How to raise your credit score quickly by
curing your CUR ...
This summarized guide containing simple, practical, common-sense ways to raise
your credit score is based largely on the article "Raise your credit score to 740"
by Liz Weston of MSN Money, but also includes suggestions from other sources
such as "How to increase your FICO score" by DailyMarkets.com. It is
meant as a beginning point for people interested in raising their credit scores.
FICO stands for Fair Isaac and Co., the name of a pioneer credit score company.
Today a FICO credit score of
740 is the "bottom" of the good credit tier; it used to be 720 before the Great
Lenders now typically demand 740 and higher scores for the best mortgage rates.
Credit scores below 740 can mean higher interest rates, or credit being denied.
The median credit score is 720 on the 300-to-850 FICO scale, so 720 means
average (but not necessarily "good") credit.
Forty percent of adult Americans have credit scores over 750.
Really excellent credit is 800+, the top 13%, which requires borrowers to make few or no late
Many people with 800+ credit scores pay off full balances religiously, and avoid paying
credit card interest.
In order to raise your credit score to at least 740, then start working on an
800+ credit rating, two very important keys are (1) always making payments on
time via automatic payments, and (2) understanding that your CUR (credit
utilization ratio) matters greatly because it comprises 30% of your FICO score.
Your overall CUR is simply the ratio of the sum of your account balances to the
sum of your available credit limits. If your CUR is high
you appear to be "living on the edge," so a high CUR is a major red flag
to the credit bureaus. There are four simple
strategies for reducing your overall CUR: (1) keep your balances as low as
possible, (2) increase your available credit as much as possible, which can
sometimes be as simple as asking lenders for higher credit limits, (3) if you
can't obtain a high credit limit on a single credit card, spread your balances
between multiple credit cards with lower balances, and (4) always pay off your
highest-interest-rate debt most aggressively, paying the minimum payments on
your other accounts if you can't afford to pay all your balances in full. Here
are a number of useful hints ...
Most importantly, you will need to pay down your debt and
make payments on time. This may require discipline and
While there is no magical cure, simple strategies and techniques such as
automated minimum payments to avoid late payments, can definitely help.
Credit scores are very sensitive to timely payments, so set up automatic
minimum payments for credit cards and loans.
But don't stop there; whenever you can afford to pay more than the minimum, make
a second payment before the due date.
Make payments on time (35% of FICO score); however, this takes time to
register, as late payments made in the past count for two to three years.
Here is a way to "speed up" the repair of your FICO credit rating, keeping mind
that your CUR can be CURed quickly ...
You're likely to see improvements in your scores within 30 days if you
pay down significant chunks of your credit card debt and decrease your overall
Pay down debt aggressively, such as home and car loans, credit card balances,
Pay down the debts with the highest interest rates first; make minimum payments
on the other debts until the most costly balances have been paid in full.
Use credit cards, but keep the balances due low in relation to
credit limits (remember, CUR is 30% of the FICO score).
Maintain a low CUR (10% is optimal; try not to go over 30%).
Object to lower credit limits, as higher balances with lower credit limits
increases your CUR and hurts
your credit score.
Do not close credit accounts; this works against you because it lowers
your available credit and increases your overall CUR.
Don't let unused credit cards be cut off by the lender; instead, use such cards
to pay for something, then pay the balances off quickly.
Don't stop using credit cards entirely, as this results in no new data to help
raise your credit rating.
Apply sparingly for new credit; new credit applications may count up to five
points against you and FICO prefers more mature accounts.
But you will need at least one major credit card: Visa, MasterCard, Discover or
Retail cards and gas cards can help you get started, if you need to "build up"
to a major credit card.
If you are not eligible for any credit cards, consider a debit card that lets
you upgrade to a credit card later.
Avoid paying interest by paying the full balances on time. Paying interest does
not help your credit rating.
Because of the desirability of lower CURs, it's better to have
small balances on several cards than a big balance on one card.
Credit utilization matters even if you pay your balances in
Making two payments per month can help keep your overall CUR down.
For instance, whenever possible, pay the balance due less your automatic minimum
payment before the statement ending date is reached.
If you can't pay the full balance, make a second payment of whatever you can
afford, before the due date.
Other strategies ...
If you have high balances that you can't pay down quickly, consider transferring
the debt to a personal installment loan.
Or move debt off your credit reports entirely with a loan from a friend, family member or retirement plan,
none of which typically show up on credit reports.
However, be wary of 401k loans.
If you lose your job, any unpaid balance can become a tax nightmare.
debt can be erased via bankruptcy; 401k loans can't.
Moving credit card balances to a home
equity loan or line of credit may improve your scores, but put you at risk of
losing your home.
Also, as with a 401k loan, you're turning unsecured debt that could be wiped out
through bankruptcy into secured debt that typically can't.
Patrol your credit reports for erroneous red flags, such as:
Accounts that aren't yours; for instance, other people with
similar names who end up on your credit reports.
Reports of late payments when you paid on time.
Bankruptcies older than 10 years or accounts that were wiped out in bankruptcy
but are listed as still due.
Other negative information older than seven years.
Credit scores are based entirely on the big three credit bureaus:
Equifax, Experian and TransUnion.
If their information is wrong, your credit scores can suffer.
You can get your reports once a year for free from the government-run
You can get one free credit report each year from each of the major credit
You can buy subsequent copies directly from the bureaus or from
Dispute any serious errors that you find on your credit reports.
If your credit card is lost or stolen, report it immediately.
Check every credit card statement for bogus transactions; why pay for fraudulent
Don't let lender disputes go to collections and become black marks on your credit
reports. If necessary, pay under protest and go to a small claims court.
get sued: lawsuits and judgments can be major stains on your credit reports.
If you change your address, bank or checking account, be sure to notify your
Avoid ultra-high forms of credit such as title loans and payday loans whenever
possible; even if the fees seem to be small the APRs are often astronomic.
However, if you are facing utility disconnect and reconnect fees, a title loan
or payday loan may be the lesser of two evils.
But if you have taken on an ultra-high APR loan, it is imperative to pay it off
quickly, even if it means eating pork'n'beans or restoring to food stamps.
If you have serious black marks, such as
bankruptcies or foreclosures, you may have to wait to
join the 700+ club.
Liz Weston is the Web's most-read personal-finance writer. She is the author of
several books, most recently The 10 Commandments of Money: Survive and Thrive
in the New Economy. Weston's award-winning columns appear
every Monday and Thursday, exclusively on MSN Money. Join the conversation and
send in your financial questions on Liz Weston's Facebook fan page. And please
remember her advice:
"The lower your scores, the longer it will take to crawl your way back up the
FICO scale. But progress is possible, and anyone can hit the 740 mark in time by
using credit consistently and responsibly."