Are you looking for credit repair help? Stop looking! Fix your credit and improveyour credit score by an average of 57 points in only 3 weeks following these4 simple steps.
Pay Your Bills on Time
It goes without saying that late payments affect your credit score. Obviously,a person with a big list of items showing “never late” will have a much better score than someone with a bunch of negative hits for late payments.
Start Early
Building a good credit history takes time. You won’t build an amazingcredit record overnight. That is why it is so important to start early.
Open Savings and Checking Accounts
A lot of people still rely on cash as a main method of payment. This can bea big mistake if you are trying to build a credit history. Open at least onesavings account and one checking account. And use them.
Don’t Close Old Accounts
Closing accounts can be very damaging to your credit score. Keep them open.If you have an old credit card and you are thinking about closing it becausethe interest rate is 30%, don’t do it. Keep it open. Make sure you keepa really small balance, even if it’s $10, so you don’t have to paya lot in interest. But don’t close it. An old account with on-time paymentshistory can really boost your credit score. This also applies for store cards,such as a Wal-Mart card, Sears, Home Depot, etc. Don’t close them. Ifyou are an obsessive shopper and are afraid of spending money if you have thecards, cut them in half and throw them away; but don’t go to the storeand ask them to close the account.
Keep Your Debt-to-Credit-Ratio between 10% and 30%
A high credit limit is the total amount of unsecured revolving accounts thatyou have in your name.
It includes credit card debt and any other kind of credit not secured by anasset. It doesn’t include mortgages or car loans, since these kinds ofloans are secured by a piece of real estate and a car, respectively.
If your high credit limit is $40,000, try to have an outstanding balance ofbetween $4,000 and $12,000. If you really need to go over that, never go past50%. That would hurt your credit. If you have 4 credit cards and you max outall of them, it is not going to help you. If you decide to pay off your creditcards balances every month, it is not a bad idea, but keep in mind that creditorsmake their money when you pay interest to them. If you pay your credit cardbalances in full every month you will have a good score, but not as good asif you kept a 10% balance.
Something else to keep in mind is how to distribute your debt among your accounts.For example, if you have 4 credit cards with a limit of $10,000 each and yourtotal debt amount is $12,000, it would be OK as long as your balance is $3,000on each of those cards. If one of the cards is maxed out (you used all yourcredit, which was $10,000), and the other cards have balances of $1,000, $500,and $500 respectively, that will damage your score, since you are way over 30%on one of your cards (actually, the debt-to-credit ratio for the card whereyou have a $10,000 balance is 100%). Make sure your debt is distributed evenlyamong your accounts.
Increase your high credit limit
A high credit capacity can increase your credit score. But you need to be verycareful about this. If you open too many accounts in a short period of time,it will hurt your score. If last week you had a limit of $10,000 and you wentand got 3 new credit cards for $10,000 each within the last 4 days, it willdamage your score a lot.
There is no rule for how much you can increase your limit to get your creditto improve, it is just common sense. Think about it this way: if you were alender and you were looking at someone’s credit report, and this personhad a limit of $10,000 until last week, and now she is opening more and morecredit cards, taking more debt, you wouldn’t see that as a good thing.You would think that this person went crazy and you don’t know how wellshe is going to manage her new credit capacity. One thing is to manage a $10,000credit limit, and a very different thing is to manage $40,000 all of a sudden.If your limit is $10,000 today and $40,000 tomorrow, some red flags will raiseand your score will significantly drop.
Open new accounts slowly but constantly. Another technique that almost nobodyuses but it has proven to be very effective is to call your current credit cardvendors and ask them to raise your limit. Ask them to raise it by 50%-100% every6 months. If you always paid on time and kept your debt-to-credit ratio below50%, they will almost always agree to do it. You are a good customer to themand if they can make more money on you, why wouldn’t they?
Make Sure to Have a Mix of Revolving Debt and Installment Debt
So far, we have only talked about revolving debt, which is unsecure credit, such as credit cards and any other type of credit that is not secured against an asset.
In order to have a great credit score, you also need to have some installment debt: a mortgage, a car loan, or any other kind of loan secured by an asset.
A lot of people finance their cars even if they don’t need to, because it is very beneficial for their credit history.
Use Your Revolving Debt
Having a bunch of credit cards is not enough. You have to use them. Try to keepsmall balances (between 10% and 30%) and use your cards as often as you can.Try to avoid cash.
The key is using your cards lightly but regularly. If you just keep them inyour wallet, they won’t do much for your credit.
Avoid Hard Inquiries
There are 2 different kinds of inquiries: soft and hard. Soft inquiries areregular account reviews and they don’t affect your credit score, so youdon’t need to worry about them.
Hard inquiries take place when you apply for a firm offer of credit or insurance.They do hurt your credit score and can stay on your credit report for up to2 years, even though FICO only takes into consideration the ones during thelast 12 months to calculate your score.
A hard inquiry could lower your score up to 35 points, so only allow them ifyou are serious about a credit or insurance application within the next 2 months.
Note that nobody can place a hard inquiry on your report unless you authorizethem to. It does happen though. Some companies will do it despite of the law.If it happens to you, contact the creditor or collector and ask them for their“permissible purpose”. If they don’t have a permissible purpose,you can ask for and collect damages for up to $1,000 ($2,500 in California).Mortgage broker inquiries are not rare, even when they did not process yourapplication. They have to mail you an approval/denial letter and state thatyou did not put the application on hold. If not, they had no permissible purpose.
Show a Stable Lifestyle
Even though this might not directly affect your credit, showing stability cangreatly improve your chances of getting new credit card offers, which can ultimatelyimprove your credit score.
Credit card companies are more likely to offer you a card if you didn’trecently get divorced, if you have kept the same address for a couple of years,if your mailing address is not a P.O. box, if you have a landline listed asyour primary phone number instead of a cell phone, and if you are not self-employed.
Actually, being self-employed can be very detrimental to your credit. But thereis something you can do about it: you can create a business entity (corporationor LLC), and you will basically be an employee of this company. You need toown no more than 55% of this new business, or you will be considered self-employedanyway. Find someone you trust to own the rest of this company.