13 Ingenious Ways to Improve Your Credit !

13 Ingenious Ways to Improve Your Credit That You’ve Probably Never Even Heard of!

 

  1. Don’t close old credit cards

Don’t close old credit cards! Doing so will reduce the average age/depth of your credit. You may even alter the mix of your credit negatively.  And your utilization rate will suffer.

 

I recommend you use your old credit cards occasionally. Use them to pay for gas or groceries and then immediately pay off the full balance. This will keep the credit card active and of course paying it in full renders the interest rate irrelevant.

 

  1. Don’t pay off old charge-offs

Don’t pay off an old charge-off or collection account. Doing so damages your credit score because this action updates your last activity date, keeping it on your credit report longer. Pay only if the collection agency agrees in writing to withdraw all reporting from credit bureaus.

 

 

 

 

  1. Set up auto pay to always pay all your bills on time

You might be surprised to learn that the most important factor in maintaining a great credit score is paying your bills on time. Wherever possible, set up auto pay to pay your bills automatically. This has several advantages:

 

  • Always paying your bills on time enhances your credit score
  • You save on postage
  • Since you have no further labor after set up, you save time
  • If you’ve set your bills to autopay to a rewards program, you’ll build up points effortlessly!
  • You should also consider setting up computer reminders on any bills that you can’t get paid automatically

 

  1. Boost your ‘utilization rate’ with this sneaky tactic

Another guerrilla tactic to enhance your utilization rate and improve your credit profile is to request a credit line increase on one of your current accounts. If granted, this effectively lowers the percentage of credit used and improves your utilization rate!

 

  1. Checking for mistakes and correcting them

It’s important to have any mistakes on your credit file removed. Common mistakes include:

 

  • Charges that aren’t yours
  • Unauthorized inquiries
  • Recorded late payments, when in fact you paid on time
  • Payments made by you but not credited to your account (perhaps applied to the wrong account as happened to me!)
  • Bankruptcy over 10 years
  • Items wiped out by bankruptcy but still showing
  • Bad credit over 7 years old but still showing.

 

How should you deal with these issues? First, contact lenders to get inaccuracies corrected or removed. Follow up with 3 credit bureaus to make sure that inaccuracies are resolved. You can also complain to the Consumer Financial Protection Bureau.

 

 

  1. Add Credit That’s Missing To Bolster Your Credit Profile

Here’s a well proven, but little known, tactic.  Add any missing good credit histories from companies that are not usually required to report, such as:

 

  • Utilities
  • Cable
  • Internet
  • Wireless providers
  • Medical providers
  • Non mainstream automotive accounts and telephone companies

 

If you ask them to report your good credit history as a courtesy and remind them that you’re a good customer, they will usually comply. This can make a difference to an otherwise sparse borderline credit history.

 

 

  1. Protect against phony charges

It’s a sad fact that we all need to actively protect ourselves against phony charges and identity theft nowadays. Don’t give out account numbers, passwords, or Social Security Numbers over the phone or thru email. Closely guard such information at all times, sharing it only once you are positive you are dealing with a representative authorized by the merchant. Failure to do so might leave you open to identity theft or a Phishing Scam.

 

Personally, I pass my bills through American Express and I sign up for automatic notifications of any large payments — $200 or more — You specify the amount of the threshold. I get the frequent flyer rewards. And I’m notified of any large purchases.

 

I am a big fan of American Express’s fraud protection department. They notify you of anything suspicious and even if a bogus transaction isn’t caught in time, they reimburse you on those charges!

 

Using American Express has allowed me to catch several people who tried to make large charges on my account.  On one occasion, they (Amex) contacted me without my intervention to inform me of questionable foreign transactions that turned out to be bogus!

 

  1. 8. Reorganize your Credit to have a good Mix

It’s an advantage to have a good mix of credit types. Add to the mix by shifting some credit card debt to a small installment loan. Or shift credit card debt to a home equity loan. A third option is to pay off some of your credit card debt with a loan from a friend or relative or your retirement account. All of these actions will help your Credit Mix ratio.

 

  1. Make sure creditors report your full credit limit

Make sure that creditors report your full credit limit to credit bureaus. If the actual credit limit is not reported, credit bureaus can assume that your balance is at the maximum of your credit limit.

 

For instance, with a credit limit of $10,000 and a balance of $2,000, if the credit bureau doesn’t know your credit limit is $10,000, it may inaccurately assume a credit limit of $2,000. This will trash your credit utilization rate (the second most important determinant in your credit score!).

 

 

  1. Evenly distribute your credit

Evenly distribute your credit and balances across your cards — credit scoring systems penalize those with very high utilization rates. Generally the cutoffs are 70%,  50%,  30%  and  10% with the lower best. So spread balances when possible to get below the 30 cut off as much as possible.

 

Interest rate is a consideration, but on balance, it is better to pay off credit cards with the highest utilization rate first. It also helps sometimes if you pay bills a little before their report date as opposed to at the due date because this will show lower balances on your credit report.

 

Consider making bi-monthly payments. These lower your perceived balances.  And if you have a bunch of credit cards, consider paying off those with small balances so you don’t have too many cards with balances (One of the factors Bureaus consider is how many cards have balances and this will also improve your mix ratio).

 

 

  1. Limit inquiries, particularly when it comes to credit cards

Research thoroughly before applying for credit. Aim to limit inquiries to the best merchant offers (that you qualify for). Excessive inquiries can damage your credit, particularly multiple credit card inquiries. However, according to MyFico.com,  ‘most  credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time’.

 

Typically, these are treated as single inquiries and will have little impact on your credit score. Research indicates that the FICO score makes more accurate predictions when it treats differently loans that commonly involve rate-shopping, such as mortgage, auto and student loans. For these types of loans, the FICO score ignores inquiries made in the 30 days prior to scoring.  So, if you find a loan within 30 days, these inquiries won’t affect your score while you’re rate shopping. In addition, the score looks on your credit report for rate-shopping inquiries older than 30 days. The system counts as single inquiries all inquiries falling within a typical shopping period when determining your score.

 

For FICO scores calculated using older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated using the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender is free to choose their preferred version of the FICO formula the credit reporting agency should use to calculate your FICO score.  Here’s the takeaway: If shopping for a car, home or student loan, rate-shop in a short span of time!

 

 

  1. Reporting your credit card lost

There is another method. In my opinion this method is unethical and therefore cannot be recommended. I have included it here so that you are aware.

 

Reporting your credit card lost causes some credit card issuers to close your account, open a new one and move your history — including the original open date — to your existing credit report. This can enhance your average credit age score as it is possible (though by no means certain because each credit card issuer has different rules)  that you end up with two accounts showing that length of history.

 

  1. Dispute items

Dispute items, even if legitimate, require the creditor’s confirmation and proof of the debt. Sometimes the debt has been sold. Maybe even transferred between many different lenders. This makes it virtually impossible to provide details of the debt. This is particularly true of real estate related debt.

 

Another effective tactic used by some credit improvement companies is to repeatedly dispute items. The creditor may confirm the debt the first or second time but erroneously this that subsequent inquiries have already been answered. If they don’t reply, the item may be taken off the credit report. (Jim, I don’t understand what this means!)

 

 

 

NEXT I’LL TELL YOU 6 KEY BENEFITS TO IMPROVING YOUR CREDIT SO KEEP READING . . .

 

 

6 benefits to improving your credit

 

Here’s several key advantages to having an excellent credit score:

 

  1. The single biggest benefit is that you qualify for much lower percentage rate home loans, car loans,  personal loans & credit cards. This can save you thousands!

 

  1. You will qualify for rentals of apartments or homes. Many Landlords run credit checks on perspective renters and a strong credit profile will give you the best chance to get the best rentals. And when you move in, a great credit rating will enable you to get utilities. If you have bad credit, you won’t be able to get basic utilities turned on. I don’t know about you, but electricity, water and internet (plus perhaps TV) are necessities that I’m not willing to do without!

 

  1. Having good credit could help you get that plum job. In this age of identity theft and digital shenanigans, most employers run credit checks, and bad credit could set a red flag that costs you the job!

 

  1. You’ll enjoy much better credit flexibility, allowing you to take advantage of special offers. I know from personal experience that this can be a lifesaver. If you ever build up a big balance, you’ll be able to do a balance transfer for as low as 0% up to 18 months (as I once did!). This can make payments manageable and save you a lot on interest too.

 

  1. You’ll qualify for better reward programs, leading to free merchandise and travel perhaps. You might also use the points to pay down balances. I have been channeling routine bills thru a reward card program for years, which has allowed us to travel wherever we like, get merchandise and even pay down balances!

 

  1. As a prospective student you’ll qualify for more student loans at potentially lower rates

 

Clearly it is in your best interest to establish and maintain great credit! Now let’s examine in more detail how credit is calculated. After that, I’ll reveal some common-sense under the radar methods to improve your credit. These are tailored to take advantage of the way bureaus calculate credit! 

IT’S IMPORTANT THAT YOU KNOW HOW CREDIT IS FIGURED. LOOK BELOW FOR THE ANSWERS . . .

 How your credit is calculated & some helpful resources

 There are three major credit bureaus:

  • Equifax
  • Transunion
  • Experian

The precise calculations of these companies differ slightly but the formulae in the table below is a close approximation.

 

Factor % Inquiry
Payment History 35% Have you paid all your bills on time and as required?
Utilization Rate 30% What percentage of your available credit are you using?
Depth of Credit 15% How far back does your credit history go?)
Types of Credit Used 10% Do you have a good mix of different types of Credit?
Recent Credit Inquiries 10% Did you intelligently limit inquiries?

 

 

I strongly recommend you get free credit reports annually. You’re allowed one for each of the three credit bureaus. A great idea is to stagger them. In other words, spread each out at 4 month intervals. So for instance, you might get Experian in January, Equifax in May and TransUnion in September. This will give you the most accurate and up to date picture of your credit on an ongoing basis which will allow you to take immediate action if needed!

 

You can get your free credit reports at annualcreditreport.com  Also you can use free services like credit.com and creditsesame.com to monitor your credit monthly. A 2012 study by the Consumer Financial Protection Board found different modeling of consumers in the same credit range 73 to 80 of the time. This high correlation between different scoring models indicates that free services like creditsesame.com and credit.com can be useful and relatively accurate.

 

WHAT IF YOU DON’T HAVE ANY CREDIT, THEN WHAT?

 

Bonus: Don’t have credit? Here’s how to get it.

 

Get a Secured Credit Card (But not just any one!)

It’s a modern version of Catch 22. You want to establish credit because you don’t have any. But without credit (or with bad credit), you can’t get credit.

 

What’s the answer? A great way is to get a secured credit card. With a secured credit card, you deposit an amount with the credit card company and that is generally your credit limit. The deposit covers the limit so the issuer is in a no lose position! But it’s also beneficial to the cardholder because it usually accrues interest and it’s a foolproof way to establish (or raise) your credit when it’s not possible to get a regular bank card.

 

 

It’s also a safer way for a parent to help a child, student or anyone else establish credit (rather than putting them on your credit account and jeopardizing your credit standing). Here are some you may want to consider (Google each for more details):

 

  • Digital Federal Credit Union Secured
  • Applied Bank Secured Credit Card
  • USAA Platinum Secured
  • Centenial Secured Credit Card
  • New Millenium Secured Credit Card
  • Capital One Secured MasterCard
  • Citi Secured MasterCard
  • First Choice Bank primor Secured Visa Gold Card
  • First Progress Platinum Elite MasterCard
  • US Bank Secured Visa
  • Merrick Bank Secured Visa
  • Orchard Bank MasterCard Secured
  • OpenSky Secured Visa
  • Unity Visa Secured Credit Card
  • First National Bank Secured Visa

 

Do look closely at fee structures because many companies in this segment charge high fees & APR.

 

IMPORTANT: Before doing anything else, ask the Credit Card Issuer whether they still report on a monthly basis to the three credit bureaus before moving forward, as policies change.

 

It is essential that the Credit Issuer report your good ongoing payment history for this strategy to be effective!

 

 

Piggyback on good credit

Another tactic is to piggyback on someone with good credit. Though it’s not as effective as having your own credit card, by becoming an authorized user on their already established credit card you can get a credit card in your own name. Less weight is given to authorized users, but it is still beneficial because you get credit for the whole account history, establish a credit history, and increases the average age of your accounts. You also get credit for the ongoing credit. On the downside, if for whatever reason the account goes bad, it will hurt both of you, so you absolutely want to make sure the payment history stays perfect.

Get a Cosigner

If  possible, you can have someone with good credit Co-Sign for you. This could be a parent or relative — a friend even. If you can find someone willing to co-sign for you, return the favor by maintaining a perfect credit payment history on that account no matter what. It will greatly benefit you both!

 

Hopefully you’ve gotten some good tips, tricks and hacks to help you with your credit. If you have any questions I can help with, feel free to contact me !



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