I’m refinancing my auto loan and I need to increase my score a few points to get the APR where my payment will be lower. How can I do that in just three to four weeks? I’m showing that my score is 730ish but according to the auto lender it’s 699 and they say I need a 700. Can you explain how I can increase my current score?
—Rhonda Richardson in New Jersey
Amy Myers of Ovation Credit Services responds…
As you’ve noticed, your credit score can play a significant role in many aspects of your financial life. Lenders will use those three little numbers to determine whether or not to approve your loan application, and will even calculate the interest rates you’re offered with these scores in mind.
And yes, I said scores. That’s because you don’t have just one credit score — rather, you have many, many different scores from which lenders may choose.
The two primary scoring models are FICO and VantageScore, each of which has multiple different versions. Depending on which model your lender utilizes, they may see a different score than you do when you pull your own credit.
So, how can you improve your credit score in a short period of time, especially when you don’t know which scoring model your lender will use? Here are a few places you might want to start.
Option 1: Check for errors
If you haven’t checked your credit reports recently, now might be a great time. You’re allowed to request a free credit report from each of the three bureaus — Experian, Equifax, and TransUnion — through AnnualCreditReport.com. (Note that this is the only federally-authorized website for requesting your free reports, so watch out for lookalikes!)
Spend some time going through each of these reports carefully, looking for common errors. Make sure that all of the accounts are indeed yours, and that details like your payment history and account balance are correct. If you see any inaccuracies — like a reported late payment that was actually on time — contact both the creditor and the reporting bureau to dispute it. You may also choose to have a professional help you correct any errors found.
Finding errors can be a quick way to remove derogatory reports and boost your score. If everything is correct, you get to enjoy peace of mind. It’s a win-win.
Option 2: Pay down balances
Any existing debt that you owe will impact your creditworthiness. This happens in two ways:
- A lender will usually consider your total debt burden when underwriting your loan
- Your credit utilization (the amount you owe on accounts compared to your overall credit limit) makes up a notable portion of your credit score
Depending on which credit scoring model your lender pulls, high credit utilization can mean tens of points lost — accounting for as much as 30% of your total credit score!
It’s recommended that you try to keep your credit utilization below 30%, if possible. If you have a credit card with a $10,000 limit, for example, but are carrying a $3,500 balance, you have a 35% utilization. By paying off a little extra on that card, you can quickly reduce your utilization and boost your credit score. If dropping to below 30% feels unrealistic, you may still benefit from a small boost by getting your utilization under 50% instead.
Balances are typically reported to the bureaus once a month, so try to do this as soon as possible before your statement cycle ends.
Option 3: Get a higher credit limit
In a similar vein, you can also request higher limits on your existing accounts, like credit cards. This is an easy way to reduce your utilization if you can’t pay your balance down right away (as long as you don’t take on more debt in the process).
It’s important to note that some creditors will run a credit check before approving a limit increase. Any hard inquiries can impact your score negatively, so be sure that the company won’t be doing a hard pull first (soft inquiries are okay).
Option 4: Become an authorized user
An authorized user is someone who’s added to an account (a credit card, for example) and given spending authorization; however, they do not own the account and are not responsible for the debt.
Many credit card companies will report the activity on an account for both the authorized user and primary cardholder. If you have a trusted spouse, parent, sibling, or even a close friend willing to add you as an authorized user — and manage their account responsibly — this could boost your score pretty quickly.
Adding yourself to a well-managed account can increase your credit mix (the type of accounts you have), boost your average age of accounts (how long your credit-based accounts have been open), and improve your payment history. Just make sure that any account you’re added to has a low credit utilization and a positive payment history, or it could actually lower your credit score.
Option 5: Pay off any collections
If you have any accounts in collections that have not yet been paid, consider satisfying the debt. While this won’t remove the account(s) from your credit report, most scoring models take paid collections into account differently than they do unpaid ones.
But even if you can’t fully pay off your collections account(s), you may still benefit if your lender is using the FICO 9 Score — that’s because, with the FICO 9 scoring model, unpaid medical collections will have less of an impact than other types.
Since you’re looking to refinance your auto loan in just a few short weeks, these options may be your best bet to quickly boost your score and snag a lower interest rate. In the future, though, keeping balances low, making payments on time every month, and even having utilities or rent payments added to your credit report can also help you build (and keep) a healthy credit score. Good luck!