When you’re applying for private student loans in the next few weeks, there are several ways you can boost your credit score quickly to score better interest rates including disputing inaccurate reporting, becoming an authorized user on your spouse’s credit cards, reducing the balance of your cards, and reducing applications for new credit.
Try these tips for increasing your chances of approval either immediately or for the following semester:
Dispute Inaccurate Reporting
The easiest way to boost your credit score is to dispute inaccurate reporting. 1 in 5 Americans in a Federal Trade Commission survey had errors they were able to get disputed and fixed. For 1 in 20 dispute filers, the difference in score could have caused them to get denied for credit or get worse terms, i.e. higher interest rates.
Since a dispute can take 30 days to resolve, dispute items on your credit reports immediately if you have errors. Start by pulling up your free credit reports on annualcreditreport.com. Each one will pop up individually for TransUnion, Experian, and Equifax. You may have to create logins if you haven’t created one for each credit reporting bureau before. You may be asked to verify information such as old addresses. Have information on your last 10 years of addresses nearby before pulling up your reports.
Once you’ve logged in, review each credit report carefully. Look for accounts you didn’t open, inaccurate balance reporting, and inaccurate late payment reporting. When you see an error, click on the dispute button and write a brief explanation. The credit bureau will then contact the original creditor.
How much can getting an error removed from your credit report boost your score? Since payment history represents 35 percent of your FICO credit score, the most common credit score used, getting a 30 day or more late payment off your record can boost your score by at least a few points, maybe a few dozen.
Become an Authorized User on Your Spouse’s Card
One of the easiest ways to boost your credit score quickly is to selectively become an authorized user on one of your spouse’s credit cards.
Why is becoming an authorized user a good strategy, and when should you do it? When you’re added as an authorized user on someone else’s account, their credit history just on that card is also shown on your credit reports. Thus, if they’ve had that card for 12 years, you now have a card with a 12 year history.
How much can this strategy boost your score? A lot. 15 percent of your credit score is based on length of credit history and 30 percent is based on the amount owed. Thus, if your spouse’s has a card with a long credit history and a low balance, it could boost your score by quite a bit. The exact amount varies based on your credit history and how close you are to maxing out your current credit cards.
Reduce the balance on your credit cards
Pay down your cards to boost your credit score. 30 percent of your credit score is based on the percentage you of your credit limits you are using. For instance, if your card has a $500 limit, you would likely have a higher credit score if you stuck to spending no more than $125. The score also looks at your overall credit usage. If you have a total of $20,000 in available credit, you shouldn’t charge more than $5,000.
The nice part about boosting your credit score via paying down your credit cards is that it’s not history based. It doesn’t matter what you did in the past. Whatever you pay off now, can boost your score in as little as a month or two.
Limit applying for new credit
Applying for multiple lines of credit too close together can lower your credit score. Thus, avoid opening new cards or getting a new car loan until after you borrow private student loans. Parent PLUS loans have a different credit policy that just considers adverse credit. Thus, applying for new cards doesn’t affect PLUS loan approvals.
- Errors on your credit report are quite common and easily disputable. Start by downloading your free credit reports at annualcreditreport.com.
- Consider becoming an authorized user on your spouse's card.
- Limit applying for new credit before applying for new private student loans.
- Pay down your cards. Start with the card with the lowest balance and try to pay each card down to 25 percent of the spending limit.
- Boosting your credit score may take several months. If you don’t get the loans and terms you want, you could expect a better result for the following semester.