We all may be tempted to say that we can't do anything about our credit scores. We can say this by blaming the economy, by blaming the President, by blaming the last two presidents, by blaming the jobless rate in our society, by making excuses. However, none of this is really true facts. There are ways, simple ways, we can improve our credit.
First, before we try to improve our credit, we should know what our credit rating is. A good credit score is anything above 720. If you can manage to get your credit rating up to that score, you can get better rates when you need them and you may even find that you can get lower insurance premiums.
Although, 720 is an ideal score to have, the startling fact that this is not the number most Americans have. In fact, static's are now saying that over 43 million Americans have a credit score under 600, about 25% of Americans. What can they and what can you do now to help improve your credit rating? Begin by trying these simple tips:
Pay your bills on time
Did you know that about 35% of your credit rating comes from whether you pay your bills on time or not? If you have trouble remembering when to pay them, keep a better schedule or consider signing up for online bill paying.
Limit your amount of credit of your credit use
Just because you have an open credit card, doesn't mean you should use it. In fact, you should only be using a total of 10 to 30 percent of the total amount of credit available to you. This does not mean that you should use 10 to 30 percent per credit card.
By keeping your credit open, you can improve your credit score and show that you have credit restraint.
Keep old credit cards open
If you aren't using a credit card, don't close it. Just keep it open. Then you will have the credit, if you ever need it. Plus, you are adding more credit to that amount that is available to you.
Do not keep applying for new credit
Show restraint. Say no when you are offered new credit. This will help keep your credit down and help you manage the credit you may all ready have.
Have different types of credit
Credit scores can improve if you have a mix of credit such as paid loans from automobiles, mortgages, student loans and an added mix of credit cards. Make sure you pay some of these off and down as you can. If you wish to learn what your credit score is today check out credit.com. This site can help show you areas in which you need to improve your credit standing for free.
I have worked hard to maintain a high credit score over the years. I remember when I applied for my first credit card; correction, when I was introduced to credit cards on campus. I had no clue what I was doing then. I was given an application that allowed applying for all the major credit cards there was. I guess it's clear how it all unfolded... A young teenage girl approved for three or four major credit cards, living on her own for the first time and uninformed about what having 'credit' really means. After having no credit, which we understand is as good as bad credit; my growing credit plummeted to really bad credit. Over the years I have had to work really hard to improve, and maintain it.
PAY OFF YOUR CREDIT CARDS:
Pay off your credit cards (or credit accounts). However, if there is a high balance on the account call anyway to get the high interest rate reduced so that the monthly payment is not as high, and avoid paying only the interest on the account. If you are unable to pay off the account in full, then paying more than the minimum monthly payment is essential to improving your credit score (FICO score).
CALL CREDITORS:
Call all creditors and asked for a better interest rate on every credit account. Let them know that you intend on making that credit card the major account used and share with them your intent to reduce the number of accounts you have. If the agent you spoke with was unable to help you, then ask for a supervisor (insist on speaking with a supervisor if necessary) and start the spiel all over again.
REVIEW BENEFITS:
In an effort to determine which credit account to keep sit down and review the benefits of all the credit cards and then make a decision based on the information gathered.
CANCEL EXCESSIVE ACCOUNTS:
Cancel excessive accounts if your debt to income ratio is high. If you have too much debt and not enough income, then this will cause the credit score to plunge.
REVIEW CREDIT REPORT:
It is very important to review your credit report monthly. This can also be accessed at freecreditreport.com. It is vital to make sure that the credit bureaus are reporting your credit limits correctly. If not then you have the right to dispute it by writing them and requesting that they update the information (challenge the information if you must).
VantageScore is a new Credit scoring model, which is advertised as being able to open the doors of opportunities that having credit produces. It is the brainchild of America's three major credit-reporting companies. VantageScore's highly predictive model uses a groundbreaking and patent-pending scoring system to provide lenders with an ordered rendering of consumer credit files across all three major credit reporting companies and the ability to score a much broader population. This will eventually allow lenders to help more creditworthy borrowers while allowing millions more Americans who use their credit more infrequently to be accurately scored.
What this will eventually mean to us is that the new credit scoring system will eventually allow Lenders to have a second formula for judging our past credit history which will be backed by the three giant credit bureaus. Your VantageScore will also look very different from your current FICO score.
The major credit bureaus are boasting their new system as a boon for borrowers, which is easier to understand while being more consistent than the current scoring models. VantageScore uses the same key data about your debts as the FICO scores in which you are already familiar with.
Equifax, Experian and TransUnion are privately owned companies that track accounts, balances and payment habits while a credit score simply puts a weight to those factors to develop an indicator of how much risk you pose as a borrower. Fair Isaac's formula for scoring is currently the one that most lenders prefer to use.
Every time a car dealership or appliance store asks one of the credit bureaus for your credit score, the information that the Bureau has gathered about you is sent through the proprietary FICO model. The lender then pays the credit bureau for the score after which the bureau in turn pays FICO for using its' formula.
This is a multimillion-dollar business for Fair Isaac accounting for 20% of the company's revenues, which means that the bureaus naturally want to cut out the middleman. They currently don't like the fact that they have to pay Fair Isaac, which is the reason that they are so intent on finding the next area of revenue generation. The bureaus have tried to break Fair Isaac's chokehold before with no success but they believe that the VantageScore may be a completely different story. Of notable interest, on the day that the new scoring system was announced, Investors drove Fair Isaac's stock down 6.6% even though the bureaus hadn't committed a single Institution to the new system.
FICO or VantageScore - Advantages for the consumer.
From what we understand from recent reviews, the VantageScore is more laid-back than FICO in general and is designed to better fit certain groups of consumers where the FICO algorithm most likely would score them very low. The VantageScore should provide a higher credit rating to people who would fall into either of the categories below:
- people who shy away form traditional banking systems by choice
- young adults who are just starting their careers
- recent widows, divorcee or individuals with little or no credit in their own name
- newly arrived immigrants
- People who have had previous Bankruptcies.
Using the current FICO scoring system these same people would only have the option to be made sub-prime mortgage loans where as with the new Vantagescore, your score will always be higher than your current FICO score.
A credit report is an equivalence of a report card on the management of your finances. It is a collection of detailed information on how you pay your bills, the amount of debt you have accumulated and how frequently you settle them as well as your bankruptcy status. The report includes your credit activities, your loan/debt settling history and your credit status. The credit activity history entails the accounts in good and due standing, account details in relation to high balances, credit limits in the past reports and information of accounts reclaimed by credit agencies. Credit reports maintain negative credit information for seven years.
A credit report can only be accessed only once in a year according to the Fair Reporting Act. The US federal law allows the credit report bureaus to supply customers and consumers with a free credit report in case any company or an individual has pursued an adversarial financial action against them. The act also allows employers to request a credit report of a potential or current employee but with permission from the employee. In this case the employer pays the bureau for the report.
The Fair Reporting Act permits three major credit bureaus to collect individuals’ credit information. They provide credit reports to insurance companies, banks, lenders and other organizations legally permitted to receive individuals’ credit reports. The credit reports are updated monthly as banks, lenders and other financial based firms send updated records to each credit reporting agency after every 30 days. The three credit reporting bureaus are TransUnion, Experian and Equifax.
A credit report is divided in to four sections.
This part of the report details your personal information like your social security number as well as your residence. It also includes public records related to your credit score and status. A public record is an entry obtained from federal, state, county or local court.
Public records that can appear on a credit report are tax lien, judgments and bankruptcy. Public records remain on your credit report for up to seven years. However, some like bankruptcy stay on your credit report for 10 years.
Not all public records make it to the credit report. Some records like divorces, property tax records, criminal suits and other records that don’t affect your credit score are not included in the report.
This section of a credit details out information about individuals’ credit accounts and how they have settled them. The account history information is comprehensively detailed and it is crucial that you go through it for authentication.
Every credit account contains numerous pieces of information as follows:
This essential part of the credit report details the result of evaluation of information provided on your accounts, inquiries and public records. This evaluation is considered by your creditors to forecast your ability to settle loan or debt in the future.
The section at the top of this part details your credit score displayed with the equivalent credit risk score as well as the score rank.
This section provides detail of the lenders who have enquired about you regarding your credit score. The information is presented in four columns; the lender’s name, the purpose, date and amount enquired.
Enquiries by lenders are categorized in either soft enquiries or hard enquiries. An enquiry is considered hard when the lender makes too many enquiries in a short period of time. It has a negative effect on your credit score.
A credit report is a mathematical representation of your credit status. It is calculated based on your financial history and acts as a report card to your financial activities. Your credit report, which contains your credit score might be used to determine if you qualify for a loan, the amount you qualify for and the interests your loan will attract. So, it is very important for you to manage your financial initiatives in order to boost your credit score
Boosting your credit score is not just something that happens overnight, it requires intense discipline and a healthy financial decision over a period of time. And we all know managing our finances is not a walk in the park. But if a good credit score is what you desire, then you will have to invest years of financial discipline into it.
There are steps you might consider in order to get on the road to a good credit score. They include;
Your credit card usage habits hugely impacts on your credit score. The amount of credit you have on your credit card at any given time versus the amount you are spending significantly affects your credit score. The lower the percentage of this ratio the better for your credit score.
The optimum percentage of the spending to the revolving amount in your credit card ratio is 30 and below. In order to increase your score, you should pay your balances in entirety or keep them low. Merging your multiple credit balances with your loan can help you boost your credit score.
It is important to note that paying your balances in full on a monthly basis while still having a very high utilization ratio won’t actually help boost your scores. The reason behind this is because the bureau uses the balances on your statement to calculate your credit score.
If your plan is to make a huge procurement like a house, a business or a vehicle, then you must be getting together a huge sum of money to service that. If not then you might be planning to go for a mortgage or a loan. And this is where you don’t want the ghost of late payment of bills haunting you.
While bills can be quite a hassle, paying them late does not do any good to your credit report. One of the most important parts of a credit score is the timely payment of bills. The content on your credit report is what basically determines your credit score. If the credit report reports that you are always late on payments, then you can forget about a good credit score and maybe forget about that mortgage, car loan or a business startup cash. This bills might not normally be associated with the credit bureaus but may find their way to your credit report. So pay attention to your bills, settle them no matter how small they are.
There is a belief that having an old debt on your credit report is bad and negatively affects your credit score. Well, this notion is false and removal of old debt from your credit report might in fact hurt your credit score.
An old debt on your credit report might appear negative but it eventually disappears after a seven year period. Seeking to get a settled old debt from your account is not a good idea. A settled old debt is a good debt for your credit score. It demonstrates that you can handle a debt so well and pay it in time.
One way to improve your credit score is to leave the old settled debt on your credit report for as long as possible. It portrays a person with a good history of credit management and helps you qualify for even higher loans with low-interest rates.
If you take credit for a mortgage or a car, it is advisable to do your shopping within a short period of time. Every single time you apply for a loan, your credit score tanks. This is because making several applications for credit portrays you as someone who intends to use more credit.
However, there are three types of loans that you are allowed to apply for simultaneously without them hurting your score. They include mortgage, students’ loan and auto loan.
A good credit score is important. However, attaining and maintaining a good credit report can be quiet a hassle for some people. This is very understandable as most people struggle so much with debt, unstable income and various unplanned financial emergencies. Most people attempt to repair their credit report through quick fixes like filling for bankruptcies only to end up with negatives on their credit score after a while. Getting tips on how to successfully repair your credit score for a period of time is a far much better approach.
A credit score is an essential component of your financial information. It is literally a grade of how well you manage your finances and a reflection of how good you are at making financial decisions. Attaining a good credit score, improving or repairing your credit score to your level of desire means that you can easily qualify for loans and credit services and lower interest rates and better terms of payment. Whether you are out to buy a car, applying for a student’s loan or servicing your mortgage, a good credit score inevitably comes in.
The problem with repairing a tanked credit score is that it’s not something that you can miraculously work on it overnight. It calls for a strict financial discipline and a lot of patience. It will surely take a long time for you to stabilize a tanked credit score and even much more time for you to make it rise further.
Luckily, it is not that hard to repair your credit score. There are some conventional steps you can follow for you to attain that desired credit score. They include
Have a look at your credit report.
You cannot talk about your credit score without your credit report coming into the picture. In fact, a credit is just a minor component of the credit report. There are other significant factors on your credit report that significantly affect your credit score. They include;
• Public records
This part of the report details your personal information like your social security number as well as your residence. It also includes public records related to your credit score and status. A public record is an entry obtained from federal, state, county or local court.
• Account history
This section of a credit report details out information about an individuals’ credit accounts and how they have settled them. The account history information is comprehensively detailed and it is crucial that you go through it for authentication.
• Enquiries
This section provides detail of the lenders who have enquired about you regarding your credit score. The information is presented in four columns; the lender’s name, the purpose, date and amount enquired.
Your credit report may be containing inaccurate information that may be causing your credit score to tank. It may also be missing crucial financial information. It is advisable to keep track of your credit report on a regular basis and raise issues with the reporting agencies whenever inconsistencies appear.
Schedule automatic payment reminders.
Payment of bills heavily impacts on your credit score. Settling your bills on time is the most crucial factor that you must observe in order to achieve a good credit score. Scheduling automatic deductions from your bank account for frequent bills like rent, water, electricity and credit cards helps you avoid late payments. If automatic deductions can’t be attained, then setting up reminders on your calendar is a suitable option.
Reduce the amount of debt you owe
The amount of debt owed to credit is rightfully captured in your credit report under financial history information. Reducing the amount of debt is easier said than done but if achieved; it can positively impact your credit score. Using your credit report, you can point out the amount of debt you owe to various accounts and come with a proper payment plan.
Be persistent and consistent
Repairing a tanked credit score is not a walk in the park. The process of rehabilitating it is not as easy as the process of destroying it. You will have to put in more discipline and work. Pay your bills on time, reduce the amount of date owed and your credit score will gradually improve.
Unfortunately, some credit report information like bankruptcies and public records stay on your report for some years.
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