What should you do when you’re trying to raise your credit score and it isn’t working?
A reader, Melissa, sent this question in:
I have VERY bad credit – mostly from several years ago and some of the bad things are starting to fall off now. (including a judgment from 2002)
In the last couple of years I have made sure that I pay everything on time and I am started to rebuild. I have a target store card (had for about 1 year) and car loan (about 2 years – will be paid off in 8 months) and a partially secured MasterCard (1 year) these accounts have never been late once. Everything before that was negative.
The MasterCard that I have has a very high interest rate – monthly maintenance fees and annual fee and also charges me $5 just to make a payment. I recently paid off this account and closed it because the fees were too high to justify the small benefit of having it report to my credit ($375 limit)
My Experian score is only 498 currently, which is significantly lower than the other 2 scores but I understand that it is most frequently used by creditors.
My credit is bad because I never thought that it was important when I was younger and I didn’t take care of it. Now that I am trying to stabilize myself financially I am very frustrated because for the first time in my life I am paying everything on time and my score is no higher now than it ever was.
I realize that my score is impacted by the fact that the credit that I do have are very small lines of credit and I sometimes max them out and only pay the minimum payment (not always – I sometimes pay much more) I just expected that my score would rise some from the fact that I have paid everything as agreed.
My question is what would be the best way for me to expedite raising my score. It is not good enough to get new credit at this time. I have closed one cc account and I will now pay off the Target store card but keep it open (and not use it) Will this help?
Since I can not get new credit right now I don’t know what else I can do. Ideally I would like to get a credit building card without insane fees and use it sparingly – just enough to report positively on my report – but I can’t justify paying the fees on the type of card that I can get approved for.
Is my only option to continue paying my car and Target card on time and just wait for my score to go up eventually? If I go this route how long will it take for my score to increase significantly (without getting any new credit)? Thanks a lot for your input!
Thanks for your question Melissa!
There are faster ways to raise your credit than what you are doing, so you definitely have some options! Let’s take a look:
Clean Up Your Credit Report:
This is the first place you want to start when you’re trying to raise your credit score. You can challenge anything on your credit reports, but do not challenge too many items at once.
Removing the negative items off of your credit reports will raise your score within about a month. (The challenge process takes time, and then all three credit bureaus have to update your reports.)
For complete, step-by-step instructions on how to clean up the negative items on your credit reports, you can view our guide here:
Once you have cleaned up all three of your credit reports (especially Experian) you are ready to move on to the next step.
Pay Down Your Existing Credit Cards:
Having high revolving balances on low-limit cards kills your credit score. If you want your credit score to go up as quickly as possible then pay down those cards as fast as you can.
Once you have them paid off, charge no more than 10 – 15% of your available balance each month, and pay it off in full.
I’m talking order a pizza, or some shampoo at Target. No large purchases. The only way your score is going to go up is if you keep those credit lines open from month to month. You do want to make small purchases and pay the cards off monthly though. Otherwise you may not have a record of positive payment each month and your score won’t go up as fast.
So, pay off the cards, charge $15 – $40 a month, and continue making your payments on time.
Avoid the “Bad Credit” Credit Cards
Some of the sub-prime credit cards are good deals, but not many of them. If you really want to raise your credit score, then your best bet is to get a secured credit card.
I say this because with most secured credit cards you can raise your available credit any time you want to by making an additional security deposit. That will take care of not really having a large credit line. Start the card with $200 (or whatever you can afford) and regularly send in $100 a month as a deposit to build your available credit.
Treat your secured credit card just like your existing accounts – you should charge very little and pay the balance in full each month. This is the fastest way to raise your credit score.
Another benefit of secured credit cards is that they usually do not have all the insane fees that the other sub-prime cards do. You also get your deposits back once you convert the card to an unsecured credit card. (Usually 6 months to a year after you open the account.)
As far as secured credit cards, go, I like HSBC (Orchard Bank’s) options. They have you fill out a standard credit application and then direct you to the card that fits your credit score. (Most likely secured in this case, but if you qualify for an unsecured credit card, they still have very good rates and terms.)
These three tactics will raise your credit score as quickly as humanly possible – but they can be a lot of work. It’s very overwhelming to start from the bottom and work up as far as your credit score goes.
My best advice is to set aside a little time each day to deal with these issues until you work through them all. Remember too, that your low credit scores won’t last forever. If you take these steps you’ll be in a completely different situation a year from now.
Good Luck! Please feel free to come back and ask questions any time.
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