Things You Can do to Raise Your Credit Rating
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The on going credit crunch is making it harder than ever to obtain a loan, whereas before it was fairly easy to get a loan or credit card with a mediocre FICO score. Now you may see your application rejected if your credit score is less than 700. The good news is that you can elevate your credit and increase your fico score.
By following the strategies listed in this article, you will be well on your way to raising your credit rating. |
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Obtain Your Free Credit Report
There are a number of things you can do to raise your credit rating; but before going any further, it is important that you know exactly where you stand with your credit by obtaining your credit report. By law, you are entitled to view your credit report for free once a year, from each of the 3 credit reporting agencies, Equifax, Transunion, and Experian. To do this, go to AnnualCreditReport and request your free report. Should you want to see your credit score, you can pay $6-$8 to do so.
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Check for Errors
One of the simplest things that you can do to improve your credit rating, is to fix existing errors on your credit reports. It is vital that you thoroughly check for discrepancies. Consumers find roughly 13 million inaccuracies on credit reports every year, and it's quite possible that errors on your credit report are negatively effecting your score. Check everything from the name, to the date of birth and social security number, to all the open and closed lines of credit.
If you have discrepancies, you will find details about how to dispute them on the report that the error came from. Disputes can usually be made online or by mail, and the process is fairly easy and quick. |
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Payment History
This makes up 35% of your FICO score, so do whatever you can to ensure that you pay your bills on time. Every payment you make that is 30 days late or longer, will go on your report and lower your credit score. 30 days is bad, but the absolute worst is anything longer than the 90 day overdue mark.
If you have an open line of credit that has some past late payment blemishes but is now in good order, contact that company and ask if they would be able to remove these bad marks. It is quite possible that they will. The better you’ve been as a customer, the more likely they will be willing to accommodate you.
You may also be able to negotiate a deal or even have the delinquencies removed after a series of on time payments. Don’t be afraid to ask. You have nothing to lose. Removing bad marks from your credit report will quickly elevate your credit and increase your FICO score. |
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Debt to Credit Ratio
How much you owe in comparison to your credit limit makes up 30% of your FICO score assessment. Ideally, you will spend no more than 30% of your credit limit.
- Pay down the current balance of the cards that are closest to their limits first.
- For the accounts where the balance is above 30%, consider requesting a credit line increase, as this will improve your debt-to-credit ratio. As long as you only increase the limit and not the balance owed, you will not see a drop in your credit score.
- Different credit card companies report to the reporting agencies at different dates of the month, which isn't necessarily the payment due date. Contact the company and find out what date they report on. Once you know that, you can ensure that you make your payments before this date. This way, your account will be reported to the agency when the balance is lower.
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Less Credit Checks
When you apply for loans or credit cards, your credit is normally checked. Try to limit your new applications as much as possible. Too many credit checks will result negatively in your credit score.
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Another thing that many people do not realize is that when you receive credit card offers in the mail, it usually comes from a company that has pulled your credit report in order to be able to pre-screen you. Alarmingly, this also affects your credit score. Due to a recent court case, consumers can now opt out from receiving this sort of mail, and therefore, get their credit checked less. It is highly recommended that you take advantage of this. To opt out, go to OptOutPrescreen. |
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Old Disputes
Maybe you have some old disputes on your report over a bill that you thought was unfair, and it resulted in a collections account. You can continue to dispute the account, or claim it as “not mine” with the credit bureaus. It is quite possible that the collection agency will not verify this when the bureau investigates, especially if it is a small and old collection account. |
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Don't Close Old Accounts
- If you have old accounts that you are no longer using, do not close them. Older accounts can help your FICO score as it will show an extended credit history. It is recommend that you use your older cards every few months so that those companies continue to update your accounts with the credit bureaus.
- Another reason for not closing old accounts, is that by doing so you will be reducing your overall credit limit, and therefore, increasing your debt-to-credit ratio.
- It is fine to close out a newer card, just as long as you have other cards and those cards don't have a balance on them. Otherwise, it may look as though the newly closed card was over the limit.
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New Cards
- More new accounts generally equals a lower credit score; however, the less often you open new accounts, the less you will be affected.
- Stick within two to six credit cards, preferably major ones such as Visa, Mastercard, American Express or Discover.
- Try to avoid opening store credit cards, as this can result in a 20 point drop in your credit score.
- Before opening a new account, check with the credit card company to see which credit reporting agencies they report to. Ideally, they will report to all 3 major credit reporting agencies. Some companies may only report to one and some may not even report to any, which will be no good to you if you are trying to improve your credit rating
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Credit Mix
Ideally, you will have a good range of different credit types, as this is looked upon as favorable. Apart from credit cards, you should also have an installment loan, such as student loan or car loan, and a revolvng account, i.e. cell phone or gym membership. Having a mortgage will also greatly improve your score, assuming you pay it on time. |
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Third Party Help
If you are overloaded with debt and are struggling to make your payments on time, consider working with the non-profit agency, Consumer Credit Counselling Services (CCCS). They will help you to consolidate your debt and negotiate lower interest rates. You can find your nearest CCCS office at DebtAdvice.Org.
There are also law firms that specialize in credit repair. However, it does not come for free but may be worthwhile if your credit is in desperate need of some fixing. LexingtonLaw, for example, will charge $39 and up a month for challenging disputes on your credit report and attempting to remove negative items from it. |
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