Improve Credit Score - 14 Dos and Donts To Raise A Score Fast
Welcome to our free tips for improving credit scores by both boosting credit scores with fast short term ideas and increasing credit rating long term with credit score life time strategies. Mory Brenner collected the ideas to help improve your credit report score with helpful content from TrueCredit, his ten years of experience as a debt attorney and input from other sites given credit below. While some of these items may quickly increase your credit score with a raise of a few points, major repair and rebuilding of credit can take months or years. This particular page assumes you have do not have major outstanding credit problems such as current past due accounts, unpaid charge-offs, bankruptcy, foreclosure or other such bad items on your credit report. To learn more you may want to follow the Free Credit Repair and Rebuilding Help Guide from the beginning or read other articles specifically dealing with the subjects of credit repair, credit rebuilding or correcting errors on a credit report.
This page helps with fast ways to increase personal credit report scores with both things to 'Do' and 'Dont Do'. First learn to improve how your credit report looks to credit grantors and raise your credit score, then read about what not to do if you dont want to end up with a bad credit score including credit score myths.
Think of your credit score
as a picture of your credit risk. This picture reflects your risk at a specific point in time. A picture does not change; however, when you take another one, you will probably look a little different. Similarly, when your credit information changes, your score will also change to reflect the updated information. Keep in mind that just like any picture, outside factors can affect how things look. Camera angles, skill of the photographer, the camera, lenses, lighting and background all help form the final photo. This explains why the three credit bureaus will all issue different credit scores for the same person even if the credit information is identical. Sometimes you may not think your credit picture accurately portrays what you look like, in some cases it may be perfect and sometimes the wrong name gets placed with your image. Your job as a consumer involves becoming aware of as many of these variables as you can and making financial decisions with an eye on what might fix or harm your credit score.
There are steps you can take to ensure that each time a new "credit picture"
is taken, it shows your best side. By observing the following guidelines, you can influence your credit worthiness for the better and learn how to establish a credit report you can be proud of:
7 Fast Steps to Raise Your Credit Score, Learn what to do to Manage Your Credit Score and Improve Your Creditworthiness.
Be PunctualPay all your bills on time. Late payments, collections, foreclosure and bankruptcies have the greatest negative effect on your credit score. If you have not paid credit items on time in the past do not let that stop you from changing your ways. The sooner you get things on track the faster you can repair bad credit. From the point of view of the credit reporting bureaus you may want to note that 'late' usually means 30 days late. This means your goal should be to pay things before the due date, the next best choice becomes avoiding the late fee date, perhaps at 10 or 15 days late. The most important date for avoiding a bad credit report starts with missing a payment by 30 days. To keep a clean credit report it helps to understand what is bad credit. If you cant afford to pay everything on time you may want to read Who to pay when you cant pay everyone or other materials at Bankruptcy Alternatives - Debtors Options including the automated free debt help system.
Check your credit report regularly and take the necessary steps to remove inaccuraciesDon't let your credit health suffer due to inaccurate information. If you find an inaccuracy on your
contact the creditor associated with the account or the credit reporting agencies to correct it immediately. Don't avoid this step because you think you will not understand a complicated credit report. Guides to interpret your credit report can help make that easy. Cost should not stop this process either. Once per year you may obtain free reports. These free credit reports will not contain your credit scores; they will show the items that make up the credit report and help you discover if there exist any erroneous items. If you discover entries in your credit report that do not belong there you may hire a credit repair professional to help remove them or follow through on the correction process on your own.
Resolve Negative Open ItemsOld unpaid credit card chargeoffs, medical bills or student loans that may not have called to try to collect their money from you for years. In fact, they may never call, but open unresolved credit accounts can still be hurting your credit score. If your primary goal involves increasing the quality of your credit report than pay off those old items, even if it's a settlement for less than what was owed. That will 'close' or resolve the credit item in question. How to improve your credit score involves removing bad or inaccurate information from your credit report as much as establishing good new credit. Be sure to look at timing too, after 6 years the statue of limitations may prevent a creditor from suing and at seven years the item should fall from your credit report, people in this situation may qualify as the rare exception of the people whose best option to deal with debt is doing nothing in the short term.
Watch your debtKeep your account balances below 50% of your available credit. For instance, if you have a credit card with a $1,000 limit, you should try to keep the balance owed below $500. Some people would argue that to help boost credit scores the most this level should be down closer to 20%. When you have the available cash paying down revolving accounts like credit card debt help increase your report score. Do not feel the need to pay off secure loans like mortgages and auto notes, but be aware that keeping those current each month can be more important than anything else when it comes to keeping up your credit score. If you have credit card balances without the ability to pay them down or pay them off, you may want to make an effort to even them out. For example you may be better off having a $1000 balance on five cards each rather than a $5000 balance on one card, particularly if the limit on that card is $5000. Your credit score may take a hit when lines seem 'maxed out'. When evening out cards try to even them out relative to their limits. For example if you want to even out two cards with a total of $2000 in debt, even them out by leaving $500 on the card with a $5000 credit limit and $1500 on the card with a $15,000 credit limit. If you find your credit card debt increasing out of control you may need to shift your main focus from your credit score to your personal budget and look harder at any bad consumer spending habits.
Give yourself timeTime represents one of the most significant factors that can improve your credit score.
Establish a long history of paying your bills on time and using credit responsibly. You may also want to keep the oldest account on your credit report open in order to lengthen your period of active credit use. On the other side of things the phrase 'time heals all wounds' applies perfectly to a bad credit report. From the moment a negative credit event ends the toll the incident takes on your credit score begins to diminish. To be sure, first understand that this healing does not start until the event has closed. Let's take the example of an unpaid credit card. If you ignore an account the creditor at some point 'charges it off', this does not mean that you don't owe it anymore or the incident is over. An unpaid charge off in this context would be an open wound that will not heal. Dealing with debt by not paying creditors rarely emerges as one's best option. Paying an account off or getting current marks the moment when healing can begin, even if you reached a settlement for pennies on the dollar. How fast your credit gets better with time depends on how bad it got, but you will start to see things improve within the first year. By 2-4 years expect a serious raise in score and by 7 years the negative credit item should be gone.
Adjust your credit limitsRemember the tip above to keep your ratios at 20%-50% or less of credit used versus credit available? If you cannot pay down accounts and your credit is good enough to get an increase you may develop a better ratio by increasing the credit line. This does not mean you should use the extra money on the line, in fact if you think you might even be tempted to access the new credit this may be a dangerous method and should be avoided as incresing credit lines and running up the balances stands as one of the leading causes of bankruptcy. Even when attempting a credit limit boost, don't go too far. If you have a $1000 credit card limit all used raising the limit to $2000 up to $5000 puts you in the 20% to 50% range. Having a limit of anything more than $5000 may even hurt your score because you may be viewed as having enough credit already or that you are exposed to becoming over extended. If you already have cards with balances under 20%-50% of their limits you may want to call the creditors and have these limits reduced in an attempt to add a few points to your credit score fast. Keep in mind that these techniques for adjusting ratios remain much more speculative methods then those cited above and that each of the bureaus may interpret credit ratios in their own way.
Establish Various Types of CreditIf you only have a mortgage and a car loan you may want to establish a credit card account. If you have no mortgage you may want to get your rent reported on your credit report. If you never had a car loan you may want to get one the next time you buy a car. Do not go buy a car if you don't need one just to attempt to gain a few fast points in your credit score, but if for example you may want to buy a house in the next few years and have very little established credit getting a car loan instead of paying cash for the car will help establish credit and if paid timely help improve your credit score so that when the time comes to get a mortgage you will be ready. If you have no credit at all yet you can always start with secured credit cards. The three main items to consider here should be mortgages, car loans and credit cards. Do not attept to have every department store credit card, gas station credit card or 100 charge lines at local businesses. In looking at increasing your credit score do not go out of your way to apply for more than one item per credit category unless you truly want it, once you raised your credit lines over the three minimum suggested. Make sure your credit lines report to the major credit agencies or they don't count for credit improvement purposes.
7 Credit Score Myths and things not to do in order to maintain a good credit score
Your score will drop if you check your creditFortunately, this one is definitely not true. Checking your own report and score is counted as a 'soft inquiry' and doesn't harm your credit at all. Only 'hard inquiries' from a lender or creditor, made when you apply for credit, can bring your credit score down a few points. Worried about damaging your credit while shopping around for a loan? Multiple inquiries for the same purpose within a short amount of time (a few weeks) are grouped together into a less damaging period of inquiry.
Closing old accounts will improve your credit scoreTo close or not to close, that is the question. Many people advocate closing old and inactive accounts as a way for improving your credit. In most cases, closing accounts will actually have the opposite effect. Canceling old credit accounts can lower your credit score by making your credit history appear shorter. Think twice before closing the oldest account on your credit report. If you want to reduce your levels of available credit, ask for your credit limits to be reduced or close newer accounts instead. If you want to close credit accounts eliminate new ones first.
Once you pay off a negative record, it is removed from your credit reportNegative records such as collection accounts and charge-offs will remain on your credit report for 7 years after they are first posted, bankruptcies stay on your record for 10 years. Paying off the account before the end of the set term doesn't remove it from your credit report, but will cause the account to be marked as 'paid.' It is still a good idea to pay your debts, it can improve your credit score, but the major improvement will come when the record expires.
Being a co-signer doesn't make you responsible for the accountWhen you open a joint account, co-sign on a loan or become an authorized user on someone's credit card, you are taking on legal responsibility for the account. Any activity on these shared accounts, good or bad, will show up on both people's credit reports. If you co-sign for a friend's auto loan and they don't make the payments, your credit profile will be hurt by their actions and visa versa. The only way to stop this double reporting is to refinance the loan or to have the creditor officially remove you from the account.
Paying off a debt will add 50 points to your credit score Your credit score is calculated using a complex algorithm that takes into account hundreds of factors and values. It is very hard to predict how many points you can gain by changing one factor. For a person with a high credit score, just one late payment can cause a significant drop. If a person has a low credit score, it may not cause a large drop at all. There is no magical way to improve your credit score, just keep paying your bills on time, reducing your debts and removing negative inaccuracies from your
credit report. Good financial behavior and time are the two most important factors on your credit score.
Opening many new accounts can raise your credit scoreWhile opening a new account where you have had none will help raise your score or establish an initial good score and perhaps up to three of a particular type can work to the advantage of the task of increasing your credit score, someone who already has several established account should not attempt to create even more credit lines as means to achieving an improved credit report.
The credit card companies protect me from all fraud, I don't need to worryEven though credit card companies may insure that they will not hold you accountable for fraudulent charges, identity theft can cost you money in other ways and wreak havoc with your life. You remain responsible for protecting your personal information, particularly personal financial and credit information like social security numbers and credit card account numbers. Don't fall victim to pfishing scams, enter credit information on an unsecured web site or give personal information to someone by phone if you don't know who they are, especially if the call originated from an unsolicited inbound call to you. Identity theft even without direct theft of your money might leave you with a very bad credit report.
and Bankruptcy Alternatives - Debtor's Options
Other sources for this article besides TrueCredit and Mory Brenner, Esq. include FICO's own article on improving your FICO score, Credit Inquiries article by FICO, 101 tips to increase credit score, 7 tips to increase credit score and tips for boosting credit score.
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The most recent update of this page occurred March 21, 2013.