Proceed With Caution!

Posted by Rochelle Davis on

Having a good credit score is the best way to get the things you want and need, but can’t always afford, right now. The challenge is that a good credit score takes time and consistency to establish. If you want to see a spike in your credit score sooner than later, read on! These credit hacks are sure to put you on the FICO fast track!

  1. Check your score regularly. You want to be aware of anything that should not be listed on your credit report and request to have it removed immediately. The sooner you notice these items, the less impact they will have on your credit score. Take advantage of one free credit report annually at www.annualcreditreport.com.

    2. There are five components that contribute to your credit score; Payment History 35%, Amount Owed 30%, Length of Credit History 15%, New Credit 10%, and Types of Credit Used 10%. By focusing on the areas that have the largest impact on your score you will produce the greatest results in the least amount of time.

    LuxuriousCREDIT Caution #1. Late payments stay on your credit report for seven years. It’s in your best interest to do everything you can to make your payments on time or even early!

    3. Prioritize your payments. Devise a plan of attack for your interest bearing debt. Resolve to pay off the balance with the highest interest rate first. Pay as much as you can afford on the highest interest accounts and keep other accounts current by making the minimum payment until you can afford to pay more. Show you have your debt under control by keeping your credit balances low and available credit high.
  2. Request a credit limit increase. By increasing the amount of credit you have available you create a more favorable credit utilization rate. What is a “credit utilization rate”?...It’s a complicated way to describe a simple ratio, total debt : total credit. You will do best to keep this rate below 30%.

    LuxuriousCREDIT Caution #2. When it comes to credit... Time is on your side! Credit cards and installment loans can help your score if you maintain good history. BUT, be careful not to open too many new accounts at once. This will lower the overall age of your credit history and hurt your score. Be responsible with new credit and resist opening accounts just for the purpose of improving your credit... this trick seldom works.
  3. Automate your payments. Ok, so let’s just look at the bottom line…credit companies like to see that you are a reliable source of income for them. They want to feel confident that they will get paid! By setting up automatic payments from your bank account you can be sure that your balance is paid on time which, before long, will be sure to give your score a nice boost.

LuxuriousCREDIT Caution  #3.  If you don’t manage your finances and spending according to a set budget you may want to consider scheduling a calendar reminder rather than an automatic bank draft. This will keep you on track and on time with your payments without getting you into trouble with your bank.

  1. Seek a personal loan. It may sound counter intuitive to borrow more money in an effort to decrease your debt. However, taking out a small personal loan just might do the trick. Because credit cards are considered revolving debt, they impact your credit more adversely than a personal loan from your bank or credit union would. Credit cards also tend to have higher interest rates and more variation in interest rates, meaning your interest may increase over time if you miss a payment, pay late, or any number of other reasons. A personal loan falls under the category of installment debt which has a more gracious impact on your credit score. By using a small personal loan to pay down some outstanding, high interest credit card debt you can quickly bring down what credit bureaus consider “bad debt”, causing a boost in your score.

LuxuriousCREDIT Caution #3. Get the details on loan approval from the lender or financial institution and do your best to prepare prior to applying for the loan which will appear as a hard inquiry on your credit report.

  1. Pay with caution! It is true that paying down your debt is the fastest way to improve your credit score. However, all debt is NOT considered equal. Let’s be completely honest, if you had the resources to pay everything off Right Now you probably wouldn’t be reading this blog. The fact of the matter is that, like you, most people work hard for their money and still don’t always have enough for the things we want and need.

We borrow with the promise to pay later. Unfortunately, sometimes we fall behind. In an effort to clean up your credit, you may feel compelled to pay off old debt first or even close accounts. However, making payments on the wrong past due accounts can be more like taking a step back rather than forward.  Likewise, closing established long term accounts can have a similar adverse effect. Paying off certain types of collections, installment, or other accounts with very old or inactive items may re-activate these accounts. Once new activity is reported to the credit bureaus, these negative items will re-appear on your credit report, thus hurting your score.

Working with established credit professionals will ensure that you attack the right items in the right way to achieve the LuxuriousCREDIT you truly desire.

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