The first thing you need to determine is what your credit score is, why it is that particular score, and why you are trying to raise it. If you are trying to raise your credit score because you are setting up a plan to build long term wealth, then take your time and do it right. If your credit needs a quick boost to get an auto loan or to get a better mortgage rate read on…but I truly recommend putting together a long term wealth building plan as opposed to only looking at a short term fix.
With that being said, there are things you can do to quickly raise your credit score. The first thing you can do is check your credit reports for accuracy. There are three major credit bureau’s:
Equifax: www.equifax.com
Experian: www.experian.com
Trans Union Corporation: www.tuc.com
On each website you can find out your credit score, credit report, tips on how to improve your credit, see what actions will improve your score faster, etc. They are very informative sites and imperative to building long term credit worthiness. I recommend becoming intimately familiar with each of them.
You need to order your credit report, which is free, and I suggest you pay the nominal fee to obtain your credit score. Why go through all the effort without seeing the results? If you want to lose 20 lbs how do you know when you’ve lost it if you don’t know what your starting weight is? Same concept with your credit score.
Alright, so now you have your credit reports with your scores. Congratulations! Now let’s get to work. You first need to check all three credit reports for accuracy. Make sure your name, address, and other basic information is correct. Then make sure you don’t have any late payments showing or debt that is not yours. You can correct simple information and dispute inaccurate information on the aforementioned websites.
Do this immediately. Once the above information has been determined to be correct or is in the process of being corrected, go through your credit reports and look at what is making them bad. Do you have delinquent accounts? Do you have poor longevity at your job (you’re a job-hopper)? Do you not have credit? Figure out the pattern of what is holding down your credit score.
Once you determine what is holding down your score, come up with a plan to fix it. I will go into a long term plan in other articles, but for a quick jolt you need to look at your individual situation. If you have a lot of debt, begin paying it down starting with your highest interest debt, usually your credit cards. If you don’t have a lot of debt, get a credit card and charge something small on it every month (preferably something in your regular budget, such as your groceries) and pay it off.
You can leave $10 or so on the account unpaid to show you are using the card. Sometimes if you pay it off every month it will look as if you are not using the card and won’t give your credit the boost you are looking for. Once your credit is where you want it, pay your credit card in full every month.
You can get a personal loan to establish positive credit, but be careful!!! This is a temporary fix, and don’t do it if you have been irresponsible with your bills. The best idea is to save some money, $500 for example. Put that money into a CD at the bank. Open a separate checking account and take out a personal loan for $500 using the CD as collateral. Put the money from the loan into the checking account and establish automatic payments for the length of the loan. For a quick boost make the loan for only 6 months. At the end of the loan period you have taken a loan and paid it back on time showing credit history and responsibility.
However, this won’t work if you have a high debt to income ratio (if you have a lot of debt and low income) as this will just increase your debt making the ration worse…and lowering your credit score. Again, credit is very personal.
For everyone, you can limit your credit card purchases or balances to 30% or less of your available balance. If you are confident you will be responsible, you can not only develop a plan to pay down your card, but request that your limit be raised. If your credit card has given you a $5000 limit and you have $3500 on the card, your debt is 70% of your balance. You would need to pay your credit card down $2000 (to a $1500 balance) to be at 30%. If, however, your credit card company increases your limit to $7500, then 30% is $2250, so you only need to pay your credit card down $1250 to attain your goal…but be careful about having that extra credit available to spend!!! It is not to spend. It is to reach a goal.
As you can see, credit can be very complex and it is very specific to your individual situation. There are things everyone can do to increase their credit score and equally important, their credit worthiness. Coming soon is a start-to-finish program for all, no matter where you are at with your credit, that will allow you to establish the very best credit for building wealth over your lifetime.