So, you've decided next year is the year you're finally going to buy a house. Congrats! But now you’re a little panicked because your credit score isn’t exactly going to make lenders swoon.
You’re not alone. The national average credit score is 695, while only half of consumers fall in the desired 700-plus range. Although you certainly can get a mortgage with that score, you’ll need a 740 or higher to get the best rates. And that point is not lost on potential home buyers, 45% of whom wait for their credit scores to improve before applying for a mortgage.
While credit history isn't built (or, for that matter, destroyed) overnight, there are still some things you can do right now to boost your credit score—fast. Here are some sneaky yet totally legit ways you can improve that all-important three-digit number in record time.
1. Pay down your balances like a ninja
Paying down your debt is the thing you can do that could have the biggest—and fastest—impact on your credit. Credit utilization (or the amount you can borrow versus the amount of debt you’re carrying) accounts for 30% of your credit score. And the more available credit you have, the better.
If you have the cash on hand, try to time your payments so you’re reaping the credit-reporting benefits.
“The easiest way to optimize your utilization is to use a credit card and pay your balance down to 1% of your credit limit right before your bank reports to the credit bureaus," says Liran Amrany, founder and CEO of Debitize, a financial technology company that automates better money and credit habits. "You want to have positive utilization so it's clear you are using the card, but otherwise want to be as low as possible,”
Not sure when your creditor reports? You could call them up and ask, or you can check your credit report. According to Amrany, you want to pay before the date last reported.
Estimated time for improvement: One month
2. Get your bills current
You hopefully already know that you have to pay your bills on time to get a good score. If you’re already late on a payment, pay that puppy ASAP for a quick credit boost.
“Because paying bills on time is the most important factor in a credit score, going from paying one or more bills late each month to paying all on time could show an improvement in one to two months,” says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network.
Bonus: If you’re less than 30 days late and you can make the payment today, do it! Creditors don’t typically report until after the 30-day mark.
Estimated time for improvement: One to two months
3. Open a new account
Opening a new credit account can help in two ways.
First: “If you open up a new card, which increases your total outstanding credit line, your utilization should improve,” Amrany says.
Second: If you have only one type of credit card or a small loan, opening another type (like a store card) can help your "credit mix," a term the credit bureaus use to indicate whether a person can handle different kinds of accounts.
But don’t go nuts—try opening just one new account, at least at first. If you apply for a card every time you’re asked whether you want 10% off your purchase today, you’ll take a hit on the number of recent inquiries . And that won’t look good.
Estimated time for improvement: One to six weeks, based on processing and reporting your new account
4. Become an authorized user
Have a responsible partner or family member? Becoming an authorized user on one of their accounts will let you piggyback onto their good credit history.
“The full history of the other account shows up on your credit report immediately," Gallegos says. "And when this older, established credit account is added to your credit history, it results in an increase in the average age of accounts you’ve ‘managed’ (which also increases your credit score).”
Just be careful to make sure the person you choose actually pays his bills on time and keeps the debts low—just like good credit history, bad history will show up, too.
Estimated time for improvement: Immediately
5. Don’t bother with additional payment histories
A popular credit-boosting myth says you can add to your credit history (and improve your score) by calling your other providers—like your wireless provider or utility company—and asking them to report your payment history to your credit report. It sounded like a pretty good deal, so we asked the experts about it.
“Each of the major credit-reporting agencies is making some changes to include more bill payments, albeit slowly. In general, though, most of the time, these types of payments only appear on credit reports when they are delinquent,” Gallegos says.
So, that one probably won’t work in your favor, but there are still plenty of things you can do now. House, here you come!