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How to increase your credit score in less than a year

Step 1: Pay your bills on time

Your payment history represents about 35% of your credit score more than any other factor. If you have a history of late payment of bills, you should start paying them on time. If you missed payments, catch up and stay up to date. Each timely payment updates the positive information on your credit report. The longer your history of paying bills on time, the higher that part of your credit score will be.

Step 2: check your credit report

* Errors do happen, so check your report closely for:

* Accounts that are not yours

* Accounts with wrong account date or credit limit are listed

* Names and social security numbers that are not yours

* Addresses where you have never lived

* Negative information, such as late payments, older than seven years. (Late payments can only legally stay on your credit report for seven years.)

Under the Fair Credit Reporting Act, the three national bureaus (Equifax, Experian, and TransUnion) and your creditors are responsible for correcting errors on your report. The Federal Trade Commission (FTC) website has detailed steps for correcting errors, as well as a sample dispute letter. If you find accounts that are not yours and you suspect that you have been the victim of identity theft, you will need to place a fraud alert on your credit report, close those accounts, and file a police report and complaint with the FTC.

Step 3: Pay your card balances

The amount of debt you have is analyzed in depth to determine your score. The total declared debt owed is taken into account, as well as the number of accounts with outstanding balances and the amount of available credit that has been used. The total debt reported is compared to the total credit available to determine your debt / credit ratio. Your credit score can be affected if those numbers are too close. Your best plan to reduce your debt is to make a plan to pay it off. While it may seem like a wise decision, don’t consolidate debt onto a lower interest card. Credit inquiries and opening new credit can lower your credit score, at least in the short term. Closing out old cards with high credit limits can also upset your debt / credit ratio. If a new credit offer is too good to pass up, keep the total amount of available credit high by not closing any old credit cards.

Step 4: use credit

You should use credit regularly so that creditors update your credit report with current and accurate information. While paying with cash or a debit card can make it easier to stick to a budget, a cash-only lifestyle does little to improve your credit score. The easiest way to use credit is with a credit card, especially if you are trying to improve your score to qualify for an installment loan. If you have an old credit card, start using it responsibly again. A long credit history is a positive determinant of your credit score, so re-activating an inactive account can be advantageous. Although you should make sure you use credit regularly, only charge what you can afford. Keep your credit balances low to avoid damaging your debt / credit ratio.

Step 5: monitor your report

Keeping a close eye on your credit report will allow you to see if your hard work is paying off. Credit monitoring allows you to control account activity. You will also be notified immediately of any fraudulent activity. The credit bureaus and FICO offer credit monitoring services, which generally cost around $ 15 a month to monitor all three credit reports and scores. You can also use Credit Karma or other free sites alike.

Step 6: When you are looking for a loan, do it quickly.

This is a trick due to the lag time between the lenders and the 3 offices.

When you apply for a loan, the lender will “foreclose on your credit,” that is, they will send an inquiry to one of the credit rating agencies to find out how creditworthy you are. Too many inquiries of this type can hurt your FICO score, as that could indicate that you are trying to borrow money from many different sources. Of course, you can generate a lot of inquiries by doing something perfectly reasonable, like looking for the best mortgage or car loan from several different lenders. The FICO scoring system is designed to allow for this by considering the period of time during which a series of inquiries are made. Try to make all your loan purchases within 30 days so that inquiries are pooled and it is obvious to FICO that you are looking for loans.

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