How to Raise a Credit Score in Six Months

by Brian Hill, Demand Media

    Your credit score impacts more than just qualifying for a mortgage or the interest rate on a car loan. Your credit score is seen as an indicator of responsibility. It's used by potential employers to screen applicants and by auto insurance companies as a way of determining the probability of claims, Smart Money points out. Start working on getting your credit score climbing now and you'll see improvement in six months.

    Step 1

    Obtain a copy of your credit report -- all three of your credit reports. The FACT Act of 2004 allows you to get one free credit report each year from Equifax, Experian and TransUnion. You want to know how far you have to go to reach your target score and that's only possible if you know where you stand now. Check the report for inaccuracies. That means dragging out all your financial records for the last five to seven years. Look at each account and double-check whether it's correctly reported or not. Check the name, balance due, monthly payment and all other information.

    Step 2

    Contact each credit bureau with corrections of any errors. That doesn't mean that you should dispute a negative entry in the vain hope that somehow it'll go away. If a legitimate debt is correctly reported, there's little you should -- or could -- do about it.

    Step 3

    Develop a budget. Yes, that's the big bad "B" word -- budget. You need to know where your money is going so you can stop any leakages and apply those amounts toward paying down your debt. Cut back on expenses you won't miss. You don't really need an expensive gourmet coffee drink each day. Then set a goal of reducing the remaining expenses by 10 percent each month. If your total expenses are $5,000, your goal should be $500. Add in the luxury lattes at $5 a pop for each of you, five days a week, and you've got an extra $200 to throw at your debt. In six months, you can decrease your debt by $4,200.

    Step 4

    Pay more than the monthly minimum on your credit accounts. Your credit score is developed on a number of factors. One of them is the ratio of outstanding debt to available credit, MyFico.com states. As you pay down the debt, that ratio improves and your score increases. You'll have improved that ratio for each of the six months.

    Step 5

    Pay on time. The number one rule in improving a credit score is to pay every bill, every month, on time Make a list of every account that each of you has, the minimum payment and when it's due. Tack it up where you'll see it. Pay the bills online several days before they're due or by snail mail 10 days to two weeks before it's due.

    Step 6

    Pay every bill. It doesn't do much good to pay Peter what you should've paid Paul. Missed payments count more heavily against you than late payments. Six months is enough time to show you've changed your payment habits and are more responsible.

    Tip

    • Be realistic. While you can improve your score in six months, you can't undo years of bad credit habits in such a short time. Negative entries will stay on your account for seven years.

    Warnings

    • Be leery about credit repair companies.
    • It's tempting to open new accounts to pay for furniture for your first apartment together. Or think that you can improve your available credit amount by obtaining additional cards. Don't do it. A flurry of inquiries can decrease your score as can a number of new accounts all opened around the same time.

    About the Author

    Brian Hill is the author of four popular business and finance books: "The Making of a Bestseller," "Inside Secrets to Venture Capital," "Attracting Capital from Angels" and his latest book, published in 2013, "The Pocket Small Business Owner's Guide to Business Plans."