Increasing My Credit Score
My credit rating has taken a recent beating with all the changes in the economy recently. Do you have advice for how to increase my credit score?
With all the economic and financial mayhem taking place throughout the past year, including the real estate loan mess and the bailouts for banks, it wouldn't be unexpected for your credit score to have taken a hit.
Meanwhile, it is apparant that your credit score is the financial equal to your good name. It is your passcard to obtaining assets, and a blemish can come back to trouble you in your pursuits.
This is true more than ever now due to the subprime crisis that has stretched itself to additional types of credit. For example, while the banks have been required to write off obscene amounts of credit-card debt, they are now demanding that borrowers have higher credit scores.
Just last year, a score of 720 gave you an open door to lenders all wanting your business. However, today a score of 750 will get you an account but it may not get you a good rate. So it is definitely more important than ever to have an immaculate credit history and a great score. Here is my advice on how to increase your credit score.
1. Know what your score is now. If you haven't recently taken a look at your credit report, take a look now. You can do so by logging on to annualcreditreport.com which will enable you to get a free copy from each of the three credit bureaus. The three bureaus are Experian, TransUnion and Equifax. Please be aware of copycat sites that will ask you to purchase a service before it gives you a "free" credit report.
You will have the option of buying your credit score on a bureau's Web site for $6 to $8 each. You can only do this once-a-year though, so if you've already used your once-a-year free pass, you can try myFICO.com to download your reports and scores. The price is $15.95 for the score from one credit bureau, or $47.85 for the score from all three.
2. Dispute all mistakes right away. Take a good look at your reports and file a dispute with each bureau that is showing an error. The process may take a little over a month, or 30 to 45 days, for the bureau to investigate any disputes you submit. Make sure to stay persistent until all problems have been resolved. The bigger issues, such as an account incorrectly showing having gone to collections or an account in foreclosure, could actually be dinging you 100 points or more on your credit score!
It is also important to check the dates on any negative information that's being reported. Accounts in collection are often reported long after they should have been removed from your record. Negative items typically can be reported for seven years from when you first fell behind. Exceptions to this are bankruptcies, which can be reported for ten years, and tax liens, that can stay on your record indefinitely unless you pay them.
A couple of other things to watch out for are accounts that were paid-in-full but are still showing a balance. As well as someone else's record appearing in your file. Although, mispelled names and incorrect addresses will not affect your score.
3. Lower the ratio of your credit limits vs. your outstanding debt. This step is especially important now as many lenders have decreased credit lines and with less credit available, big balances send your credit ratio up and your credit score down.
If you have a good record with a credit card, ask the issuers to raise your credit limits. Or simply focus on paying down your balances so that you're using less of your available credit. The aim is to keep your balance below 30% of your limit on each and every card.
4. Do not apply for new credit cards that you don't need. The 10-15% discount they offer when you sign up for retail cards is not worth it in the long run.
Also, when you apply for new credit, an inquiry is made on your credit report. Each inquiry is only a tiny ding, but enough dings can add up very quickly to a huge dent, especially if you don't have much of a credit history. It is best to only take on new credit as you need it. Buying new clothes and other items on a whim does not count as a need.
5. Make your payments on time or early. It is always best to pay your bill in full each month. However most people can't, so just make sure to pay at least the minimum, and pay on time. The more late payments you have, the lower your credit score, which will also raise the possibility that your lender will charge you a higher rate. The downfall with that is if other lenders see your rates increased, they may raise your rates too. That could mean more late payments in the future creating a downword spiral effect.
If it's hard to make a payment on your specified payment date, go ahead and call your card issuer to request a change in the date. It may take a cycle or two to get results, but lenders are often happy to work with you. Definitely much happier than if you ignore their calls completely.
I am confident if you follow the above advice, your credit score will start increasing in no time - wishing you well!