Eight Ways to Raise Your Credit Score
1. GET RID OF YOUR COLLECTION ACCOUNTS.
Paying off a collection account does not increase a consumers credit score, nor does it remove it from your credit report. That being the case, how is it possible to pay a collection and maximize your score? The best way to handle this credit scoring dilemma is to contact the collection agency and explain that you are willing to pay off the collection account under the condition that the all reporting is withdrawn from credit bureaus. Request a letter from the collector that explicitly states their agreement to delete the account upon receipt/clearance of your payment. Although not all collection agencies will delete reporting, removing all references to a collection account completely will increase your score and is certainly worth the involved effort.
2. GET RID OF YOUR PAST DUE ACCOUNTS.
Within the delinquent accounts on your credit report, there is a column labeled "Past Due". Credit scoring software penalizes you for keeping accounts past due, therefore, past due accounts destroy a credit score. If you see an amount in this column, pay the creditor the past due amount reported as soon as possible.
3. GET RID OF YOUR CHARGED OFF ACCOUNTS AND LIENS.
Charged off accounts and liens really only marginally affect your credit score when older than 24 months. Therefore, paying an older chargeoff or a lien will neither help nor damage your credit score. Conversely, charged off accounts and liens within the past 24 months severely damage your credit score. Therefore, in these types of cases paying the past due balance is very important. In fact, if you have both charged off accounts and collection accounts but limited funds available, pay the past due balances first. Then follow up and pay collection agencies that agree to remove all references to the credit bureaus second.
4. GET RID OF YOUR LATE PAYMENTS.
Contact all creditors that report late payments on your credit and request a good faith adjustment that removes the late payments reported on your account. Be persistent!! If they refuse to remove the late payments at first, remind them that you have been a good customer that would deeply appreciate their help. Since most creditors receive calls within a call center, if the representative refuses to make a courtesy adjustment on your account call back and try again with someone else. Remember that persistence and politeness pays off in this scenario. If you are frustrated, rude, and unclear with your request, you will make it very difficult for them to want to help you.
5. CHECK YOUR CREDIT LIMIT(S) AND EVENLY DISTRIBUTE THE BALANCES YOU ARE CARRYING.
Make sure creditors report your credit limits to the bureaus. When no limit is reported, credit scoring software scores the account as though your current balance is "maxed out". For example, if you know that you have a $10,000 limit on your credit card, make sure that the limit appears on the credit report. Otherwise, your score will be damaged as severely when carrying any balance at all on the card as if you were carrying a balance of the entire available credit. Credit scoring software likes to see you carry credit card balances as close to zero as possible. Balances over 70% of your total credit limit on any card damages your score the most. The next level is 50% of your balance, then 30% etc. If it is difficult for you to pay down your balances focus on getting your balances below 70%, then 50%, 30% respectively. When possible never carry a balance higher than 20-30% of the available credit limit to maximize your credit scoring abilities.
6. DO NOT CLOSE YOUR CREDIT CARDS.
Closing a credit card hurts your credit score since doing so effects your debt to available credit ratio. For example, if you owe a total credit card debt of $10,000 and your total credit available is $20,000, you are using 50% of your total credit. If you close a credit card with a $5,000 credit limit, you will reduce your credit available to $15,000 and change your ratio to using 66% of your credit. There are caveats to this rule: if the account was opened within the past two years or if you have over six credit cards, then you should be fine to do so. The magic number of credit card accounts to have in order to maximize your score is between 3 and 5 (although having more will not significantly damage your score). For example, if a card was opened within the past two years and you have over six credit cards, you may close that account. If you have more than six department store cards, close the newest accounts. Otherwise, do not close any at all.
7. OPEN BUSINESS CREDIT CARDS.
Most business credit cards do not report to the personal consumer credit reporting agencies unless the account becomes delinquent or goes into a default status. Therefore, any debt carried on these cards does not hurt the credit score because it is not reported. You can carry as much credit card debt as necessary on these cards without hurting your credit score. Simply apply for business credit cards now to start building this segment of your credit portfolio.
8. KEEP YOUR OLD CREDIT CARDS ACTIVE.
15% of your credit score is determined by the age of the credit file. Fair Isaac's credit scoring software assumes people who have had credit for a longer time are at less risk of defaulting on payments. Therefore, even if your old credit cards have horrible interest rates, closing those cards will decrease the average length of time you’ve had credit. Use the old card at least once every six months to avoid the account rating to change to an inactive status. Keeping the card active is as simple as pumping gas or purchasing groceries every few months then paying the balances off once you receive the statement. An inactive account is ignored by Fair Isaac's credit scoring software so you will not get the benefit of the positive payment history and low balance that card may have. The one thing all credit reports with scores over 800 have in common is a credit card that is ten years old or older. Hold onto those old cards, trust me! Achieving and maintaining the highest possible credit scores is a slow and time consuming process. Full knowledge of your credit profile and how it represents you to creditors and credit bureaus is pivotal to full credit restoration success. Credit bureaus always advise individuals that they have a right to dispute their own credit files but then typically back consumers against a wall leaving them with no answers and no solutions. If this is or has been the case for you, we are here to help! Contact us today for your free credit consultation to discuss what programs and options are available to you.
RE Credit Fix, LLC is Certified as a Credit Expert by CreditCRM, the nation's leader in credit certification.