Has your credit score prevented you from qualifying for a loan orcredit card recently? Or maybe you wereapproved, but at a very high interest rate.A low credit score can actually cost you a more money in interestpayments and fees than having a high credit score. In order to qualify for lower rates andbetter loans, you may need to look at some quick ways to increase your creditscore and get your credit back on track.
This post has been sponsored by CreditRepair.com. All opinions are mine alone and are honestlyconveyed.
How your credit score is calculated
You may bewondering exactly how your credit score is calculated, and that is a prettycomplicated formula that most of us will probably never actually know… But, wedo know the factors that the credit bureaus take into consideration when theyare calculating your credit score:
- Numberof accounts that you have open
- Levelof debt, as compared to available credit
- Lengthof credit history
- Paymenthistory
- Numberof recent credit inquiries
Your credit score is simply the credit bureau’s assessment of yourrisk to a creditor when they decide to extend financing to you in the form of acredit card, mortgage, or personal loan.
Clean up yourcredit report
The first thing that you need to do in order to repair your credit isfigure out what is showing up on your credit report.
Clear upinaccurate information
If you haven’t seen your credit report in a while, it is a good ideato check because you may have inaccurate or old items reporting. For instance, if you have an old collectionaccount from five years ago still showing up, or even reporting as though it iscurrent, it can definitely drag down your score. Once you have identified the items that needupdating, you must work to get those removed from your report. Any time you have negative items removed fromyour credit report, your score will increase.
Settle baddebts
Do you have loans or credit cards that you have defaulted on or are incollections? If these types of debtshave not been settled, and they are still showing up on your credit report,they are probably weighing down your score.If you have “bad” debt, don’t think that the only way out isbankruptcy. Often, the creditors arewilling to negotiate and settle the debt for a lower amount than what youactually owe in order to be considered settled and paid.
But how do you go about cleaning up your credit report and getting oldor inaccurate items removed? You can doit yourself—by contacting each bureau and providing the necessary documentationto have the items successfully removed.Or, if you are feeling overwhelmed or just don’t know where to start,you can choose to use the services of a company, such as CreditRepair.com,to help you complete the process.
Ask for acredit line increase
If you have a credit card that is close to its maximum limit, it maybe dragging your score down—especially if you don’t have much other credit. But, if you have been paying your billon-time every month, you may want to call your credit card company and see ifthey will approve a higher limit on your credit card. Getting a higher limit can lower your balance to credit limit ratio and helpto improve your credit score. The key toleveraging a credit line increase to your advantage is that you don’t chargethe credit card up to the limit again, but allow your balance to remain lowrelative to the maximum amount of credit that has been extended to you. For instance, if your current credit cardbalance is $2800, with a credit line of $3000, it could be keeping your scoredown. However, if your credit line isincreased to $5000, and you keep the balance at or below the $2800, then itappears that you have access to more credit that you aren’t using and yourscore will increase.
Become anauthorized user
Whether you are just starting to build your credit history or whetheryou are trying to clean up a bad one, you may want to become an authorized useron a family member’s credit card. Howdoes becoming an authorized user help?For starters, if you are a college student and you have been added as anauthorized user on your parent’s credit card, then it is helping to build a credithistory for you. So, if dad and mom paythis bill on-time every month, and you are an authorized user on the card, thenthat also means that your social security number is attached to the paymenthistory too, thus showing up as an on-time payment for you.
Obviously, you want to be selective with who you become the authorizeduser with or who you allow to become an authorized user on your own creditcards. If you share a credit cardaccount with anyone who is not willing to pay their bills on-time or who maycharge up large amounts of debt on one of your accounts, it can also work toharm your credit and lower your score.
Pay downbalances
Paying down balances can take time—if you are trying to factor it intoyour budget on a monthly basis. However,you can use money from your tax refund this year or maybe a bonus that youreceive from work to pay down a large chunk of debt much quicker. Using a tax refund or bonus money is a greatway to pay down debt and increase your score without having to change yourcurrent monthly budget.
Make yourpayments on-time every month
This one is obvious, but it doesn’t go without saying… pay your bills on-time! The best way to increase your credit score over time, is with a history of on-time payments. More weight is given to current payments, so the sooner you get all of your account payments up-to-date, the sooner your credit score will go up.
