We're thinking of a number between 300 and 850... and it's your credit score.
Do you know what it is? And most importantly, is it where you want it to be?
Unless you have an absolutely perfect credit score--850--we're willing to bet that you'd like to tack on a few points to that three-digit number.
Building credit fast is no easy task. Your credit rating is with you for the long-haul and is built up over years and years of credit history--so it won't just change overnight.
But there are things you can do to bump up your credit score quickly.
When it comes to building credit fast, here's what we recommend: credit monitoring.
We strongly believe that the more you know about your credit rating, the better you can take care of it.
Building credit fast is hard, but credit monitoring can help.
Why You Need to be Monitoring Your Credit
And that's not just for business loans. Your credit rating is considered for any big financial move in your life.
When you're taking out a mortgage, applying for an automobile loan, getting a credit card, securing a student loan, or even landing your dream job... your credit score matters--a lot.
We could talk about how important your credit score is all day. But it all comes down to this:
Having a great credit score can save you thousands on your personal (and business) finances. On the other hand, black marks on your credit rating can really limit your financial options.
That's why anyone who's interested in building credit fast needs to be monitoring their credit score carefully and often.
A Run-Through Of Your Credit Score
Monitoring your credit--and building credit fast--first comes down knowing what actually goes into your credit score.
So here's a quick credit score refresher:
Your credit score measures how reliable you are with your financial obligations. When a lender, a bank, or even a potential employer looks at your credit score, they're essentially asking themselves this: "Can I trust you?"
A stellar credit score shows that you're responsible with your financials and a safe borrower to work with. On the other hand, if your credit score suggests that you often don't repay what you owe--or you're always late to repay--lenders are less likely to trust you with their money.
What Goes Into Your Credit Score
They each have their own formula for reporting your credit score--and none of them actually tell us what that formula is.
But we have a good idea of what matters and what's not as important.
Here's what they pay attention to:
- Payment history (including bankruptcies and judgments)
- Amount of debt you have
- Age of your open credit accounts
- Diversity of credit accounts
- Your credit utilization (or how much of your available credit is actually being used)
- Tax liens
- Hard credit inquiries
- Now that you know what makes up your credit score, you're ready to monitor your score--and start building credit fast.
Best Practices for Monitoring Your Credit Score
There is no cut-and-dry formula for how you should monitor your credit score.
But when it comes to building credit fast by monitoring your score, here are the steps you can take:
Know Your Credit Report Like The Back of Your Hand
Your credit report is a summary of your borrowing and repayment history--and it's the backbone of your credit score.
Every piece of information that's used to calculate your credit score comes from your credit report. So it pays to know and monitor exactly what your creditors are seeing on your credit report.
If your credit report shows that your late bills are weighing your score down the most, then you can put more effort into paying your bills on time. If your report shows that you're being dinged for having too high a credit utilization, then you can reign in on your usage instead.
All in all, monitoring your credit report keeps you up-to-date on what's affecting your credit score. By staying on top of your report, you can change your borrowing behavior when any red flags arise.
Building credit fast isn't easy, but monitoring helps you stay on your toes and make changes in your borrowing habits where necessary.
You of course can't monitor your credit report if you don't have access to it. So check out annualcreditreport.com to get your report for free. You're also entitled to one free credit report once a year from each of the three credit reporting agencies.
Check Your Credit Report For Errors
When it comes to building credit fast, monitoring your report for errors is an easy, effective step you can take to boost your score.
You'd be surprised by how often you can get dinged for things you didn't actually do. In fact, studies show that 1 out of 5 credit reports contain errors in them. And when those errors were corrected, credit scores increased. (If that's not evidence of how crucial credit monitoring is to building credit fast, we don't know what is.)
When you find an error in your credit report, dispute it.
If you've never disputed an error on your credit report, here's how:
Check all three of your credit reports--if an error has popped up on one of them, you'll want to see what's going on with the other two. Next, make sure it's really a mistake. Just because you might be surprised by some negative information on your report doesn't mean that the information is inaccurate. If the blip on your report did result from a misstep by the credit bureau, now it's time to gather documentation to prove your case. This could be proof of payment or a correspondence related to the charge in question. You'll also need to have a copy of your credit report with the disputed charges clearly highlighted.
Once you've gathered the documents you need to support your claim, write a letter to the credit bureau reported the error. Check out the Federal Trade Commission's example of a dispute letter for help. You can also dispute an error on the credit bureau's website, too. Once you've submitted your claim, you should hear back within 30 days.
The Bottom Line on Monitoring Your Credit
If your credit score isn't where you want it to be, there's no overnight solution that can bring it up a notch.
But if you know what's bringing your credit score down, you'll know exactly what you need to do to bring it up. And the only way to stay up-to-date on your credit score is to monitor it closely.
Once you make the quick fixes that are hurting your score, you'll start to see it rise within a few weeks!
This article was originally published on the Fundera Ledger on August 29, 2016.