If you need to boost your credit score in a hurry because you want to qualify for the best rates on a personal loan or to secure a mortgage during the spring house-hunting season, it is possible to pull it off.
A strong credit score always helps you get the best lending rates and terms available.
"Even a two-point score increase can make a huge difference," says Tracy Becker, president of North Shore Advisory Inc., a Tarrytown, New York, firm that educates consumers about their credit. "If you are two points away from a 740 FICO score and 740 is the threshold needed to save in interest and pricing on a 30-year [mortgage] loan, it could cost hundreds and thousands of dollars more over the life of the loan."
Here are four legitimate ways to drive up your credit score quickly. Of course, none of this is a substitute for a strong repayment history and a low-utilization ratio, which simply means you don't use much of your overall available credit.
1. Dispute errors in your credit file
Under the Fair Credit Reporting Act, any information that is inaccurate, outdated or that can't be verified must be removed from your credit file. That's good news for anyone with erroneous data marring their credit reports.
Step one is to get a full credit report. The Federal Trade Commission recommends consumers order a free report from all nationwide credit reporting companies at the same time — Equifax, Experian, and TransUnion. Each is required to supply you with a full report, at your request, every 12 months or after an adverse credit decision, such as being turned down for a credit card or personal loan.
P.O. Box 105281
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If you notice mistakes, such as late payments that were actually made on time, dispute those inaccuracies right away. The credit bureaus legally have 30 days to investigate your request.
The fastest method of dispute is the credit bureaus' online dispute resolution process. Here's where to access this service:
2. Add rental payment data to your credit report
When you're a renter, it's easier to get a mortgage -- and lower mortgage rates -- when lenders know that you've paid your rent on time.
But since rent payments don't normally appear on your credit reports, you'll need to ask your landlord to supply your rent payment history to the credit bureaus.
Recent research studies from Experian and TransUnion have shown that adding just one month's worth of rental payment data to a person's credit report can increase his or her credit score, usually 10 points or more.
"The fact is rent is often your largest monthly expenditure and you should get credit for it," says Matthew Briggs, CEO of RentTrack, an online rent payment reporting service. "Both Fannie Mae and Freddie Mac recognize this too and are looking at using rental trade-lines in their lending decisions. Therefore, we are seeing one of the largest opportunities for non-traditional credit to count towards your future mortgage."
3. Ask about 'rapid rescoring'
Rapid rescoring is a process by which your credit score gets updated in as little is as 72 hours.
With rapid rescoring, a lender, mortgage broker or credit professional contacts the credit bureaus on your behalf to hasten the process of getting corrected or updated information added to your credit files.
"It typically takes three to five business days and in the right circumstances it can vastly improve a consumer's credit score," says Anthony Davenport, founder of Regal Financial, a credit management and protection firm in New York City.
Davenport says that in his experience in currently doing rapid rescoring for clients, "you can use it to quickly update balances on credit cards or if you have a letter from a creditor stating that they're going to remove something from the credit report."
But you can't get a rapid rescore on your own. The credit bureaus only offer this service, for a fee, to lenders and entities that furnish credit data about mortgages.
4. Pay down credit card debt
Another relatively fast way to bump up your credit score is to reduce credit card debt. This works by lowering your credit utilization rate, or the percentage of debt you've charged versus the amount of credit you have available.
"Depending on a person's credit profile, a typical credit score increase would be 30 to 50 points," after slashing credit card debt, says Davenport.
Reducing credit card balances can increase credit scores anywhere from two to 100 points or more, depending on how high the balances are, Becker says.
The score jump isn't instant, however, since creditors only update credit card balances once every 30 to 45 days.
Now, about keeping that higher score
Congratulations on boosting your credit score. Keeping it there requires a commitment to responsible use of credit.
Some consumers make the mistake of thinking that once they secure a car or a 30-year mortgage, future credit decisions will be few and far between. But creditworthiness will continue to make an impact on your everyday life, from refinancing options to loans for emergency home repairs.
Therefore, it's never a good idea to slack off on payments or to let your credit card balances balloon up again, the latter very tempting for new homeowners with new rooms to furnish and unexpected maintenance.
How do you maintain a healthy credit profile? Join the WisePiggy Facebook community to share your thoughts.