5 Fantastic Ways to Boost Your Credit Score

 

There is something beneficial about having good credit.  Good credit increases your chances of being hired for a job, provides you with cash back rewards, provides good interest rate and terms, notices about sales or discounts and more. 

Your credit is your financial identity - your financial resume and is one of the most important aspects of your life.  It can help you or hurt you during the course of your life.  Credit affects many aspects of your life such applying for a home or apartment, or applying for a personal loan or credit.  Some people have been fired from jobs or have not been considered for employment because of their bad credit.  If you have bad credit it is never too late to fix it and improve your financial situation.  You can restore your credit and still achieve your financial goals.

The first step to repairing credit damage is by ordering a copy of your credit report from the three major credit bureaus, Experian, Equifax, and TransUnion at www.annualcreditreport.com. Review your credit reports carefully checking all information for accuracy such as: name, address, phone number, SSN, date of birth, current and previous addresses, accounts, account numbers, open and closed dates, status of the account, amount owed, and payment history.

Once you have reviewed your credit report determine if you have any past due accounts. If you have bad credit due to the loss of a job, health issues, family issues or a disability let the creditor know right away. Call the creditor to setup a payment plan to pay the debt.  Determine the monthly amount you can afford, but don't let the creditor determine the amount for you.

If you find errors on your credit report write a letter to the credit bureau that is reporting the error or request an investigation by disputing the information online at the credit bureau's website. Provide any supporting documentation to prove your claim. The credit bureau will respond to your letter within 30 days from the day of receipt. Keep copies of all correspondence sent and received in the event you need to reference it in the future. If you do not receive a response follow-up with a letter to the credit bureau to verify the updates were made.

Order another copy of your credit report after 45 to 60 days have passed to verify the updates were made. You can also write a letter to the creditor reporting the error.  If the creditor does not respond with 30 days you can request the credit bureau remove the account from your credit report based on the Fair Credit Reporting Act.

1. Establish Credit. Open a department store credit card. They usually have the highest interest rates but provide easier approval than bank credit cards.  Buy something small and pay the balance in full each month. You can also open a secured credit card account. Ensure the account is reported on your credit report.  Get a secured card with low fees and a low interest rate.
2. Pay down debt.  Keep balances at 20% or less of the credit limit. Having credit cards maxed out or close to the limit decreases your credit score. Pay the smallest bills first then work towards paying the larger bills.
3. Get current.  Pay late accounts which greatly lower your credit score such as bankruptcy, judgments, tax liens, foreclosures, repossessions and collection accounts.  Ask creditors to remove the accounts from your credit report after the account is paid in full to help increase your credit score.
4. Closing accounts.  Don't close accounts that have been open for 2 years or more and don't close accounts that are in good standing.  Closing accounts can decrease your credit score. 
5. Negotiate.  Ask creditors to settle the account for 50% of the total amount owed.  In exchange for payment ask the creditor to remove the account from your credit report and request a confirmation letter stating the account will be removed prior to making a payment. If the creditor refuses ask the creditor to report the account as “paid” or “paid in full”.

How Credit Score Points Affect Your Credit

                                            

Your credit score it is one of the most critical factors in your financial life. Your credit score determines if you are approved for a loan or line of credit. Credit scores are used to determine: if you will be hired for a job, interest rates, terms and conditions, downpayment costs, rates for medical and other insurance coverage, approval for cable and internet service and more.

A credit score is a mathematically calculated number developed by the Fair Isaac Corporation (FICO) that lenders use to rate potential customers in determining the likelihood that a customer will pay their bills on time.

A credit score or credit rating is determined by using five main criteria as defined by MyFico.com: your payment history which accounts for 35% of your credit score, the amounts owed which accounts for 30% of your credit score, the length of your credit history which accounts for 15% of your credit score, new credit which accounts for 10% of your credit score, and the types of credit used which accounts for 10% of your credit score.

Payment history shows the history of how you paid your bills either on time or late. Amounts owed shows the total amount of credit you have available. The length of history indicates how long you have had credit. New credit indicates how many times you have applied for new credit. If you open too many new accounts in a short period of time this may lower your credit score. The types of credit used indicate the types of accounts you have such as revolving or installment accounts. Revolving accounts are usually credit cards and installment accounts are usually mortgages, auto loans, etc.

The FICO credit score model ranges from 300-850 with 850 being an excellent score and 300 being the worst score. The higher the credit score the lower the interest rate you will receive for a loan or line of credit. Possessing a good credit score can save you thousands of dollars in interest over the life of the loan or on a line of credit. A good credit score is generally in the range of 720 or above but may vary from lender to lender.

When applying for credit or a loan if all three credit scores are pulled, the middle score is generally the score used with the application.  Your credit score varies from each bureau because each agency collects their own data from various sources and may collect different data for the same account. Your score can vary anywhere from 5-40 points between the three credit bureaus.

Your credit score changes due to updates to your credit file which changes based on account activity such as balance changes or additions to your credit file (i.e. new accounts or deletion of older negative accounts more than 7 or 10 years old). As a result, you may see a difference in your score from one month to the next.  Here are some guidelines to help you determine how payments affect your credit score:

Payments

• Paying a 30 day late payment can increase a score by 3-80
• Paying collection accounts can increase a score by 20-90 points
• Paying public records (judgments, tax liens, Chapter 7 or Chapter 13 bankruptcy) can increase a credit score by 75-150 points
• Paying a charge-off can increase a credit score by 50-100 points
• Paying a repossession can increase a credit score by 50-100 points
• Paying delinquent student loans which can increase a credit score by 50-80 points

The major disadvantage of credit scoring is that it relies on information in your credit report that may contain errors. It is estimated that 75% of credit reports contain at least one error.  That is why it is so important that you check your credit report at least once a year to ensure that all information is accurate and up to date.  

If you plan on purchasing a large item such as a car, house or investment property, it is best to pull your credit yourself to see if any negative items appear so you can fix those issues before applying for a loan. The best way to understand your credit score is to do research and read the information that is included when you order your credit report.

Boost Your Credit Score Teleseminar on 10/15/15

Thank you for being a valued subscriber. I hope you enjoy the monthly articles I send via my monthly financial newsletter. Because you are a valued subscriber, I created some great events and programs that I know will be beneficial to you.

I am providing a teleseminar called “Boost Your Credit Score” happening today Thursday October 15th at 8:00pm EST. 

You will learn:

• How to increase your credit score
• Go from bad to good credit quickly
• How to maintain good credit
• Credit score hidden trade secrets
• How to use consumer laws to fight against creditor and collection agency abuse

You can sign up here https://www.eventbrite.com/e/boost-your-credit-score-teleseminar-tickets-19004762757