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As many of you know I worked at a major financial institution for over nine years before I quit to stay home with our Daughter. I have seen some crazy, CRAZY, credit reports. I have also seen those people take my advice and apply it to increase their scores DRASTICALLY. I’m talking 100 points or so, in a few months. Today I am going to share with you some easy, painless ways to increase your credit score.
No credit can look better than bad credit. New borrowers can be shaped to an awesome credit score. I know the age of 18 is young, however, this is when I suggest people start establishing their credit. If you are a new borrower, please head over to this post for ways to establish your credit the right way.
Get your Free Credit Report
First you are going to want to know what is on your credit report. There are a TON of different websites that will give you your credit report. I always recommend AnnualCreditReport.com, it is found to be most accurate, and is the only website that was mandated under the FCRA (Free Credit Reporting Act). Due to the FCRA you can get one free credit report every 12 months from the three major credit bureaus; Transunion, Equifax, and Experian. You can pull them all at once or one at a time, the choice is yours. I recommend pulling them all at once to look for inconsistencies, again, the choice is yours.
The first thing you are going to want to look at, is if there are any derogatories. These are marks against you on your credit report. Tax Refund season is upon us. If you are wanting to better your financial situation, what better way to do it than to repair your credit. Take that return money, pay off your easiest, low balance derogatories first. Paying off multiple derogatories will improve your score quickly.
Credit History/Payment History
Credit History/Payment history is one of the first things lenders look at. It shows lenders the ability to repay your debts. Lenders look to see if you have had a loan around similar balances before, and that you have paid well on them. They look to see if the amount of loans you have had make sense for the age you are. They also look to see what types of loans you have currently, they are looking for diversity among repay. Are amounts owed on credit cards within a good ratio? This ultimately shows past behavior and helps analyze risk.
Credit cards can be really great or can send you into a downward spiral. Lets stay away from the downward spiral. A few important things to remember: Never let your balance go above half of your limit. Balances above half of the limit will start to hurt your credit. Balances 75% of the limit or above actually hurt it even more. Keep your balance to limit ratio low and pay it off every month. Look for a card without an annual fee that will still give you awesome perks. If you are going to be using a credit card, you might as well get something back for it. Plus, you are not ever going to be charged interest if you pay it off monthly.
Apply for a higher credit limit. If you increase an existing credit card limit, it will make your credit card balance to limit ratio lower, which will increase your credit score. Creditors like to see high limits to low balances, it lets them know you aren’t relying on that credit card to survive. The trick to this is to not increase your spending habits.
Don’t close old or unused credit cards. Creditors like to see longevity when they are about to give you a loan. Just keep the card tucked away in your dresser or even shred it so you forget about it. There are a lot of cards out there that do not have to be used monthly, or at all to establish credit.
Balance transfer your high interest cards to a lower interest card, still keep your balance to limits at a good ratio though. Doing so could save you big on interest. Most creditors will do a free balance transfer for you. Your score will go up because you still have a good balance to limit ratio on your new card and you just paid off a different card. Remember low to zero balances on high limits look GREAT on your credit.
Get a Secured Credit Card. These are super beneficial for those with lower FICO scores and new borrowers. Let’s say you want a 1,000 credit card, but the creditor declined you for it. Well, if you have 1,000 in savings they can do a secured credit card instead. A Secured Credit Card locks or puts a hold on your money in savings. In case the loan defaults there is already money there to secure it. When you close your account that money goes right back to you. You can use this card just like any other card, swipe it for purchases, pay it off each month.
Stop with the hard hit inquiries already. Yes you know your score is going to go up soon, but checking your score every week is not going to help your score go up as high as it can. If you must check your credit, do a soft pull instead.
There are additional loans out there specifically designed for you to increase your credit score such as; Secured Credit Card, Secured Line Of Credit, Credit Builder Loan.
Even a consolidation loan can be beneficial. Consolidation loans pay off multiple loans and “consolidate” them into one easy, lower payment.
- Don’t be debt less, establish a history before you become debt free.
- Pay loans on time every time.
- Keep Credit Card balances to limits low.
- Pay Cards off monthly.
- Don’t close old cards.
- Use balance transfers for your benefit.
- Stop with the hard hit inquiries.
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Thanks for reading.