Raising
Your Credit Score
Let’s say you want to
buy a house but your credit score is somewhere around 675
instead of 720 which will get you the best rate on a home
loan. If you want to raise your credit score quickly,
there are some steps you can take that can guarantee a great
home loan or any other credit line for that
matter.
The mantra for getting a
great score is pay your bills on time, keep account balances
low, and take out new credit only when you need it.
People who do that faithfully have very high scores. It usually
means you're being conservative and cautious about credit. It's
not a toy and it shouldn't be a hobby.
That's good advice, to be
sure, but these actions take a long time. What if you're house
hunting and you just need a few extra points to bump you over
the line to the great rates? As we’ve said before, the
first place to start is with your credit report. Check it
over and find out what your credit score is right
now.
Go to the following
website to find out how to obtain your annual free credit
report that is available once a year to all
consumers:
You will want to
concentrate mostly on correcting any errors by taking the steps
we’ve outlined above. Look for errors such as accounts
that aren't yours, late payments that were actually paid on
time, debts you paid off that are shown as outstanding, or old
debts that shouldn't be reported any longer. Negatives
are supposed to be deleted after seven years, with the
exception of bankruptcies, which can stay for as long as 10
years.
After repairing errors,
the fastest route to a better score is paying down balances on
credit cards. There's really no silver bullet, but over
60 day’s time, it is possible to increase your score 20 points
by paying down your credit lines.
Had a few late payments
in your past? If you find yourself in some financial
difficulties, you can protect your score by making sure your
payments don't go 60 days past due. Some lenders don't
report 30 days past due, but they all report 60 days past
due.
Even if you've paid your
bills late in the past, you can improve your credit score by
paying every bill on time from now on. Forget about grace
periods. If you want to have a really good record with
the credit agencies, pay your debt before it's due and keep
your balances low.
One thing you shouldn't
do if you're just trying to boost your score is close unused
accounts. If someone tells you to close unused accounts
to improve your score, they're pulling your leg. It won't
help you and it can actually hurt you.
Closing unused accounts
without paying down your debt changes your utilization ratio,
which is the amount of your total debt divided by your total
available credit. You appear closer to maxing out your
accounts. That's why your score can drop. It doesn't mean
people shouldn't close them, but don't close them to improve
your score.
If you do cut up cards,
though, leave the oldest one open. The length of your
credit history is another factor in your score. If you close
the account of the credit card you got when you were a freshman
in college and leave open the ones you just got within the last
couple years, it makes you look like a much newer
borrower.
Another strategy for
bringing up your score is to transfer balances from a card
that's close to being maxed out to other cards to even out your
usage. You can also just spread out your charges between
a few cards. Try to get the usage on all of them at 20 to
30 percent instead of a bunch at zero and one at 80 percent.
You're not spending less; you're just shifting it around to
different cards.
Transferring the balance
to a card with a lower utilization could help, but it's much
better to actually pay down the debt if you have the cash
kicking around.
If you're really into
finessing the system, check your credit report to see what day
of the month your creditors send updates on payments to the
credit bureaus. They're rarely on the same cycle as your
payment due date.
That's why you can pay
off your card every month and your credit report will show you
carrying a balance. Then, make your payments several days
before the reporting date.
All of these strategies
generally take at least 30 days because lenders don't report
payments more than once a month.
If you're in the throes
of qualifying for a mortgage and need a score boost in a hurry,
you can speed the process along with rapid rescoring. If you've
got legitimate negative information on your credit report, such
as late payments or accounts in collections, you're out of
luck. But the process of rapid rescoring can help increase your
score within a few days by correcting errors or paying off
account balances.
You can't do this one
yourself; you'll need a lender who is a customer of a rapid
rescoring service. Generally, the service will run roughly $50
for every account on your credit report that needs to be
addressed, but it could save you thousands on your loan.
If a consumer can find a lender who is a customer of a rapid
rescoring service, new information can be posted within 72
hours.
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