Is no credit better than low credit? Is it true that you should challenge every negative mark on your credit report and see what happens? Finances in the U.S. can be confusing and overwhelming, especially when it comes to credit. How can you access information from real credit experts while also knowing which so-called “advice” isn’t coming from those in the know?
Do your research, and check the source. Genuine finance and credit professionals showcase their experience and it’s easy to see their angle. There are no bait-and-switch tactics and the priority is educating and informing consumers, not selling a product. Check reviews and testimonials from third-party sites, and before you hand over your money for any services, ensure they’re on the up and up with the Better Business Bureau.
Ready for a crash course on improving your credit score in just 30 days? Here are a few of the best tips from credit experts:
- If you’re lacking in credit, ask current creditors for a line increase with no hard inquiries. A lack of credit, including low limits and minimal credit history, can hurt your score just as badly as “bad credit.” However, every time you apply for a new line of credit—and sometimes even ask for an increase—a “hard inquiry” might get tacked onto your credit score, temporarily taking it down. If you’re not looking for anything beyond a quick credit score improvement, call current creditors and ask for a credit line increase with a “soft inquiry” (if any inquiry at all). You may instantly get approved for a higher credit limit without any inquiries impacting your score.
- Transfer balances to a zero-interest card. Finance guru Suze Orman recommends seeking out a credit card that offers a generous zero-balance period (18 months is usually the maximum) for credit balance transfers. Your credit score may take a small hit with that hard inquiry, but it’s balanced out by moving other credit balances. If you don’t have a lot of credit lines, adding that new card has the potential to ultimately give your score a little boost by next month.
- Challenge negative items on your credit report. There might be false information, outdated information, or just information you don’t recall being linked to you. All three credit reporting bureaus have easy ways to challenge negative comments, often with just a fast online form. It’s amazing how even the smallest of negative remarks, such as owing less than ten dollars on an account you can’t remember, can bring down your score. Within a month, your credit score can enjoy a big increase depending on how many negative marks are removed.
- Get the right credit. Not all credit is considered equal by the crediting bureaus. “Closed-end” credit is the highest quality and will give you the biggest boost. These include mortgages, car loans and appliance loans. In some cases, payday loans can also qualify, but be careful—some payday loans are considered predatory and come with monstrous interest rates or terms. (However, if you’re just looking for a fast credit boost and can pay off a payday loan quickly with minimal interest, it might be in your best interest.) A mortgage, car loan and appliance loans are all big-ticket items and shouldn’t be undertaken just to achieve a higher credit score. However, if these items are already in your life plan, it’s added motivation to prioritize them.
- Pay down your open-ended credit. Credit scores look at your debt-to-income ratio, especially when it comes to open-ended credit like credit cards and department store cards. No creditor is going to expect you to pay off your mortgage or car at lightning speed. However, if you’re carrying thousands of dollars in debt on a credit card, that’s worrisome and negatively impacts your credit. If you don’t have an active budget where you’re earmarking income to pay off credit cards quickly, it’s time to take action. The faster you pay off credit cards, the less interest you’ll pay and the higher your score will become.
- Know when negative items are naturally going to fall off your credit report. You’re entitled to free credit reports from numerous sources, including the credit reporting agencies Many items, such as hard inquiries, organically disappear from your credit report in two years. Unpaid balances, such as an overdue Redbox late fee, usually disappear after seven years. Know what your credit report looks like, and watch out for these marks that don’t qualify to be challenged. This gives you the power to naturally predict when your credit score will rise.
- Consider a tradeline. It’s not a very well-known tactic, but it can seriously boost your credit score in a very short timeframe. Tradelines work by authorizing someone who’s in need of better credit onto an account of someone with great credit. This might be someone you know (like a parent or spouse), or you can go through an agency and pay to get added to an approved tradeline account. Both approaches are perfectly legal, assuming you go with a reputable agency if you’re paying for the tradeline. Many people prefer the agency strategy in order to avoid mixing business with family or friends.
Your credit score matters for many of life’s big moments, from getting approved for a home loan to potentially landing your dream job. It’s debatable whether or not it’s ethical or a good idea to use someone’s credit score when considering them for a job, but in some industries it’s common practice. Having a healthy credit score and financial profile is indicative of maturity, financial literacy and overall health. Almost everyone has bumps and challenges in their credit history, but everything is ultimately fixable—it just takes time, effort and a little know-how. Having expert advice on your side is the first step to a higher credit score and lower interest rates in the future.