The reality is that in most cases, there’s no quick fix to your credit score. When you make a mistake like missing a payment or falling into delinquency, you often just have to rely on time to pass in order for you to get your credit back on the right track. With that said, there are a few ways that some people can improve their scores in a hurry and here’s how to do that.
1) Consolidate your revolving credit into an installment loan
This is my #1 trick I offer to people who have high credit utilizations and are trying to improve their score. I’ve seen it work wonderfully for many people, too.
- Note: It will really help here if you have a basic understanding of credit scores, so if you need to learn on the basics, read my beginner’s guide to credit scores and reports.
This is how this trick works.
For the most part, there are two different types of accounts you can have. Revolving accounts and installment accounts. Revolving accounts are going to usually be accounts from credit cards, department store cards, trade/credit lines at retailers, some personal loans, and so forth. Installment loans are typically large loans like student loans, car loans, home loans, etc.
The difference between these two is that revolving accounts directly affect your credit utilization while installment accounts do not. This is very key because your utilization makes up a whopping 30% of your FICO score.
So you may already see what can be done here.
By transferring your debt from revolving accounts to an installment account, you effectively remove your debt from the equation that affects your credit score utilization and therefore can often raise your score substantially if your credit utilization is what was holding you back. I’ve seen scores shoot up 60+ points from this trick.
I generally recommend for people to do this by going into local credit unions or banks that they have good relationships with. If you have a decent score, somewhere in the upper 600s, you probably won’t have a problem getting a personal loan for debt consolidation or just for “personal use.”
The key is to make sure that you’re getting an installment loan and not a revolving line of credit.
The former is what will launch your score up significantly. For people who have credit scores in the upper 600s and are held back by high utilizations, this is one of the most effective ways to quickly get bring your credit score up to around 720. As soon as your updated credit card statement closes and reports to the bureaus, your new utilization should reflect on your score.
Also, many credit unions may offer you better interest rates than the credit cards, so this can also make more economic sense to go with this option.
2) Balance transfer to business credit card
This is a rarer option but it can be done if you find the right card. The strategy here is to transfer a credit card balance to a business card because most business card balances to not report to your personal credit report. So while you’re still responsible for paying the balance, it’s almost like that balance doesn’t exist for purposes of your credit report.
A perfect example of this is the new American Express OPEN Blue Business℠ Plus Credit Card. It’s a business card offering 2X on all purchases for the first year, no annual fee, and best of all 0% APR on balance transfers for a limited time (12 to 15 months).
The drawback here is that you often need to at least have a decent score to get on board with cards like this. If your score is in the lower 600s or in the 500s, for example, this probably won’t be a realistic option for you.
However, if you have a low overall credit limit that has high utilization, this could be perfect for you, since it will effectively wipe away that utilization from your credit score. Again, just make sure that the business card won’t report to your credit report. Those from banks like American Express, Citi, and Chase will not but some like those from Capital One will.
3) Get added as an authorized user
Adding yourself as an authorized user to a credit card can be a nice way to give your score a little bump. It probably won’t affect your score as much as the first option here could, but it could still provide you with something.
Becoming an authorized user can improve your credit score by doing these things:
- 1) Lowering your credit card utilization
- 2) Improving payment history
- 3) Increasing the average age of accounts
- 4) Diversifying your credit (this factor plays a very limited role).
To maximize the benefits of being added as an authorized user, your goal should be to get added as an authorized user to an account that:
- 1) Has as close to 0% utilization as possible
- 2) Has flawless payment history and no negative reports
- 3) Is older than your average age of accounts.
Depending on which of these factors is bolstered by being added to the new credit card, you score may jump anywhere from a few points to up to 20 points. I’ve even seen reports where some scores shot up by 50 points! In my experience, scores don’t improve much more than 20 points, but it all depends on the specific factors of your score that you’re addressing.
Sometimes you can resort to this option first so that your score climbs up some and then resort to option 1 or 2 to get an even bigger boost to your score.
4) Goodwill letters
You payment history makes up 35% of your score and is therefore the most important factor in your credit report, so it’s vital to take care of this factor.
If late payments or delinquencies are holding you back then the above options aren’t going to do you too much good. Instead, you need to try to send out goodwill letters or negotiate with collections to get the late payments taken off.
Goodwill letters are short letters you send to the lender explaining to them your situation of why your payment was late. Whatever hardships you were experiencing at the time should be mentioned. You should send the letter certified to the lender to ensure that they get it, although some have success with sending the letters via email. The success rate on these is mixed, but it’s worth giving it a try, since you have nothing to lose.
If you have a late payment in collections, it’s rare that a collections agency is going to entertain your good will letter. In these instances, it pays to negotiate. I was able to get on the phone one time with a collections agency for a client and get the them to agree to remove the late payment entirely from the report and in exchange for a payment, which was about 40% of the total debt due. Again, this is another route that is met with mixed success and it can also be a little bit pricey, so it’s not for everyone.
However, if you go this route, I suggest you get something in writing from them guaranteeing the complete removal of that late payment from all credit bureaus that they have reported to. Otherwise, it’s your word against theirs.
Overall, it can be difficult to quickly raise your credit score since often time is the only healer for your report. But I’ve seen these 4 options work effectively to improve credit scores instantly (relatively speaking) for many people, so I know that they can work if you’re able to give them a try.