I recently received an e-mail from a Man Vs. Debt reader (also one of my good friends) who wanted to know if there were any methods or strategies to quickly improve and raise his credit score.
His situation is actually kind of funny. He’s apartment shopping and house hunting for a place to rent in an unfamiliar city. He’s young, has great self-generated income, with a plenty of available cash. The only problem is that he has a slightly below average credit score. He expressed to me several stories about offering to put down large deposits to rent units from landlords and property management companies only to be turned away because of his credit. He even recounted offering a company 6 months of rent up front for only a one year lease!
I couldn’t help but laugh out loud. With the help of some friends he could probably scrape together enough for a down payment to buy the apartment complex, but can’t actually rent a $1200 a month unit with over $7,000 up front. Does this seem like a good direction for our culture to be heading?
Tangent over… Back to some content…
There are no extremely quick ways to improve your credit score!
Even some of the “quick” methods that can raise your credit, usually take 30-90 days to actually appear. And of course, the best way to build up a great credit score is gradually, over time. That being all fine and dandy, we did discuss a view strategies over a quick phone call.
Pull your credit report and check for inaccuracies!
My friend had paid to pull his credit score (which he could have got as part of a free trial at MyFico.com), but had not pulled his actual credit reports. I told him the first step and one of the quickest ways to see a turn-around in your actual score is to make sure that the information in your credit report is actually YOUR information. He was surprised to hear that my wife was the victim of identity theft several years ago and that it is the fastest growing white collar crime in the world!
We set-up a time when he could give me a call and we could both pull up his credit reports online using AnnualCreditReport.com. Of course, aside from checking for fraud, this also helps with awareness of legitimate debt. For example, upon pulling my report several years ago I found one bureau had a $24 hospital bill from 4-5 years prior, when I was 18 years old. Not only could I not remember the reason I went to the hospital, I never ever remembered being contacted about that bill in the first place. Obviously, I was able to clean this up quickly, but had I not checked I would have never known I had this issue.
Fix inaccuracies and resolve any legitimate unknowns!
I wont be diving into the exact process for reporting fraud and fixing inaccuracies (that would be a post in its own), but I do want to point out that this is the quickest way to see a major difference in your scores. If you take 3-4 fraudulent, unpaid accounts off your record, you can imagine what that might do to your score.
Also, don’t be afraid to call creditors, especially those who might hold legitimate accounts that you did not honestly know of. In my situation, I was able to call the creditor who bought my $24 bill from the hospital and explain the situation. I told them I hadn’t been contacted about the debt, had a great history of always paying my accounts, and that their account was the only negative one on my whole report. I told them that even though I didn’t remember the visit, that I didn’t have any problem paying the $24 bucks, but most of all I wanted to know if I they would, based on my situation, remove this account as a misunderstanding if I paid them in full. Even though I didn’t get this in writing (I should have), they did remove the account several months later. It isn’t listed as a bad account which is now paid off, rather they completely stopped reporting it to the bureau all together. I can’t say exactly how much, but this definitely helped my score.
A couple strategies that won’t help my friend, but could help you!
My friend doesn’t have any open credit cards. He has no balances and canceled his credit cards a while ago. Although I strongly believe this is a great strategy to commit to being debt-free (see Declaring War: Canceling Credit Cards), I did tell him that his mix of credit ratio (10% of overall score) was down a little because of this. Opening a new credit card wouldn’t immediately help as the new credit would temporarily ding his credit. It also wouldn’t improve his account length until much later and would only marginally improve his mix of credit.
If you DO currently have credit card debt:
- Try calling all of your credit cards and asking them to raise your credit limits. See if they can raise your limits without re-inquiring on your credit score, therefore avoiding any temporary ding from an inquiry. This will lower your overall debt utilization ratio, meaning you will be using a lower percent of your total available debt, thus raising your score. Be sure to site payment history, length you’ve been a customer, etc… If all else fails, threaten to cancel the card and ask for their retention department. Credit card companies will often do just about anything to keep a customer they are making money on!
- Rearranging revolving debts. Your overall utilization rate is important (see above), however so does the amount of debt on each specific card. For example someone may have a $1,000 balance with $5,000 in limits over 3 cards. In this example, let’s say one card is maxed out ($1000 of $1000 limit) and the other two have balances of $0 with $2,000 limits. This arrangement of debt is actually hurting the individual. They would be better off having $200 on this first card and $400 a piece on the remaining two. Their individual cards go from being 100%/0%/0% to being 20%/20%/20% in percent of used debt. This actually improves the credit score. Bottom line, having individual cards close to being maxed-out hurts your credit score!
In the end I suggested that my friend not open credit cards in an attempt to raise his credit score. It wouldn’t help him in the short run, which was his primary question anyhow. In addition, I strongly believe that a passionate commitment to remaining debt-free is one of the most powerful tools someone can utilize in accomplishing their long-term financial goals.
I guess he’s going to have to find someone willing to take 6 months of rent up front on only a 12 month lease! My guess is he’s not going to bump into this problem for very long in this economy!
Have you had luck raising your credit score in a short amount of time? Do you have any better advice for improving your credit score? Join in on the conversation by adding your comments below!