There’s no magic formula to improve your credit overnight, but there are several actionable steps you can take to drastically increase your credit report over time and increase your chances to land a payday loan. While many financial experts offer small tips and tricks to boost your number, the most effective way is to specifically address each factor on your report that is considered as part of your credit score.
How well you pay off your bills is the largest contributor to your credit score, accounting for 35% of the calculation. What does this mean if you’re trying to improve your credit score? It’s simple: pay your bills on time. All of them. All types of companies report delinquencies to the credit bureaus, including electric utilities, cell phone companies, credit card companies, and student loan companies. You generally do have a 30 day grace period from the due date, but it’s still best to create good habits and avoid late fees and the potential of a delinquency report that can harm your credit.
This category accounts for another 30% of your credit score and entails your debt utilization. That is the amount of money you owe compared to the amount of credit available to you. While not all types of credit are weighted equally (credit card debt, for example, is weighed more heavily than debt like mortgages and student loans), you typically want your debt utilization ratio to stay under 30%. Pay down some of your heavier debt to decrease your utilization and increase your credit score.
Length of Credit History
Totaling 15% of your score, the length of your credit history also impacts your credit report. This is another instance where it takes time to build your credit. However, this category doesn’t just apply to credit cards, it also applies to things like utilities and phone bills. If you have a roommate, ask to transfer the electric bill to your name or switch your prepaid phone to a contract plan.
Types of Credit in Use
While only accounting for 10% of your score, it’s still important to vary the types of credit available to you. Revolving credit includes things like credit cards, where the amount you owe fluctuates. Installment loans, on the other hand, represent debt with a fixed payment, like student loans. Try to keep a mix of each type of credit in your portfolio, although you don’t want to take on any new debt or lines of credit just for this purpose.
This category also represents 10% of your FICO score. Be sure not to load up on too many credit cards as this practice will have a negative impact. Lenders view consumers with tons of new credit cards as potential risks. While closing an account doesn’t automatically remove it from your credit report, be wary of opening any new accounts that aren’t necessary.