Money Moves: Improve Your Credit In 90 Days

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What is a credit score?

Basically a credit score is a numerical expression based on a level analysis of a person’s credit files, to represent an individual’s credit worthiness. It is based on a report that is sourced from credit bureaus.

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Why is credit important?

Credit card companies and banks use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Credit scores are used to determine who qualifies for a loan, at what credit limits and rate. Believe it or not, good credit can be used in a decision for employment and car insurance rates. Landlords also use credit history in tenant selection.

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How to improve your credit score in 90 days

Pay down revolving balances to less than 30%. Amounts owed on all credit cards and all installment accounts make up about 30% of your credit score. The most common revolving balances are amounts owed on your credit cards, and there is a big difference between the revolving balances of someone with a 780 credit score and a 680 credit score.

A person with a 680 credit score has revolving balances of 40%-50% of their credit card limits.

A person with a 780 credit score has revolving balances of 15%-25% of their credit card limits.

A single late payment can drop your credit score by 60 to 110 points.

If you had a 680 credit score, a 30 day late payment can drop your score by 60 to 80 points (and 70 to 90 points if you have a 90 day late payment).

If you had a 780 credit score, a 30 day late payment can drop you score by 90 to 110 points (and 105 to 135 points if you have a 90 day late payment).

Try setting up automatic payments to avoid late payments. If you do end up with a late payment,  there are a couple ways to request a removal. The most common and effective way is to call the original creditor and ask for a goodwill adjustment.. For other late payments, you can file a dispute against the late payment for inaccuracy.

Collections

If you do have a collection account reporting on your credit report, your goal is to get the collection deleted.

Don’t just pay a collection. A paid collection usually doesn’t help improve your credit score! Instead, negotiate a “pay for delete” IN WRITING with the collector. Only when you have a written agreement should you pay a collection account, and then work on getting the account deleted.

Increase your credit limits

Call your credit card companies and request a raise to your credit limits. Ask if they can raise your credit limit with a soft pull of your credit, since a hard inquiry will appear under the “New Credit” category of your FICO score. If you can negotiate an increase of your credit limit with a soft inquiry, then you will instantly decrease your revolving balance ratio (revolving balance divided by your credit card limits).

If you have low balances and a good payment history, then your chances of successfully executing this tactic will increase.

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Charge small amounts to inactive credit cards

It’s easy to neglect older credit cards when you have a primary credit card that you use every day. If your credit cards haven’t had activity in the last 6 months, charge a small amount to the credit card. Creditors want to see that you are using the credit available to you (and paying the balances off responsibly). Charging a small amount and paying off the balance shows that you have a different mix of credit in use, which makes up a portion of your FICO score.

Get Credit

No credit equals bad credit. You need credit accounts to be reporting to your credit report in order to improve your credit score. You must have at least 1 open revolving account, even if you have no negative accounts. In addition, this revolving credit account must have been used in the last 6 months.

There are a couple of ways to get credit to improve your credit score in 30 days. One way is opening a secured credit card, with a preference being given to a card that reports as an unsecured card with your credit limit to all 3 bureaus.

The other way is to add yourself to a seasoned trade line. Someone with good credit history can add you as a co-signer, where you are equally responsible for all debt. Or, they can add you as an authorized user, where you are not responsible for any of the debt.

 

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