Step By step way to Increase your Credit Score

     Having good credit is detrimental- without good credit you are would not be able to get credit cards, loans, mortgages etc. Ranked on A scale from 300-830 with a higher score indicating better credit and A lower number indicating a poor score. You really have to know what effects your score and your credit report.

     

      The average credit score in the United States is about 690- not a bad score, but not great either. A score sub 630 is considered poor, while A 630-690 score is average, a 690-720 score is good while a score above a 720 is considered great.

      So what can you do if you have A low score?


1. Review your report

You really have to sit down and understand why your score is what is.. things that affect your score are

1. Hard credit inquiries
2. Credit Usage
3. On time payments
4. Length of credit lines
5. New accounts
6. Charge-offs and collections
7. Total available credit

I will go over each one and talk about how you can change them. Not all these categories are created equal, some are weighted on your score more than others.

2. Credit Usage

One of the quickest ways to get A positive change with your credit score is to evaluate your credit usage. This is an easy process with a few different solutions.

A. You can simply pay down all your credit cards.
B. You can use get a consolidation credit card. These cards will allow you to transfer balances from one card to another, they generally have A lower interest rate that will allow you to pay off the balance faster. This will be A hard inquiry on your score, but IF approved will help your credit usage. The recommended credit usage is under 30%
C. Personal loan to consolidate balances. A personal loan will offer A lower interest rate than most credit cards and with this, you can completely pay off all your balances and make one payment a month, rather than worrying about multiple credit card payments. This will also cause a hard inquiry on your report- but will (depending on the amount of your balance and the loan) could completely pay off your balances.
D. You can request credit limit increases- This is one of the most overlooked strategies for raising your credit score.

For example, let's say you have 5 credit cards all with a $2000 limit. You have an $8000 balance...
that means out of your $10,000 in available credit you used 80%. If you request higher credit limits (For this example let's say they all get approved for a $1,000 limit)

Now you have 5 credit cards with $3,000 limits. Your balance stays the same but that credit usage is 54%, opposed to the 80% you had before.

These generally don't cause you to have hard inquiries since you already have A "good relationship" with the creditor.

3. On time payments
This one is simple, you just have to make your payments when they are due. Creditors want their money on time. If you are borrowing money you can't pay back, why would another creditor want to lend you MORE money? Sometimes you can fall behind or just flat out forget to make the payment. I always suggest checking your accounts every few days, getting text or email alerts or consolidating so you don't have to worry about so many payments.

There is no way around this except to make your payments on time.

4. Charge Offs and Collections

If you get something sent to collections for failure to pay it's not the end of the world... Your score will initially drop significantly. But you have a few options...

A. You can dispute the collection with all three major credit agencies (Equifax, Experian, and TransUnion) once you do that, the debt collector must stop all collection activities until they can prove the debt is yours. If the debt is small they may not even bother, and they have to remove it... If they do prove the debt is yours, carefully review the information they provide. Something as small as a typo on the address can make for a legitimate argument that the debt is not yours.
B. Ask the collection agency for proof of their license to collect. Not all states require this, but if A collector does not have the right to collect in your state they may just take the loss or sell the debt to another collector.
C. Pay to delete, this was one that helped me a ton- when you pay off a collection agency they are not required to take that debt off of your credit report. They can still report that you were sent to collections.

When you get sent to collections and one and two don't work you have to resort to a pay to delete. The pay to delete is exactly what it sounds like.. You agree with the collector that you will pay the debt (sometimes not even the entire amount. I would suggest somewhere between 50%-70% of what you actually owe) in exchange for them deleting the item off your report. This may not initially work but if you keep nagging them about it they will eventually break. In Massachusetts negative reports can only stay on your credit for seven years.. the closer they get to that seven years the more desperate they become.

It is important to never take ownership of the debt, deny that it is yours and simply state that you will satisfy the debt in exchange for the report to be taken off. Once you take ownership of the debt it opens you up to lawsuits.

here is an example of a pay to delete a letter

http://www.modernizedinvesting.com/2018/10/letter-to-delete-improve-your-credit.html

4. Hard Credit Inquiries 

It's important to understand the difference between soft and hard credit inquiries. A soft inquiry is when A company or person checks your credit during a back round check or even when you get pre-approved for a credit card or loan. These inquiries do not affect your score and can be done without your consent.

On the other hand, A hard inquiry is when you apply for credit and the potential creditor looks in depth at your credit score. This is not a big deal but if you have a ton of inquiries for credit it may look bad from A creditors point of view.

However, there is an exception to this- If you have A lot of inquiries in A short period of time for similar credit products they are usually looked at as one single inquiry. For example, if your shopping for A car and 5 inquiries hit your score. A creditor would be able to look and see that you were simply shopping for the best rate.

Disputing inquiries are easy- you can just send a letter to the lender asking to remove the inquiry, as A goodwill gesture they usually do. If they don't you can dispute with the three credit bureaus. At that point, it's not worth it for the lender to dispute it any further and they just remove it.

5. Length Of Credit History

There's no way around this... Creditors just want to see you be able to make on-time payments for an extended period of time. This has a very minimal effect on your score.. but an effect nonetheless.

6. New accounts

Having A ton of new accounts is a red flag to creditors because it looks like you may have overextended yourself financially. It's important to only apply for credit when you need it.

There's no way to fix this, but A "new account" falls off after about 1-2 years of having the line of credit open.

7. Total available credit

This goes hand and hand with credit usage and new accounts. A low available credit shows a creditor that you have stretched yourself to thin and may not be able to pay them back. This could be changed by paying off your cards, consolidating your cards, applying for new cards or asking for credit limit increases.





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