5 Basic Ways And 1 Advanced Tip To Boost Your Credit Score
If you are reading this article, you probably have a good feeling of how important your credit score is and the carnage it can cause your life if you fail to pay enough attention to it. About half the population do not understand how big an impact it can have on their lives
A few might fall through the cracks and let it run riot on their mortgages. While those who have wised up play an active role to monitor or fix it before making a big loan request.
No matter if you have already felt the wrath of adverse credit scores or simply preparing to equip yourself with a clean slate before applying for a mortgage in a few months, here are some basic tips to improve your credit.
1) Pay off your debt
One of the biggest misconceptions many people have about credit scores is that once a debt is settled, they are in the clear and that record will not have an impact on their scoring. They will then find out the hard way later when lenders refuse to entertain their calls while the option-to-purchase on a house gets closer and closer to expiry.
I’ve even seen businessmen committing to high end corporate purchases only to realize later that they won’t be able to get approvals from banks because of their credit. That’s a complete nightmare.
If you owe the bank $1000 and agree to a negotiated settlement of $400, it is recorded as a bad debt in your statements even though the creditor will no longer harass you for payment. And when your credit history is pulled up by a lender, it is something that triggers rolling eyes.
Just think for a moment. If you are a landlord and a tenant who has a history of destroying homes turn up, will you rent to him?
Don’t go for negotiated or structured settlements. Just fully pay off what you owe. What are you thinking anyway if you are using money which you have no intention to repay?
2) Make timely repayments
In many instances, late payments are understandable. You could be traveling or maybe your bill got lost in the mail. This can happen, and lenders understand that. You can usually explain your way through if you really have a legitimate reason for missing your payments. Your payment record can then be amended.
Even if you just missed a payment, it will not have a big negative impact on your credit as long as you fulfill the payment as soon as you realize your mistakes.
The full force of late payments will be felt when you have been late on your payment for more than 60 days, or when you have multiple accounts being late. That is when even a toddler might be able to tell that something is wrong somewhere.
The most basic and simple way to boost your credit score is to always make full payments to your accounts at the end of each month. Don’t leave any debt on the table.
3) Don’t use too much credit
It really is an irony that card issuers want to grant consumers as many cards as possible at as high a credit limit as possible. Lenders then penalize new applicants for being too much of a risk when they have too many credits cards on revolving credit.
It is a science that I’m unable to dissect. But the fact is that the more you utilize your cards, the bigger the beating your credit score receives. Some people just prefer to use more credit effectively than cash for the convenience. They don’t owe any money and pay their bills on time. But they unknowingly ignite a negative effect on their scores.
Don’t use too much credit. Try to keep your spending at 30% or below your credit limits.
Some lenders also use internal guidelines on how much exposure each person can have. And your credit limits can count towards that exposure ceiling. This means that if your ceiling is $100,000 and you already have $40,000 worth of credit limits on your cards, the maximum loan quantum you would be eligible for on your next loan becomes $60,000.
4) New and old accounts
The more cards you activate recently, the more risky a consumer you will be perceived as. Banks try not to leave anything to chance. If you are actively signing up loans after loans and cards after cards recently, they will start to think what is going on.
So don’t open new accounts just to grab that freebie the salesperson was dangling in front of you.
And the older your accounts, the better it reflects on you. This means that if you are reviewing your finances and determining which cards to cut up, start with the most recent accounts to close.
5) Review your credit report
Fraud and identity theft has become more rampant ever since the digital economy was embraced by the main stream.
Even if you are 100% sure that you have taken care of your finances well, there is still a chance of criminals charging the world to your card. You would be even more vulnerable to these circumstances if you are a frequent traveler or enthusiastic online buyer.
Make frequent checks on your own credit report to ensure that everything is in order. Get your report from the credit bureau. Even if you have not run into any bad guys, data entry errors can sometimes occur which dents your score.
Very often, a disappointing credit score causes the types of problems that can be resolved with time and wise action. But if getting your credit score amended as soon as possible is really that important to you, you actually have the right to take the fight to them.
Banks make billions of dollars and serve millions of customers. If attending to you is costing them more money than they could make from the time invested, there is every chance that they might just be open to reporting amendments to your records.
You can get their attention by calling them up and demanding an explanation for reporting on you. Demand evidence and documentation to verify the facts. And since the main leverage they have on you is the law, you can throw the book at them too.
Read up on the Fair Credit Reporting Act (FCRA) Section 623(a)(3) and the Fair Debt Collection Practices Act (FDCPA) Section 807(8). What these 2 hidden secrets of lending legislation says is that creditors might be liable to damages paid to borrowers should they fail to follow certain rules. You might want to read them up. Do consult a friendly lawyer if you are unable to understand what are the implications to you.
The point is that, if you make enough of a nuisance of yourself, and the bank thinks you are costing them more money than you are worth, don’t write off the possibility that they might just give you what you want so as to move on.
A lender’s success is built on branding and goodwill. A dent to their reputation, or just simply bad publicity, is much more damaging to their standing than anything else.