The average American credit score varies by age. The 25 to 34 crowd has the lowest scores on average, likely because they’re getting established and paying off student loans. Credit scores steadily climb with age, as consumers become more stable and focus on saving rather than spending. The 55+ crowd has the highest average score of nearly 700.
The irony here is that 25 to 34 year olds are in the most need of a good score. It’s during this time that many are trying to buy a home for the first time, when a good credit score is critical. They are also paying of debt, where a high score could help them refinance student loans and credit cards to a lower rate.
With that said, you can take some steps to raise your credit score quickly, especially if you’re nearer to the bottom credit score range than the top. The first step, of course, is to make sure you know your score. There are several ways to get your score online for free.
Here are five easy steps to take:
1. Get rid of errors: Approximately five percent of consumers have an error on their credit report from at least one of the three major credit reporting bureaus. Sometimes these errors are as minor as your current address. In some instances, however, they actually affect your credit score.
If you need to boost your score fast, take the time to pull all three of your individual credit reports. Check the accounts, credit limits, current balances, and payment records carefully. If you notice any issues, take these steps to get the error corrected as soon as possible.
2. Ask for goodwill adjustments: Even one missed payment can significantly lower your credit score. Missed payments also stay on your credit report for as long as seven years. Sometimes, though, you can get your creditor to take that missed payment off of your record.
This is known as a goodwill adjustment. A goodwill letter to a creditor explains the situation that caused the late payment. You can ask your creditor to remove negative records from your credit report, which can quickly increase your credit score.
3. Get a higher limit: One major factor of your credit score is called credit utilization. It measures how much debt you carry in relation to your overall credit limits. If, for instance, you have a $ 1,000 credit limit on your Chase card and are carrying a $ 100 balance, your credit utilization is 10%. The lower your credit utilization, the better in terms of your FICO score.
If you’re carrying credit card balances that you’re diligently paying down, you could increase your credit score by applying for a higher credit limit. With a good payment history, many credit card companies will give you a modest limit increase, even if you’re currently carrying a balance.
4. Pay down your balances: One of the smartest ways to boost your credit score is to pay down your balances. Similar to seeking a credit increase, reducing your balance on an existing credit card decreases your credit utilization. This approach has the added bonus of reducing your debt.
5. Auto-schedule your bills: The credit reporting company doesn’t know how you pay your bills, and they don’t really care. As noted above, however, they very much are concerned about late payments. One simple approach to avoiding late payments is to auto-schedule your bill payments.
With credit cards, keep in mind that most card issuers allow you to set the due date of your payment. Set the due date to a few days after payday, and then set up an automatic payment with the credit card company. The result is that you’ll never miss a payment.
Improving your credit score is a little like losing weight. There are a few “crash diet” type tricks you can use to boost your score by a few points pretty quickly. But the best bet is to implement healthy habits over the long term. With your credit score, this means keeping credit card balances low, paying all your debts on time, and letting longstanding accounts stay on your record as long as possible. Over time, you’ll build your score to a high level, which puts you in a great place any time you want to buy a car, buy a home, or take out a home equity loan.