6 Ways to Build and Improve Your Credit Fast

Credit scores tend to be an issue we don’t consider until it’s too late, and the damage is done by the time you need it. Big purchases like buying a house or car require a suitable credit score for approval. Beyond that, your score impacts the loan terms and interest rate, which could cost you thousands extra over the loan’s duration.

Whether you have a big purchase on the horizon or just want to get back on track, use these effective strategies for building and improving your credit score fast.

Dispute Negative Items on Your Credit Report

The first step in improving your credit score is determining what negative items are on your report. Don’t be afraid to pull your credit report; when lenders pull your report, it impacts your score, but not when you pull a copy for review.

Some of the most common negative items include:

  • Collections
  • Late payments
  • Missed payments
  • Hard inquiries (lender pulls)
  • High debt ratio
  • New debt

These items each have a statute of limitations, after which point they should be removed. However, many collectors will sell your debts to outstanding agencies. As a result, the information is often fractured or incorrect and should no longer be on your report. Once you discover the errors and file a dispute, the creditors will have to remove incorrect items, increasing your score. 

Implement a Debt Payment Strategy

Paying down your existing debt is the best way to improve your credit score and see notable changes from month to month. Your debt ratio is measured by comparing how much you’re approved to borrow versus what you actually borrow. In essence, if you’re approved for $2500 and only borrow $1000, your credit score will be higher than if you borrow $2000.

Some of the most effective debt payment strategies include:

Debt Snowball

Financial guru Dave Ramsey introduced the debt snowball. With this strategy, you start with the low-hanging fruit by paying down the smallest debt you have. Then, you use the money that used to be applied to monthly payments for that debt and move to the next smallest debt. Continue this process until all debts are paid.

Debt Avalanche 

The debt avalanche takes the opposite approach of the snowball. Rather than starting with the smallest debt, you start with the biggest to offset your interest payments. There are several pros and cons to each approach.

Debt Cascade

The debt cascade is for those who absolutely can’t put any extra money on their debts. With this strategy, you pay slightly over the minimum payment on your existing debt. Then, you continue to pay that same amount, even when your minimum payments come down until the debt is paid.

Talk to a Financial Advisor

Working with a financial advisor can help you explore options for consolidating your existing debt or creating a long-term financial strategy to move you forward. Consult with a financial advisor specializing in budgeting and debt management to get started.

Set Automatic Payments

If you’re the type of person who forgets about upcoming bills or mistakenly spends money before bills are due, automation is your salvation. Set up automated payments to occur on payday to ensure all your bills are paid on time. Then, leave your credit card in a drawer at home to prevent mindless swiping.

Try a Budgeting Challenge

Gamification is an effective way to help people change habits and improve engagement when trying to reach a goal. The theory is to apply a game-like structure or extrinsic reward system to keep you on track as you try to commit to otherwise boring tasks. 

Some of the common budgeting challenges include a 30-day no-spend challenge, in which you determine a reward and avoid purchasing anything deemed inessential for a month. The pantry shopping challenge is another effective game that encourages you to use food that’s already in your home to create meals. 

Get creative and use your savings to pay down existing debts while avoiding further debt accumulation. 

Limit Exposure to Marketing

One of the biggest struggles in trying to pay down debts and improve your credit score is resisting the urge to purchase new things. In our digital society, marketing efforts are constant. Additionally, browsing on social media creates a culture of comparison. Did you know that if your neighbor buys a new car, you’re more likely to buy a new car?

As you attempt to build your credit score, break up with social media, unsubscribe from sales emails, and focus on your ultimate goal: financial freedom.

With these effective strategies, you’ll improve your credit score quickly and sustainably.