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10 Ways To Boost Your Credit Score
By Dave Czach
1. Deleting Errors in 48 Hours
This is the absolute fastest way to correct errors on
your credit report and raise your credit score. However,
it can only be done through a mortgage company or a
bank. If you apply for a home loan and find errors on
your credit report, request the loan officer to conduct
a Rapid Rescore. But don't mistake it for the credit
clinic tactic of multiple dispute letters.
The Rapid Rescore strategy requires proper paperwork.
You need proof that the item is incorrect. It must come
from the creditor directly. For example, a letter stating
the account is not your account, a letter stating the
account was paid satisfactorily, a release of lien,
a satisfaction of judgment, a bankruptcy discharge,
a letter for deletion of collection account or any relevant
evidence.
This is the same documentation a bank or mortgage company
would require for the credit accounts anyways. The difference
is, now you can improve your credit score and receive
a lower interest rate. The results are not guaranteed
and will run you about $50 per account.
2. Deleting Negative Credit
This is the infamous area where you've heard of all
the scams. Credit repair clinics charge "an arm
and a leg" and promise a clean credit report. Sometimes
even a new credit profile! People spending hundreds,
or even thousands, of dollars for something they can
do themselves.
Removing errors is simple. Deleting negative credit
that is accurate requires advanced methods. But that
is not the scope of this report. So I'll focus on the
deleting the negative errors.
Credit report errors easily disappear by using a simple
dispute letter. If you have the paperwork proving the
error as mentioned above in Rapid Rescore, send copies
of that along with the dispute letter. This will make
the credit bureau's job easier and you will get faster
results.
If you don't have the documentation to prove the error(s),
send the dispute letter anyway. According to federal
law, the credit bureau's have a "reasonable time"
to validate your claim. They will contact the creditor
for verification of your dispute. Then the account will
be reported accurately - or deleted. It has been generally
accepted the "reasonable time" to complete
this task is 30 days.
If you're not the do-it-yourself kind of person. Or
don't have the time. You could hire someone who is very
economical.
3. PiggyBack Someone's Credit
This is a fast and great little credit score booster.
But it requires a very trusting relationship. Simply
put, someone else adds you to their credit account.
For example, when applying for a credit card, you may
have seen the section to add a card holder. If your
trusting person adds you, their payment history is now
reported on your credit report too. If they have perfect
credit, now you have a perfect account.
To make this more effective, use an aged account. Imagine
if your trusted person has a 10 year old credit card
account with a perfect payment history and a balance
of only 50% of the credit limit. Wouldn't you love to
have this on your credit report? The easy part is your
trusted person just calls the credit card company and
requests a form to add a cardholder. Once completed
and activated, their entire account history and future
is now firmly planted on your account. Imagine if you
secured 3-5 of these accounts - especially installment
accounts. Your credit score could sky-rocket!
The challenging part? Finding the trusted person. Since
you already have a low credit score and bad credit,
how eager will someone be to make you a cardholder?
Even your parents don't want you to damage their credit.
But, no one says you need to possess the card! In other
words, your trusted person could add you as a card holder
and never give you the card or PIN or any information.
Since the bills and all account information is still
mailed to the trusted person's address, you won't know
anything about the account. This scenario could land
you many trusted persons. And you still benefit with
a higher credit score.
4. Playing Round Robin
This strategy is one of the oldest credit building techniques
around. It used to be accomplished with secured savings
accounts. But now, it's much easier with secured credit
cards. In fact, I've used this method myself.
Here's how it works: Take ,000 (or what you can afford)
and get a secured credit card. Once received, get a
cash advance of 70% of your credit limit. Get a second
secured credit card. Once received, get a cash advance
of 70% of your credit limit. Get a third secured credit
card. Once received, get a cash advance of 70% of your
credit limit.
Open a new checking account with the final cash advance.
Use this account only for making payments on your three
new credit cards. If you make your payments on time
every month, your credit score will increase because
you now have three new perfect payment credit cards.
(Initially, your credit score might drop a few points
due to the rapid, multiple accounts being opened. However,
be patient because within 4 months of no new accounts
or any delinquencies of any account, you will see your
credit score increase. Mine increased 60 points in 60
days!!)
5. Pay on Time
This one is quite obvious. But after 12.5 years in the
mortgage business, I discovered it still needs repeating.
Your creditors were gracious enough to loan you money.
Now pay your damn bills! If you don't, your credit score
decreases. EVEN IF ONLY 30 DAYS LATE!
That's right folks. For some reason people think, "I'm
only a few weeks late. What's the big deal?" Well,
for the loan company, if you pay late but consistent,
they make a lot more money with late fees and more interest
(if a simple interest loan). For you, your credit score
is damaged. If you think long-term and credit score,
I'm certain you would not have a cavalier attitude.
6. Pay Down Debts
This seems like an obvious method, doesn't it? But it
is not as transparent as you might think. Remember,
we're playing with high-level statistics and probabilities
which evaluates and forecasts trends in your behavior.
Here's what you do...
Never pay off your revolving debt in it's entirety!
Isn't that a surprise? Think about it. Your credit score
is a reflection of your ability to manage your credit.
Paying off your debt is not managing your debt. If you
have a zero balance, how can you manage it? You don't.
It no longer exists. And you cannot manage what does
not exist, right? Therefore, in terms of credit score,
you have demonstrated your ability to swiftly pay off
accounts to avoid managing them. Thus, slightly decreasing
your credit score.
One exception, of course, is if you're over extended
to begin with. Pay off what's necessary to make your
credit profile look great. Then manage the remaining
credit.
7. Don't Close Accounts
Even if you pay off revolving debts, do not close the
account. The longer an account is open with no negative
reports, the better it reflects in your overall credit
score. This is due to the weighted-average in the credit
score formula. Many credit experts suggest a balance
of 30% of your credit limit. That's ideal. But you can
go as high as 70% and still maintain a healthy credit
score.
8. No New Credit
You must be vigilant in your credit behavior if you
want the best credit score. Therefore, do not get any
new credit unless it is absolutely necessary. Each time
you apply for credit, an inquiry is added to your report.
This usually drops your credit score slightly. When
you have fresh credit, there is no track record how
you will manage (or pay) this account. Therefore, it's
a higher risk which results in a minor drop in your
credit score. Remember, your credit score is about risk
assessment.
Here's what you do: obtain credit for your housing,
transportation, college or continued education and 3-5
credit cards. That's really all you need for personal
credit. If you want more credit, request a credit limit
increase on your current cards rather than apply for
new ones.
9. Maintain A Mix of Credit Types
If you show you can handle different types of credit
at the same time, you are rewarded with a great credit
score. In other words, get installment loans like vehicle,
personal loan or mortgage. Get revolving credit like
credit cards: Visa, Mastercard, Sears, Sunoco Gas, Costco.
By mixing it up, you demonstrate you can manage your
credit because you will have short term and long term
credit with a fixed payment. As well as a "variable"
monthly payment on your credit cards.
Keep these accounts open with a balance of 70% or less
and paid on time and you will witness your credit score
climb to great heights.
10. Don't File Bankruptcy or Foreclosure
Here's the most obvious advice: Don't file for bankruptcy
or foreclosure. These stay on your credit report for
10 years and always decrease your credit score. The
older the bankruptcy or foreclosure account becomes,
coupled with re-built credit history, the less of an
impact they play on your credit score.
Contrary to popular beliefs, you can legally delete
a bankruptcy and foreclosure. It's not easy. But it's
possible. See the advanced methods for that solution.
To quickly rebuild your credit history after a bankruptcy
or foreclosure, use the Round Robin strategy above and
get secured credit cards. Now you can even get a car
loan or mortgage right after bankruptcy.
© 2005 David Czach.
-------- Editor's Note ----------
Dave Czach has 12 years experience in the mortgage business
and a Bachelor's Degree in Real Estate. He can be reached
at http://myLoanHero.com/go.cgi/daveczach.
This article may be reprinted without compensation provided
there are no changes whatsoever to the article, the
copyright notice and the complete Editor's Note. Any
reprinting or duplication without these conditions is
copyright infringement.
-------- Editor's Note ----------
Dave Czach has 12 years experience in the mortgage business
and a Bachelor's Degree in Real Estate. He can be reached
at http://myLoanHero.com/go.cgi/daveczach.
Article Source:
http://EzineArticles.com/
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Credit Cards, Free, objective information articles and rate quotes for consumer bank products such as mortgage rates, home loans, CDs, auto loans.
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