Raise your credit score in six months

One of the most important numbers in your life is your three-digit credit score, a number that lenders and credit card providers use to determine if they want to lend you money or approve you for credit cards.

If your credit score is low, you’ll take a financial hit. Mortgage lenders might not approve you for home loans. Auto loan providers might reject you, too. And if they do loan you money, they’ll do so at higher interest rates, which means your monthly payments will be high.

Fortunately, you can fix your credit score in as little as six months. It’s all about paying your bills on time and reducing your credit card debt.

And boosting your credit score is worth the effort.

“Just as you would monitor your grades in school, you should monitor your credit score on a regular and periodic basis,” said Bruce Ailion, a Realtor and attorney with RE/MAX Town and Country in Atlanta. “Credit scores impact not only your cost of borrowing, but your insurance rates and ability to rent or buy a home.”

Credit score ranges

FICO credit scores — the ones most commonly used — typically range from 300 to 850. A FICO score of 740 or higher is considered particularly strong. A score under 620? That might make lenders pause before approving you for a mortgage or car loan.

Lenders will also assign you higher interest rates if your score is that low. A lower credit score means that you’ve had missed or late payments in your recent past. To make up for the risk of lending to you, lenders will boost the interest rates attached to your loans or credit cards.

Is your credit score low? The good news is that you can fix your credit score, or at least improve it, in six months.

Here’s how to fix it

Pay your bills on time

Paying a single credit card or mortgage bill late – 30 days or more past your due date – could cause your credit score to fall by 100 points or more. But paying these bills on time each month will gradually improve your credit score. Pay every bill on time for six straight months and you will see an increase – how much will vary depending on other factors – in your credit score.

Be aware, though, that not all bill payments are reported to the national credit bureaus of Experian, Equifax and TransUnion. Payments that aren’t reported to the bureaus, and won’t impact your credit score include utility payments, cable bills and cell phone payments. Most landlords don’t report on-time rent payments to the bureaus, either. Payments that will always impact your score include mortgage, auto, student loan and credit card bills.

Pay down your credit card debt

Your credit-utilization ratio measures how much of your available credit you are using. The lower this ratio, the better it is for your credit score. That’s why it’s important to pay down your credit card debt. Attack your credit card debt for six months and your score will improve.

Keep paid-off credit card accounts open

If you do pay off a credit card balance in full, don’t close that account, even if you never plan on using that card again. When you close a credit card account, it will lower the amount of credit available to you. If you have other credit card debt, you will then instantly be using more of this debt than you were before you closed the card, hurting your credit-utilization ratio. This could cause your credit score to fall.

Fix any mistakes on your credit reports

Each of the three credit bureaus of Experian, Equifax and TransUnion maintains a credit report on you. The information in this report determines your credit score. Your credit reports will list any open loans or credit card accounts in your name and will also list any late payments that you’ve made in the last seven years. 

Other financial mistakes, such as bankruptcies and foreclosures, will be listed on your reports, too. Foreclosures stay on your reports for seven years, while Chapter 13 bankruptcies remain on your reports for seven and Chapter 7 bankruptcies for ten.

You can order one free copy of each of your credit reports once a year from AnnualCreditReport.com. Once you do, study these reports to make sure the financial information on them is accurate. If you find a mistake – such as a late payment that you know you paid on time – correct it with the offending credit bureau. Erasing a mistake from your reports can cause your credit score to rise.

Increase the limits on your credit cards

You can improve your credit-utilization ratio by increasing the amount of credit available to you. The easiest way to do this is by asking for higher credit limits on your credit cards. There’s no guarantee that card providers will increase your limits, but you’ll have a better chance if you have a history of on-time payments with them. Call the customer-service number on the back of your card to request a higher limit.

Use one credit card wisely 

Again, on-time payments are the best way to consistently increase your credit score. If you want to improve your credit score in six months, pick a credit card that you will use for several routine purchases. When your bill comes due, pay it in full each month. That way, you won’t pay pay interest on those purchases and you’ll help your credit score. By paying in full each month, you also won’t run up a balance on your card.

Dan Rafter

Finance Writer

Dan has written about personal finance, credit cards, mortgage loans, credit scores and personal loans for more than 20 years. He’s written for the Chicago Tribune, Washington Post, HSH.com and many others.