Tag Archives: Scores

The quickest way to increase your credit score

I’ve been seeing a number of people who have lower credit scores lately.

A common attribute is excessive revolving debt or credit card balances that are close to the limit.

Having a credit card balance that is over 30% of the available limit will lower your credit score.  Being close to or even over the limit will put a hurting on your score.

Recently, a borrower who was over their limit by a few dollars said the credit card company told them to charge up the balance then pay the minimums to pay it off.  The only benefit for that “advice” is to the credit card company who is making interest off them.

Furthermore, with many people cutting back on credit cards, they can hurt them selves by closing accounts they don’t use often.  By reducing the amount of available credit to the ratio of credit in use, you can hurt your score as well.

So……My advice on how to increase your score the fastest, probably by next month is………Pay Down your outstanding credit card balances!

Further example, you have 3 credit cards.  One has 300 with a 500 limit.  The second one is 1500 balance on a 2000 limit and the last one has 400 on a 500 limit.

Pay the 400 balance down to less than 250 first.  Next pay the 1500 balance down to 1000 or less and finally pay down the 300 to 250 or less.  If you are tight on money, maybe the 300 before the 1500.  By reducing the credit used to under 50% of the balance available, you will get more points on your scores.

If you want even more points, the next step is to lower them to less than 30%, and finally to zero every month.  Don’t close them out but keep them open and available with minimal use.

“But  XYZ Bank is offering me a zero percent balance transfer?” I hear this sometimes.  That is great if you are trying to minimize your payments but if you are trying to get qualified for a mortgage, you have a different goal.

I’ll save my thoughts on the balance transfer scam,  strategy for a later post.

Good article from USAA on building credit history from scratch

1146426_house_question_2I get many first time home buyers in my office who have no idea about their credit history much less their credit score.  With a little preparation ahead of time, they could prevent an unpleasant surprise.

If you have an adult child that is just going out into the real world or college, it would be wise to discuss this with them. https://www.usaa.com/inet/pages/advice_building_credit?offerName=logoff_advice_building_credit

You should take advantage of the free reports offered by the bureaus once per year at www.AnnualCreditReport.com.  These reports won’t give you their score-they make you pay for that, but you are looking for any surprises and how any existing creditors are reporting your credit history.

Even if you’re one of those types who says I don’t need credit, you do need a credit history to get the best financing when the day comes to apply for a mortgage.  Contrary to what some like Dave Ramsey say, living without a credit score has many disadvantages.

If you open credit accounts, buy a tank of gas a month on the account and then pay it in full when the bill comes, you’ll build a history of responsible use and avoid finance charges.  This method works well while avoiding debt building up.  After 6 months, you’ll see the positive effect on your credit score.

I would add that if you’ve had a bankruptcy or foreclosure, you really need to make an effort to repair and rebuild your credit history.  You can’t shun credit simply because you had problems.  A good part of your credit score is how you manage your credit.  Avoiding it is not the same as managing it.

With a little advance effort, you can detect any errors, bad credit, and monitor how your existing credit is showing.  It’s common for me to work with borrowers some time in advance to get ready to purchase.  Should you need this help or know someone who might, call me.

 

 

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