Personal Finance Ology

How Can I Improve My Score? I’m glad you asked! Here are a few tips that will get you moving towards an improved credit score, improved interest rates and most importantly a peace of mind in your financial world:

First Tip: Take Yourself Off The Credit Bureau Marketing List

Ever been tempted by all of those “great” offers of credit or “low interest, no qualifying” loans and mortgages? Although they may sound like great offers many of them are not. If you continue to read the small print you will notice that their is a very high annual fee or the interest rate may only be good for a couple of months and then it goes up.

Instead of getting involved in these risky offers and maybe defaulting on one of the loans, you can permanently take yourself off of the credit bureau marketing list. The reason you are receiving these offers are because the credit bureaus sell your information to companies that want to offer you lines of credit. Therefore, by taking yourself off of their marketing list you will no longer receive these offers, decrease your chances of identity theft and can even increase your score by 5 to 10 points. Simply visit www.optoutprescreen.com and permanently opt-out.

Second Tip: Keep Credit Card Balances Below 30% Of The Credit Limit

Here’s what’s really important. It is pertinent that you not close any of your credit card accounts. If you were to pay off your credit card account and then close it this would take away from your credit history and may cause your credit score to drop a few points. As mentioned previously, it is important to create a strong credit history so that you appear less of a risk to lenders.

Therefore, because you are working on improving your credit score, you would want to keep the credit card open, even if you were to pay it off. However, if you cannot completely pay your credit card off, try to pay each one down to at least 30% of the credit limit. When a potential creditor is looking at your credit report one of the key things they look at is your debt-to-income ratio. Paying your credit cards balance down by at least 30% shows that you are in control of your finances rather than vice versa. If you have multiple credit cards, transfer high balances to cards with low balances so that all cards are 30% of their respective credit limits.

Third Tip: Maintain 3 Active Revolving Credit Lines

As mentioned above it would beneficial to never close a credit card account, wait 6 months between opening new accounts and always remember the oldest credit cards with the highest balance have the biggest impact on your credit score.

In general, having multiple credit cards isn’t a bad thing. You just want to make sure you are current on your payments and have at least 30% of the balances paid. I wouldn’t recommend more than three credit cards. Leave the one with the highest limit closer to zero and use it only for emergencies.

Also note that revolving credit lines are VISA, MasterCard and Discover not department store cards, debit cards, gas cards etc. And always remember to keep the balances below 30% of the credit limit!

Fourth Tip: Have At Least One Active Or Paid Off Installment Loan

One way to build your credit score quicker is to have at least one installment loan. These loans include auto loans, leases, boats loans or credit attached to personal property such as computers or furniture. When you purchase any of these items make sure it is an installment loan and not a revolving line of credit. You find out the type of loan you are receiving by asking the lender.

Fifth Tip: Negotiate A Deletion Letter Before A Collection Is Paid

Before you agree to pay a collection always try and negotiate a deletion of the collection from your credit report. Make sure you get this agreement in writing and signed by the collection company before you pay. A key point to note here is that the further away the negative items on your credit report are the less impact they have. For instance, collections that are two years old only hurt your score minimally. Negative items over four years old really don’t hurt your score at all.

There’s No Time Like The Present!

Get started now!

You can receive a free credit report (with no trial offer) from the three major credit agencies, Equifax, TransUnion, and Experian. A federal law requires them to give you your credit report for free once every 12 months. All you have to do is request your report via web at www.annualcreditreport.com , by phone 877.322.8228 or mail by mailing your request to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Ga. 30348-5281.

Some individuals may feel like they are in too deep to come out ahead of their financial debts, but there is always a way out. It is important to note, however, that doing so takes time and effort: you can’t expect it to just happen over night. If you are willing to put in the energy and time it takes to clean up your credit score, sufficient improvements can be made.

Improving your credit score isn’t an easy feat, but it isn’t as hard as most people think. You won’t be able to instantly increase your credit score, but six to eight months is a good window of opportunity to get the desired results. And once you increase your score it is that much easier to maintain!

Related posts:

1. Clean Up Your Credit Score (Part 1)
2. Debt Management
3. Most Common Types Of Mortgage Loans
4. The Basics of Interest (Part Two)
5. Understanding Good Debt Vs. Bad Debt