Credit Score Tips - 3 Free Steps You Can Take Right Now

I would consider myself somewhat of a credit score expert. What I did with my credit score (getting over 100K in credit at age 23) unfortunately didn’t turn out very well for me. That doesn’t mean that you can’t benefit from my mistakes though! Here are 3 free, fast, and easy steps you can take to increase your credit score.

Increase your credit limits

The first simple and fast tip to raising your credit score is by increasing your credit card limits. If your balance is $4900 on your $5000 limit card, your balance to credit ratio is nearly 100%. By raising your limit to say $8000, your score will jump because you now don’t look as stretched on your report. You have free credit available. For better or worse, the more available credit you have, the higher your score is going to be.

So, how do you increase your credit line? Simple. Call up your credit card company and ask. If you have been making your payments on time, your request will likely get approved. One item to note: make sure and ask the customer service rep if they will do a credit check (inquiry) to approve the increase in your credit limit. An inquiry can temporarily lower your credit score, the last thing you want! Press the issue with the rep to do the increase without an inquiry. If an inquiry cannot be avoided, make sure you are getting a significant increase in credit to justify the hit by the inquiry.

When talking with the credit card customer service rep, don’t be afraid to tell them you will take your business elsewhere. They don’t want to lose a customer. If you have a higher credit limit with another credit card, ask them to match or exceed that limit.

Apply for new credit

Initially applying for new credit will ding your score. But by adding available credit, you will lower your balance to credit limit ratio (the most important factor in your credit score). Make sure and apply for all your credit the same day. This way you’ll be more likely to be approved for all your cards as the inquiries will not show up right away on your report.

Once you get your new credit cards, make sure to charge at least one item right away. That will get the cards reporting on your credit report, along with their available balances. Now, make sure not to rack up the debt on your new cards, otherwise your efforts to increase your score will go down the drain!

Reduce your outstanding balances

The fastest way to raise your credit score is by reducing your balance to credit ratio. For example, if you have a $5000 limit credit card, but owe $4900, that will kill your score. Reducing that balance down to 0 or even $1000, would likely cause a jump of 40+ points or more in your score.

So, how do you reduce your outstanding credit?

There are a few options. The first is pay down what you can. Debt sucks (I know). If you want a quick fix your best best is to refinance your outstanding credit card debt into an installment loan. The installment loan won’t count against you in terms of the dollar amount nearly as much as having that balance on a credit card.

Also, an installment loan will have a set period to pay off the loan, thus reducing your overall debt over time.

Knowing is half the battle

Without knowing where your current 3 credit scores are you’ll be negotiating in the dark. (you don’t have ONE credit score, you actually have 3. One from each of the major companies, Experian, Equifax, and TransUnion. You should know all 3) Make sure and get your current credit score from a reputable source, not those “free credit report” scam sites. The place I get all my scores from is MyFico.com, they have the best rates, and an easy to use website to access all three of your scores. Go here, and use coupon code GOALS25 when you check out for a discount.

What about an installment loan?

Tip #3 involves refinancing your current credit card debt into an installment loan. This is more difficult than it sounds. Going into a bank and asking for a personal loan to pay off your credit card debt isn’t always easy (unless you have equity in your home and want to go that route).

I’d try a peer-to-peer loan from a site like Lending Club. You’ll get a much lower interest rate than from a traditional bank. Also, if you sign up here, you’ll get a $25 bonus in your account. Not a bad way to start. Lending Club only accepts borrowers with a 640 FICO (credit score) or higher. So make sure and get your scores first before you apply.

Delete bad entries from your credit report (legally!)

If you’re credit has some issues, and you want results a little faster, you might check out a service like Lexington Law. It’s not going to be free, but I’ve seen results that are pretty amazing.

I'm 300K in debt. Gulp. I'm 24 and day traded away a fortune. Now I'm trying to crawl back to zero. Why not subscribe to my RSS feed and join me on this journey. You can also subscribe via e-mail. I appreciate tips and feedback! ~ DebtKid