How to Improve a Credit Score in 2 Months

There is no magic way to immediately improve your credit score, but there are certainly things you can do in order to move toward raising your score. Don't expect an instantaneous increase, but if you monitor your credit score while aggressively working to improve it, then you will soon start to notice an improvement. Even small increases in a credit score can increase your chances of getting approved for credit at a reasonable interest rate.

Instructions

1

Review a copy of your credit report and then get aggressive. If you truly want to increase your credit score in two months, then you need to be very intentional in your actions. It takes some work to improve a credit score, so the more quickly and aggressively you pursue your goal, the quicker you will notice an improvement. The only way to see a difference in your credit score in a short period of time is to work quickly and with your eventual goal in mind.

2

Bring all your accounts into current status. If you have any bills that are unpaid, you should pay the past-due amounts right away in order to get rid of any delinquent listing on your credit report. You should pay delinquent accounts even if the account is closed, because delinquent accounts drag your credit score down substantially. When paying the delinquent accounts, be sure to also pay any additional fees because you want to ensure the account appears completely up-to-date on your credit report.

3

Remove errors on the credit report. It's not uncommon for individual credit reports to have errors that can be removed once the consumer alerts the credit bureau to the mistake. If you find errors on your credit report, contact both the credit-reporting agency and the creditor listing the account. You will have to be particularly aggressive with this step if you want to see results within two months, because removing errors from a credit report is a notoriously slow process.

4

Pay down debt. The amount of available you credit you have is one of the deciding factors for your credit score, so paying down any balances that are close to hitting the maximum credit limit will help your score quite a bit. You don't have to pay everything off in order to see an improvement in your credit score, but the more you can pay down your balances, the better.

5

Don't apply for any more credit. Every time you apply for a new credit product, whether it's a credit card, a loan or some other form of credit, an inquiry is placed on your credit report. Too many inquiries can drag your credit score down. Stop applying for credit while you're trying to improve your credit score. This is not the time to go out and get more credit; instead, concentrate on raising your credit score.

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Does Paying Judgements Affect Your Credit Score?

Nobody wants to end up in court, defending themselves from a debt collection lawsuit. If you lose the case, however, the creditor that filed the lawsuit receives a legal judgment from the court. Like a bankruptcy, tax lien or foreclosure, a judgment is a public record that appears on your credit report and has a detrimental effect on your credit scores. Depending on when the creditor received its judgment, paying off the debt could protect your credit from damage.

Paying a Judgment

In most cases, paying a judgment has no impact on your credit rating. The entry itself is inherently negative. Paying off the debt neither awards the judgment a positive status nor causes it to vanish from your credit history. While paying a judgment doesnt generally affect your credit scores, doing so protects you from such judgment enforcement methods as liens, property seizure and garnishment.

Docketed Judgment

The court does not consider a judgment final until it is docketed. The creditor dockets its judgment by filing a copy of the final judgment with the court clerk. Only then does the court add the judgment to your countys public record making it available to the credit bureaus which will then insert it into your credit file. If your creditor agrees not to docket its judgment against you, provided you pay off the debt, paying the judgment prevents it from ever appearing on your credit report. While this does not actively benefit your credit scores, it does protect them from further damage.

Considerations

If the creditor has already docketed its judgment against you, that does not mean that paying off the debt is not worthwhile. Even though paying the judgment does not help your credit scores, the fact that you paid off the debt shows up on your credit report whenever a lender reviews your history. Paid judgments reflect better on you than unpaid ones. All companies lending policies differ but some will require that you pay off your judgment before granting you a loan.

Time Frame

The degree to which a judgment, either paid or unpaid, affects your credit changes over time. Your credit scores serve as an indicator of your financial reliability. More recent items have a greater impact on your scores than older entries because they more accurately reflect your current responsibility level. Thus, as the judgment ages, it has less of a derogatory effect on your credit rating giving you the opportunity to rebuild your credit.

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What Happens to Your Credit When You Get a Charge Off?

If you stop submitting payments to your credit card company on your outstanding card balance, the company will eventually write off the debt. Referred to as a "charge off," this process does not mean that you no longer owe the debt. Rather, it reflects the fact that your credit card provider is no longer willing to carry the liability of your bad debt in its accounting ledgers. A charge off can have severe credit consequences.

Significance

After your credit card provider charges off your unpaid credit card debt, it will report this fact to the credit bureaus. The charge off will then appear on your credit report. A charge off is a derogatory entry and negatively affects your credit score. Your lack of credit card payments prior to the actual charge off, however, can damage your credit even more. According to MyFICO.com, a subsidiary of the Fair Isaac Corp., your payment history to your creditors accounts for 35 percent of your score. Therefore, the missed payments that caused the charge off have a significant negative impact on your credit.

Time Frame

Most credit card companies will charge off your delinquent account after 180 days pass without you making a payment on your overdue debt. The record of your charge off--and the late payments preceding it--will remain on your credit report for seven years from the date the account was charged off. If your creditor waits longer than 180 days to charge off your debt, however, the seven-year reporting period begins on the day that your credit card debt first went 180 days delinquent.

Considerations

Once the credit card company sells the account to a collection agency, the collection agency may also report the delinquent debt to the credit bureaus. The appearance of a collection account on your credit report will further damage your credit score, provided that the amount you owe is greater than $100. The collection account can also appear on your credit report for seven years. This time period is calculated from the date the original debt was 180 days late rather than the date the collection agency either received the debt or initially reported the account to the credit bureaus.

Effects

Lenders who review your credit report will see the charge off and subsequent collection account within your file and consider you a much higher lending risk than someone who had kept up with his debt and made timely payments. This may result in your lender charging you a higher interest rate or even denying your application. Some lenders will approve financing for you, but only under the condition that you pay off the amount that you owe. Unfortunately, while doing so may help you get financing, it doesn't improve your credit score to pay off an old charge-off if your account has already been turned over to collections.

Warning

If you ignore the debt, the collection agency that purchased the debt--and in some cases, the original creditor--may file a lawsuit against you. You have the option to fight the lawsuit in court, but if the creditor wins a judgment against you, that judgment will appear in your credit file. A judgment will cause additional damage to your credit. Even worse, if the statute of limitations for judgment collection in your state is longer than seven years, the negative record will remain from the date of the court's decision until the statute of limitations in your state runs out. In some states, this can be 10 years or longer.

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Five Factors in the Development of Your FICO Score

If you're like most consumers, you might look at those three digits of your FICO score and scratch your head. You know that the Fair Issac scale falls between 350 and 800, with anything north of 700 considered the elusive "good" credit. Understanding the different categories of your FICO score and how they rank can demystify the numbers -- and help you take steps to improve a weak score and get in the habit of regular credit report checkups.

When You Pay Your Bills

Your payment history accounts for approximatelty 35 percent of your FICO score, according to Fair Issac. A pattern of late payments, accounts in collection and severe delinquencies will ding your report and chip away at your your score. And it can sneak up on you with little warning. For example, paying a utility bill or car note past the grace period for six straight months gets reported in your payment history as late payments of "30 days" or more. If possible, create an electronic auto payment program with your creditors to avoid this trap.

Outstanding Debt: What You Owe

The amount of debt you owe totals 30 percent of your score. This includes revolving credit lines, mortgages, auto loans, school loans and credit cards. Watch your debt-to-credit-ratio -- how much credit you use compared to the amount available. For example, using only 10 percent of your available credit (low utilization) versus 30 percent (high utilization) makes a difference to lenders. The lower the ratio, the better your overall score.

Established Credit

How long you've held a credit card, line of credit or department store card can work in your favor. In the eyes of the credit bureaus and Fair Issac, the longer the credit history, the better -- and it's 15 percent of your FICO score. When considering which credit cards to cancel, always pick the youngest of the bunch with the highest interest rate.

Credit Types

Fair Issac calculates the different types of credit you use and ranks this category 10 percent of your score. Think of types of credit in classes, such as retail credit cards, or gas cards, your mortgages and signature lines of credit (these don't require collateral). Different loans have varied levels of risk. For example, taking out high-interest loans, such as payday loans, places you in a high-risk profile: Lenders believe you have a stronger likelihood of defaulting than a consumer with a 30-year mortgage with an excellent payment history.

New Accounts

Every time you open a new account you create a record in your credit file. Impulsively opening accounts, signing up for credit card offers or multiple loans can whack your score -- FICO measures the final 10 percent of your score based on how much new credit you carry. But if you're trying to re-establish credit, a new account can benefit your score. By keeping the account active, with small purchases paid off in full at the end of the billing cycle, you gain points for responsible credit usage.

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How Long Does it Take for Inquiries to Fall Off Your Credit Report?

Credit inquiries come from a number of sources. An inquiry appears any time you apply for a new credit card, a car loan or a mortgage or even rent an apartment. Too many inquiries can lower your credit score, but they do fall off your credit report with time.

Significance

Inquiries are important because they hurt your credit score if you have multiple credit applications in a short period of time. Rate shopping, though, does not lower your score, as long as it's done in a short period of time. For example, going to multiple lenders for a quote on a single car loan won't harm your score as long as it's done within a 30-day window. Applying for multiple credit cards in the same period of time would negatively affect your score.

Time Frame

According to FICO, the company that compiles and create credit scores, inquiries stay on your credit report for two years, but they affect your score for only one year.

Neutral Inquiries

There are several types of credit inquiries that do not affect your credit score. One is a promotional inquiry, when a company wants to offer a solid, preapproved line of credit. Another is an account monitoring or account reporting inquiry, when an account that you already have reviews your overall credit. Internal inquiries, as when Equifax reviews an item you've disputed, also do not affect your credit score.

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How to Build Credit With a Credit Union

Credit unions provide members with the same kinds of products and services that you can obtain from banks. If you have very little credit history or poor credit, credit unions offer certain kinds of accounts that can help you to build your credit. When you improve your credit score, you can obtain credit more easily and pay less to borrow. However, not everyone can join a credit union so before you can start working on your credit you must first find a credit union that you are eligible to join.

Instructions

1

Call credit unions in your area and find out whether you meet the membership eligibility requirements. Some credit unions base membership on where you live while others base membership on where you work. If you qualify to join more than one credit union, choose the one that offers the widest variety of products and services at the lowest cost.

2

Contact Equifax, Experian and TransUnion online or over the phone to obtain your free annual credit reports. Review the reports for accuracy and if you find any inaccurate information, contact the credit bureau in question to correct the info. It can take several weeks for corrections to show up on your report, so do not open any accounts at the credit union until errors on your credit report have been corrected. Correcting errors may improve your credit score and make credit easier to obtain.

3

If necessary, find a family member or friend willing to act as a co-signer for a loan or credit card. Go to credit union with your co-signer and submit an application for credit. You only benefit from having a co-signer if that person has good credit and sufficient income to qualify for the loan. Also that person must meet the credit unions membership eligibility guidelines. In many instances, if you are unable to qualify for a loan by yourself, you can qualify for a loan if you have a well-qualified cosigner.

4

Open a deposit account if you cannot find a willing co-signer. Submit an application for a secured credit card or cash secured loan. Generally, you can borrow an amount equal to the sum of money that you deposit in your account. The credit union places freeze on the deposit account so you cannot access that money until you have paid off your debt. Cash secured debts and credit cards are reported to credit bureaus in the same way as unsecured debts. Therefore, these types of loans enable you to improve your credit score. If you make your payments on time then over the course of many months you gradually improve your credit score.

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Why Do You Have to Be Enrolled in a Credit Monitoring Service to Get a Credit Score?

You may see advertisements offering a free credit score on the Internet, yet when you click on one of these ads, you are taken to a website that offers the score only in conjunction with their credit monitoring services. If you are interested in getting just your credit score without the additional services, there are options available. Some are free and some cost a small amount, but all provide you with important information about your financial situation.

The Lure

Credit monitoring services entice you to sign up for their product by offering a "free" copy of your credit score. They can call this credit score free, because typically they offer a free month of service along with your enrollment. The catch is that you have to sign up using your credit card, and they will automatically bill you for the next month of service until you cancel your account. Some companies make it difficult for you to cancel your subscription. The lure of the free score is used to get you to sign up.

The Need for Credit Monitoring

You may appreciate the services offered by a credit monitoring company. Having someone keep an eye on your credit profile for a small fee may seem like a good idea. However, Consumer Reports warns that the services do not provide sufficient protection to justify the price. They cannot fully protect you against identity theft, because identity theft can occur without a change to your credit report. Also, you can monitor your credit history yourself by ordering a free copy of your credit report each year from each of the three credit bureaus through the AnnualCreditReport.com website. This service does not provide you with your credit score, but it gives you all the information used in calculating the score.

Alternatives for Free Scores

If you are interested in getting your credit score for free, you have some alternatives to signing up for credit monitoring services. Any time you apply for a loan, such as a mortgage, car loan or other personal loan, your lender will pull your credit score. Whether the loan is approved or not, you have the right to ask for this copy of your score. The lender cannot charge you for it, although you may pay a fee for the credit pull as part of the loan fees if you are approved.

Fee-Based Alternatives

If you are not planning to get a loan and do not wish to go through the hassle of signing up for and then canceling credit monitoring services, you can get a copy of your credit score by paying for it. Each of the three credit bureaus -- Experian, Equifax and TransUnion -- offers your score for a small fee. Each bureau has a slightly different credit score for you, so you may want to purchase a copy from each bureau to get an overall view of your credit rating.

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