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How to improve your credit score from fair to good

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Fair credit score report with pen and calculator; document and the report are mocked-up
Here are some steps you can take to improve your fair credit score.  Getty Images / iStockphoto

To be eligible for many credit cards and loans, you need to classify them as "good" 670 -739 credit score range. Fortunately, most Americans already belong to this category. In 2021, the average US FICO scoreforhas risen to 716.

In contrast, a "fair"credit scoreis any score from 580 to 669. Lenders may approve this range of credit, but interest rates may be significantly higher than borrowers with good credit reporting. 

Where is your credit score? If you're not sure, there are several online tools that can help you get yourcredit score quickly. 

If you improve your credit score from normal to good, or even better, to "excellent" (800+), you can get mortgage, car loan, and other credit approvals. Good interest rate products. This can save you thousands of dollars over time.

How is the credit score calculated?

To understand how to build credit and achieve a good credit score, it is helpful to first know how your credit score is calculated. 

Financial tools may be able to provide credit reports and additional informationor guidance regarding your position.

In the meantime, the breakdown of the elements that make up the credit score is as follows.

  • Payment History: When lenders consider your credit application, they want to know how well you manage your credit. Therefore, payment history is the most important credit scoring factor, accounting for 35% of the FICO score. 
  • Unpaid Amount: The lender considers your debt to be part of your credit utilization-the amount of revolving credit you are using compared to the limits you have available. Credit usage accounts for 30% of the FICO score.
  • Credit History Length: As a general credit rule, the longer you can manage credit well, the better. The three largest credit bureaus, Equifax, Experian and TransUnion, take into account the ages of oldest and newest accounts, and the average age of all accounts. The length of the credit history makes up 15% of the FICO score.
  • Credit Combinations: People with high credit scores tend to have different types of credit accounts, including mortgages, car loans, personal loans, credit cards, retail cards, and other types of accounts. The credit mix is ​​equivalent to 10% of the FICO score.
  • New Credits: Applying for multiple credit accounts in a short period of time increases the level of risk and can adversely affect your credit score. New credits also make up 10% of the FICO score. 

Three Ways to Quickly Increase Your Credit Score

If you need to create credit, you still need to repair fair or bad credit Even if you understand that it will take about 3-6 hours, a few months to make a good credit decision to see the noticeable difference in your credit score. Think of credit building as a long-term game where good habits pay significant dividends over time. Fortunately, there are a few things you can do right now to winright away.

1. Get a Credit Builder Loan

As the name implies, the purpose of a credit builder loan is to help people with little or no credit history. Is to do. credit. With this loan, the borrowed money is transferred to the lender's bank account. You make monthly principal and interest payments and the bank reports it to the credit bureau. 

You will receive money from your account when you repay the entire loan over a specific period of time (usually 6 to 24 months, per Experian). Establish a positive payment history by paying on time each month. This will help you create credits.

2. Get a Loan Co-Signer

As we've seen, payment history has a big impact on your credit score. Opening a personal loan, car loan, or another installment loan and creating timely credits can have a significant impact on your credit score. 

If you can't qualify for a loan yourself, consider hiring a creditworthy co-signer. Co-signers may help qualify for a loan at better interest rates and terms. Of course, you need to make sure that the signer understands that the bank expects the bank to be financially responsible for the loan if you fail to pay.

3. Become an Authorized User

Another effective way to improve your credit is to become an Authorized User with a friend or family credit card account. is. You are allowed to make purchases using the card, but you do not need to have your own card to receive the benefits. Your payment history-and your credit score-may be enhanced as long as your monthly credit card invoice is paid on time.

How to create a credit with a credit card

A credit card is one of the best opportunities to build credit from fair to good. Consider these options that may help you manage your credit and demonstrate your ability to make regular on-time payments.

Apply for a secure credit card

Secure credit cardrequires you to submit a cash deposit I have. Your credit limit. The deposit protects the bank by covering the purchase in case you miss a payment. 

You can enhance your payment history by making payments by the due date of each month. As a result, credit card issuers may upgrade their cards to traditional unsecured cards in the future.

Organize your debt with a 0% interest balance transfer card

When your credit score is above a good credit range, use your balance transfer card as follows: Consider getting it. Organize and repay your debt. Balance transfer cards typically offer low or 0% interest rates during the introduction period (6 to 21 months). If you have a high interest credit card or loan debt, it may make sense to transfer that debt to your balance transfer card. In most cases, you will save interest and pay off your debt much sooner. 

Please note that there is usually a fee for balance transfer cards. Before signing up for a balance transfer card, run a calculation to make sure the savings you receive exceed your free balance transfer.

As a general rule, do not apply for unnecessary loans or credit cards. It usually doesn't make sense to pay interest when you don't have to. Improving your credit score should be an additional benefit of using credit, not the main reason.

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