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If your credit score is below 580, that's generally considered to be a poor credit score. A score this low could mean you have a hard time getting approved for a loan. It could also mean you end up paying a lot of extra interest when you do borrow.
Poor credit scores can happen for a lot of reasons, from a history of late payments to simply having too little information on your credit report. The good news is, you aren't stuck with poor credit for the rest of your life, even if your score isn't great right now. There are steps you can take to raise your credit score from poor to good.
In fact, with the right moves, you may be able to hit this milestone in as little as a year. That means you could end 2021 with a credit score that's a lot better than when you started. Here are a few techniques to try.
1. Ask your creditors for help
Chances are good you have poor credit because creditors are reporting black marks on your history. This might be the result of late payments or even defaulted debt. Removing one or more of these negative remarks could, by itself, be enough to raise your credit score from poor to good.
This isn't always going to be possible. But there are circumstances where your creditors may work with you. If you have one or two late payments but have otherwise been a good customer, you can write a goodwill letter and ask your creditor if they'll remove the derogatory information from your credit.
Since a single late payment could cause your score to drop by more than 100 points, the removal of that late payment could be enough to send your score into "good" territory. A good credit score is defined as a score of 670 or higher.
Creditors may even be willing to remove a record of a default under certain circumstances. If you can negotiate with your creditors to make a lump-sum payment for any debt you're behind on, they might agree to list the account as paid in full on your report. When you make this type of agreement, make sure you get it in writing.
2. Make all your payments on time, all the time
Payment history is the single most important factor that determines your credit score. If your goal is to raise your score from poor to good by 2022, you can't afford to miss a single payment. To make sure you don't, consider setting up automatic payments to develop the type of history that should improve your score over time.
If you already have late payments or derogatory information on your credit history, time alone can make those past black marks less important -- especially if all of your more recent transactions show you've been responsible with borrowing.
3. Make sure all of your positive accounts are listed on your credit record
Services such as Experian Boost allow you to get information added to your credit report that wouldn't otherwise be on it.
This can include a history of paying utility or phone bills on time. When this information is added to your report, it can show a history of on-time payments (assuming you've been responsible with paying your bills). Since payment history is the most important factor in determining your credit score, this can also cause a significant increase in your score.
While simply adding more data to your credit report isn't going to raise your score from 580 or below to 670 or above, there's a real chance this could increase your score by around 20 points or so.
4. Pay off debt that you owe
Your credit utilization ratio is another important factor for your credit score. It's the ratio that compares the amount of available revolving credit you have to the amount of credit you've used. Your revolving credit is things like credit cards that change from month to month, rather than, say, a personal loan or mortgage. A ratio above 30% will damage your credit score as it makes lenders concerned you're in over your head.
If you can pay down your credit card balances, you'll be able to reduce this ratio and so bring your score up. A maxed-out credit card could cause as much as a 45 point drop in your credit score.
5. Consider becoming an authorized user
One of the single fastest ways to improve your credit score is to piggyback on someone else's solid payment credit history. You can do that if there's someone in your life who's willing to list you as an authorized user on one of their credit accounts.
If you're listed as an authorized user on a card, the entire history of that card will show up on your credit report. This can help your credit utilization ratio if there's a lot of available credit on the account. And it can help your payment history if no late payments were ever made on it. If it's an older account, it can also help make your average age of credit longer, which is another component in determining your credit score.
Being added as an authorized user isn't a permanent solution, since the benefits of this status would disappear as soon as you were removed from the card. But it can be a great way to quickly raise your score, perhaps even from poor to good -- especially when combined with some of the other steps on this list. It could buy you time to develop your own positive payment history and wait for black marks to drop off your report.
Raising your credit score is possible
Raising your credit score from poor to good is definitely doable. And if you're able to follow most or all of the steps on this list, you should be able to make it happen by 2022.
Even if it takes a little longer, the important thing is to start ASAP and practice responsible borrowing behavior consistently. You'll achieve that "good" score range sooner rather than later -- and perhaps one day you'll even be able to earn an excellent score.