You’ve probably heard it said before that good credit is worth more than cash, and in many cases, it’s true. For example, you may not be able to purchase a home or rent an apartment without a decent credit score, even if you have a very large income.
If you have no credit score because you’ve never borrowed money, or if you made some mistakes with credit cards in your youth as I did, you need to improve your credit score as quickly as possible. It’s important to do this while you’re still young, even though it’s difficult when you’re living paycheck to paycheck as so many young people (and plenty of others) do.
However, many consumers—especially young people—don’t know how to quickly improve their credit scores, or even how to check them (without getting scammed).
Getting A (Legitimate) Free Credit Report
The federal government requires that individuals have access to their reports from the three major credit agencies (Equifax, Experian, and TransUnion), according to USA.gov. The only catch is that a report from each agency for each person can only be accessed once per year—which is okay, because significant credit score changes take at least that long anyway.
However, a lot of scam sites and almost-scam sites have existed since the dawn of the internet for the sole purpose of getting you to pay for your “free” credit report. The least harmful of these scams are out to charge you for something that’s rightfully yours for free. The most harmful are out to steal your personal financial information.
According to both USA.gov and a great Solution Loans article (recently updated Jan 2020) on improving your credit score, the official site licensed by the federal government to provide free credit reports is AnnualCreditReport.com.
If you visit the site, the guides there will easily walk you through the process of checking your credit score. However, the site cannot help you actually improve your score—for that, you’re essentially on your own. Here are some tips to help you get started and improve your credit score greatly in the shortest possible amount of time.
How to Quickly Improve Your Credit Score
While changing your credit score for the better overnight is impossible (and you should be suspicious of any service offering you too-good-to-be-true results, as it’s probably a scam), if you follow these tips you should be able to go from bad or no credit to average or good credit within 1-3 years. From that point, it’s easy to improve your credit forward by keeping up with all payments.
1. Consider Secured Credit Cards
A secured credit card differs from a traditional (or “unsecured”) credit card in that the individual applying for the secured credit card puts up some of his or her own money as a deposit, usually getting credit equal to the deposit, according to Nerd Wallet.
However, they differ from prepaid debit cards, which don’t affect your credit score one way or the other, in that you’re not actually spending your deposit when you use the card—the deposit is just there in case you default on your line of credit. The bank is still loaning you money, and if you pay off the card and close it or transfer its line of credit to an unsecured card, you get your deposit back.
These cards are easier for people with bad or no credit to get because they are less of a risk to the bank, and because they’re less of a risk to you, they’re a fairly safe way to build or rebuild credit. The best way to use one is to swipe it a few times a month for small purchases and then pay those purchases off completely by the due date. This protects you from accruing interest, which is often fairly high on these types of cards.
2. Correct Errors on Your Credit Reports
This one’s a bit of a long shot, but it can improve your basic financial habits.
Take a very close look at the details of your credit reports and make sure there are no errors (such as a problem caused by identity theft or the company getting your credit mixed up with someone else’s). The FTC found that around 5% of credit users had mistakes in their reports that made negative impacts on their credit scores.
3. Make Payments to Boost Your Score in 2 Ways
In case you didn’t know already, whether or not you make minimum payments on time is a huge part of what determines your credit score. Late payments can affect your score for up to seven years, but don’t give up if you have a lot of late payments already: all three credit reporting bureaus take a “better late than never” approach to making payments.
Be sure to pay off anything less than three months late first, as paying within this window results in a greatly reduced impact on your overall score. Also, if any of your loans have been sent to a collections agency, be sure to pay this amount in full as soon as possible. Paying less than the full amount starts the whole thing over in terms of credit reporting, and it can look as if you’ve had two separate collections claims filed against you.
Making your payment also helps you in another way. It reduces your credit utilization: a measure of how much credit you are using out of how much is available to you. If you have $1,000 total credit and you’re using $950, that shows the credit agencies that you may not be a responsible borrower. However, utilizing only a small amount (say, $50-$100 of that $1,000) of your available credit can make you look much better to the credit bureaus.
No, these tips won’t solve all your credit woes overnight. However, they can make it much easier for you to fix your credit. That’s important for everyone, and there’s no better time to start than now—especially if you anticipate moving or taking out a large loan anytime within the next 3-5 years.