a complaint to have them removed.
This involves sending a dispute letter to the bureau and the creditor that filed the report. When doing so, attach any records you may have to prove the information in the report is incorrect. If the bureau proves the information is inaccurate, they’ll have it removed and thus boost your credit score.
6. Request Credit Limit Increases
An increase in credit limit on your credit cards also boosts your credit score. This happens because it reduces your credit utilization ratio.
Some credit card issuers allow people to request a credit card limit increase. If approved for enough credit limit increase, you can improve your credit score in 30 days.
For detailed information on credit, credit cards, and financial services, check out CreditGuideUS. This website is purely an aggregator of credit information.
Why you Need to Get Credit if you have None
While taking out new credit dips your score, there’s no way to improve your score when you have no credit history. Therefore, consider applying for at least one revolving account or installment account like a mortgage, title loan, a student loan, or a personal loan. This will be helpful if your information is reported to a credit bureau for six months.
It’s good to note that applying for credit may be challenging when new, just like for those with a poor credit rating. However, TopcreditCardFinder is a perfect place to go for anyone having challenges getting approved for a credit card.
To get started, open a secured credit card (though preference is given to an unsecured card) with your credit limit that reports to all three bureaus. Alternatively, become a co-signer or an authorized user of a person with good credit history. That way, you’ll start building a credit history which is essential for your financial health.
Make good use of CreditSesame to achieve financial wellness. With this incredible tool, you can grow and manage your credit and cash to achieve financial freedom.