Your three-digit credit score is one of your most important financial numbers because it determines both whether you can borrow, and how much borrowing will cost you. The costs of bad credit could total a quarter million dollars or more over your lifetime, depending upon how much you borrow on credit cards, or for cars or homes. Paying a higher interest rate on everything you buy makes it a lot harder to get ahead, so if your credit score dips below around 700, you'll want to take action to improve it.
Since your credit score is determined by factors like the age of your credit and your history of on-time payments, raising it is often a long slog. But if you want to boost your score quickly, there are a few things you can try. Here are three of them.
1. Ask your lender for an increase in your credit limit
One of the key factors determining your credit score is your utilization rate, or the amount of available credit you use. Your utilization rate accounts for around 30% of your credit score, and a lower utilization rate is preferred because lenders get nervous when you start to max out your cards.
Ideally, you shouldn't use more than 30% of available credit, so if you have a card with a $10,000 limit, keep your balance to $3,000 or less. If you're over this threshold and have a high utilization rate, lowering that ratio is one of the key ways to improve your credit score.
The slow-and-steady way to get this credit score boost is to pay down your debt -- which is also good for your overall financial health. But if you want to quickly gain points on your credit score without spending months, or years, waiting for debt to be paid off, you could also ask your creditor for an increase in your credit limit.
If your $10,000 limit is raised to $20,000 and you had a $5,000 balance, you're now at a healthier 25% utilization ratio as opposed to the 50% utilization ratio that may have sent up red flags before. While this change can give your score a big boost, you don't want to max out the card's new higher limit, so don't opt for this approach unless you're confident you're in control of your spending.
You should also be aware you may get a hard inquiry on your credit if your lender wants to check your credit before raising your credit line. This can hurt your score a little, but not enough to offset the boost that comes from improving your utilization rate.
2. Ask your lender for a courtesy adjustment
A single late payment on a credit card could result in a credit score drop of 110 points if you previously had good credit. If you don't make a pattern of being late, your lender may be willing to remove this black mark from your credit report if you ask.
To get your creditor to remove the record of your late payment, write a polite letter taking responsibility for the late payment and requesting a courtesy adjustment. If you've generally been a good customer and made on-time payments, the creditor will likely agree.
3. Become an authorized user
If you have a family member or friend with good credit, see if they're willing to add you as an authorized user on a card they've had open for a long time on which they have a positive payment history. When you're an authorized signer, you aren't responsible for paying back any of the charges on the card. But the card's history of on-time payments is posted on your credit record, which means you now have a long record of paying as promised. Payment history accounts for 35% of your credit score, so that alone can give you a big boost.
If the card is an older one, being an authorized signer can also lengthen your credit history, which is important because average age of credit counts for around 15% of your score. You'll have a higher credit score if you've had credit open for a long time and established a long history of paying as promised -- and being an authorized user gives you a shortcut to creating that history.
Maintaining good credit over time
While taking any of these three steps should boost your score, you don't want to rely on gimmicks to keep your score high. The best way to make sure you can borrow what you need at a reasonable cost is to build positive credit the right way -- pay your bills on time, don't max out your credit cards, and generally be responsible with your debts.
If you can do these three things, maintaining a good credit score for the long haul will be easy.