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How to Improve Your Credit Score in 30 Days

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Did you know that credit scores update every 30 days? This could be good if you have had good financial habits over the last 30 days. It could also be bad if you didn’t have the best habits during the last month.

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Luckily, it’s possible to improve your credit score in just one month with the right habits. Keep reading to learn how it’s done.

Get Rid of That Late Payment

Did you have a recent late payment report on your credit report? Did you know that it could knock your credit score down as much as 100 points? It’s well worth the effort it takes to eliminate this record.

First, is the late payment true? If it is, you’ll have to do some negotiating with your creditor. Some creditors will give a one-time exception and waive the late payment. They call it a ‘ goodwill adjustment.’ It helps if this is your first and only occurrence with late payments.

If the creditor won’t agree to a goodwill adjustment, you may be able to convince them in other ways. If it’s a credit card, they may remove the late payment if you pay the balance in full. Others may agree to remove it if you set up automatic payments so the risk of a late payment is removed.

Get Higher Credit Limits

Your credit utilization rate has a lot to do with your credit score. The more revolving debt that you have outstanding, the lower your credit score becomes. This could happen in the span of one month. Let’s say you maxed your credit card out one month. If you didn’t pay that balance down or off before the credit card company reported it to the credit bureaus, you just increased your credit utilization rate immensely.

One way around this is to ask your credit card companies for higher credit limits. A higher credit limit means a lower credit utilization rate. This only helps if you leave your credit cards alone, though. If you get the higher credit limit, but then rack up more debt, your credit utilization rate remains high and you won’t improve your credit score.

Use Your Credit

On the other end of the spectrum, are those consumers that never use their credit cards. While it’s a good idea not to have any debt outstanding, it can hurt your credit in the long run. If your credit cards have remained unused for a long time, consider using them for small purchases. You don’t have to go buy things you wouldn’t normally buy. Just charge things that you normally buy, such as your groceries or regular household purchases. The make sure you pay the balances in full right away.

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This way you show creditors that you are a good financial risk. You can borrow money and pay it off. This will help boost your credit score in a short amount of time.

Eliminate Mistakes on Your Credit Report

It’s a good idea to check the accuracy of your credit report at least once a year. You can get a copy of your credit report free of charge annually. You can actually get a copy of a credit report from each bureau annually. In reality, this means you can look at your credit reports three times a year if you spread them out.

Once you have the credit reports, review them for accuracy. If there are mistakes reporting on the credit report, get them fixed. This takes time and effort, but it will be well worth it. If you start a formal dispute with the credit bureau, they have 30 days to respond to the dispute. If they can’t come to a resolution with it, by law they must remove the mistake from your report.

Become an Authorized User

The final step is to ask a trusted family member if you can become an authorized user on one or more of their credit cards. Make sure that the credit card company that issued the card reports authorized users to the credit bureaus before you take this step, though.

If you do become an authorized user and your family member that holds the card makes purchases and pays the balance off regularly, it can help your credit score too. The positive financial transactions will have an immediate effect on your credit report too.

Improving your credit score in 30 days is possible with diligent effort. The best way to keep your credit score high is to keep your revolving balances down, pay your bills on time, and keep a good mix of credit. If you need a little boost now and again, though, the above tricks can help.

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10 Things That Hurt Your Credit Score

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Your credit score lets lenders know your level of financial responsibility. It’s often one of the first things lenders look at before they decide if you are a good risk. If your score doesn’t meet their minimum requirement, chances are they will not move forward with your loan application.

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Understanding the top 10 things that can hurt your score can help you determine how to make the most of your credit.

Making Late Payments

Your credit score is made up of a variety of factors, each of which has a different weight. Your payment history, though, makes up the largest factor as it accounts for 35% of your score. If you make your payments late, it can damage your credit score more than many other factors.

Keep in mind, though, that a late payment is one that is more than 30 days late. If you miss your due date, but it’s only a few days, it won’t affect your score. Once you hit that 30-day mark, though, the credit bureaus know about it and they record it on your credit report, affecting your score.

Using too Much of Your Credit

Just because a creditor gives you a credit line doesn’t mean you should max it out. Instead, you should use financial responsibility and only charge what you can afford to pay off each month. Your credit utilization makes up 30% of your credit score.

Just how much of your credit line can you use? Generally, lenders prefer if you have no more than 20% of your available balance outstanding at any one time. If you do charge more than 20% of your available credit, do your best to pay it off right away so that it doesn’t affect your score.

Too Many Inquiries Hurts Your Credit Score

Every time you apply for new credit, lenders create an inquiry on your credit report. This hard inquiry lets other lenders know that you are trying to get new credit. Lenders need to see these inquiries in order to have a clear picture of your outstanding debts. New accounts don’t always show up on your credit report right away – it can take as long as 60 days for them to appear.

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Inquiries only knock off 5 points off your credit score, but if you have a lot of them at one time, it can damage your score. Rather than applying for any new credit that catches your eye, be selective and only apply for those loans that you absolutely need.

Closing a Credit Card

You might think you are doing the responsible thing by closing a credit card, but it could hurt your score in the end. This is especially true if you have outstanding balances on your credit cards. Closing an account increases your credit utilization rate because you now have less available credit but the same amount of outstanding debt. If you don’t want a credit card anymore, just put it away, but keep the account open to keep your utilization rate the same.

Cosigning on a Loan

Cosigning on a loan might seem like the noble thing to do. In many cases, it works out just fine. But in those other cases when the borrower defaults, it affects your credit score. You are just as responsible for the debt as the person you cosign on the loan for and if they don’t pay it you are responsible. Not only that, but your credit score may drop if they make late payments or default on the loan entirely.

Letting Accounts go to Collections

If you stop paying a bill or bills and the creditor sends the account to a collection agency, your credit score will likely drop. Having an account with a collection agency shows lenders that you are financially irresponsible. What’s worse is that the account stays on your credit report for at least seven years. It may not affect your score for that long as it usually has the greatest effect during the first few years, but it might hurt you in other ways, such as lenders not approving your loan request.

Filing for Bankruptcy

Bankruptcy is there to help you when you just can’t go on financially any longer. You should know that it greatly impacts your credit score in a bad way, though. Depending on the type of BK you file (Chapter 7 or Chapter 13), your score could drop dramatically. Chapter 7 bankruptcies usually have the greatest impact because you write off your debts rather than set up a payment plan as you do with a Chapter 13 bankruptcy.

Losing a House in Foreclosure

If you stop making your mortgage payments, lenders will take possession of your home in a foreclosure. Not only will you lose your home, but your credit score will likely drop quite a bit because of it. Not only do you have late payments as a result of the foreclosure, but you have a repossession of your home, which is like a double hit to your score.

Not Having a Good Mix of Credit

Your credit score is also affected by your credit mix. It only makes up 10% of your score, but it’s still a part of it. You should have a mix of revolving credit and installment loans for the best impact on your credit score. If you have all revolving debt and no other credit accounts for the credit bureaus to score, it could make your score drop.

Errors on your Credit Report

Human error occurs all of the time on credit reports. If you aren’t aware of the errors, they could drag your credit score down lower than it should be. Rather than letting that happen, make sure you pull your credit report at least once a year to make sure everything is accurate and that your score is an accurate picture of your financial health.

These mistakes could damage your credit score by a few points or a few hundred points depending on the factor. Try to stay on top of your credit by making sure it’s accurate; pay your bills on time; don’t overextend yourself; and make good financial decisions. If something does happen to your score, pick up the pieces and try to fix things. It won’t happen overnight, but with regular good habits, you may be able to increase your score once again.

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This Could Explain Why Your Monthly Mortgage Payment Changed

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It happens. Your monthly mortgage payment has increased for reasons unknown to you. It could be an error on the part of the loan servicer; but most often than not, the change has to do with the inner workings of your mortgage.

After all, you chose a mortgage mainly based on affordability or its low monthly mortgage payment. Better to understand how mortgage payments can change and what you can do about it.

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Three Reasons Why Your Monthly Mortgage Payment Increased

The Consumer Financial Protection Bureau listed three main reasons why a monthly mortgage payment changes or goes up. These are:

  1. Your interest rate increased.
  2. Your property taxes or homeowners insurance premiums increased.
  3. Your loan servicer/lender assessed fees added to your mortgage payment.

ARM and Rate

If you have an adjustable-rate mortgage, your interest rate will change throughout the life of the loan. The frequency of this rate adjustment depends on how the ARM plan is structured.

For example, you have a 5/1 ARM.

  • The “5” represents the number of years that the rate will not change or remain fixed.
  • The “1” represents the frequency that the rate will change after the fixed-rate period.

In this case, the rate will adjust once every year after five years of having a fixed rate. During this “floating” period, the rate could increase or decrease and when it does, the mortgage payment will go up or down as well.

An ARM rate is tied to an index plus a margin. This index reflects the general market conditions tracked by LIBOR, COFI, MTA or MAT (12-month average of Treasury bills) and other third parties.

The margin is the percentage points added by your lender to the index. Together, the index and margin make up your interest rate after the initial fixed-rate period has expired.

While it’s true that ARMs can go up, thus the increased monthly payments, these increases are checked by caps that (i) limit how high the rate can go or (ii) how much the monthly mortgage payment can go up.

Property Taxes and Homeowners Insurance Premiums

Even fixed-rate mortgages, which are hailed for their stability, can see an increase in their monthly payments.

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Remember your PITI — principal, interest, taxes, and homeowners insurance premiums. The principal and interest components of a fixed-rate mortgage will remain the same throughout the life of the loan.

As to the taxes and homeowners insurance premiums, they are placed in an escrow account by the lender at closing. In case of tax hikes and premium increases, the lender will initially pay for any shortfall until such time as it has adjusted your monthly payment.

These fluctuations in property taxes/homeowners insurance premiums can increase your monthly mortgage payment.

Lender Assessed Fees

Were you late on your last payment? This and other fees depending on the status of your mortgage can inflate your next mortgage payment.

Late fees, for instance, can be 4% to 5% of the overdue amount. This is provided that your lender is authorized in your mortgage contract to collect late payments.

For more information or clarification on any assessed fees or other payment concerns, don’t hesitate to write to your lender or loan servicer.

It certainly matters to take time to shop and ask around about mortgages before getting one. Know before you owe and ask questions.

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