10 Ways To Boost Your Credit Score
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.
© 2004 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 ----------
-------- 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.
MORE RESOURCES:
 Reuters | Credit cards Superprime slime Economist, UK - As the credit boom reached its peak, the firm’s credit-card business was growing by a dizzying 20% or more a year, with younger consumers with scant track ... Overdue credit card bills show rise in June Credit Cards: How to Protect Your Limits Debt crisis spreads to credit cards |
 Reuters | Washington Mutual stock down on credit concerns Reuters - Citing the thrift's financial statements for the period ending June 30, Gimme Credit analyst Kathleen Shanley wrote that "many creditors have quietly been ... WaMu Drops Second Day as Gimme Credit Cites Liquidity Concern UPDATE: WaMu's Stock Down As Investor Confidence Drains WaMu spokesman: no need to rely on outside funding sources |
 The Associated Press | Credit Suisse's cautious tactics in credit crunch pay off for now Wall Street Journal - CREDIT SUISSE Group's slow and steady approach may yet win the race. It seems to be working so far for the Swiss bank. While most bank bosses a few months ... Credit Suisse Bulks Up Despite Losses Credit Suisse cautious despite return to profit Credit Suisse defies fears by posting only a small markdown |
FCStone Group increases size of credit facilities Forbes, NY - AP 07.24.08, 3:55 PM ET FCStone Group Inc., a commodity risk management firm, said Thursday it has reached deals to increase the size of its credit ... FCStone increases credit lines Kansas City Business Journal FCStone Group, Inc. Announces Syndicated Margin Call Credit ... |
 CBC.ca | Credit-card firms investigate fraud at Canadian airport kiosks Computerworld, MA - By Jaikumar Vijayan July 24, 2008 (Computerworld) Low-cost Canadian airline WestJet has temporarily stopped the practice of allowing customers to use credit ... Does using your credit card to check-in expose you to fraud? Expert says it's not surprising airport kiosks possibly targeted ... Credit card fraud at Pearson International Aiport has people worried |
Cicero gas station reports attempt to disrupt credit card system Chicago Tribune, United States - An operator of a Cicero gas station called police Tuesday after finding that two men had climbed the roof of the business to cover up a credit card ... Rooftop gas theft scheme foiled |
 Sify | Misuse of unsolicited credit cards to be penalised Business Standard, India - PTI / Mumbai July 25, 2008, 16:03 IST Aggressive marketing by credit card issuing banks may bounce back on them with the Reserve Bank making it clear that ... Unsolicited credit card is no more your headache Credit cards get RBI boost RBI warns banks on credit card interest charges |
 The Associated Press | Executive says bank has more than enough capital to endure credit ... MarketWatch - The company has been one of the harder-hit banks during the credit storm, but analysts said it has effectively boosted its capital reserves to protect ... National City Reports Loss On Write-Down, Credit Losses National City Corporation Q2 2008 Earnings Call Transcript City National posts lower profit as it sets more money aside for ... |
 Wall Street Journal Blogs | Extra! Extra! Credit Concerns at New York Times! Wall Street Journal Blogs, NY - The NYT front page does not include a story about its credit default swaps. (nytimes.com) Shares of New York Times Co. are down 4%, but the newspaper ... Extra, Extra: New York Times (NYT) About To Get Downgraded To "Junk" |
 Gulf Times | Asian Stocks Fall on Credit Concern; National Australia Slumps Bloomberg - ``Investors are out there thinking everything's fine and another bank comes out and increases its provision for credit-related losses. ... Asian Stocks Fall Most in Six Weeks on Credit, Profit Concerns Asian Stocks Fall on Credit Concern; National Australia Slumps Asian Stocks Gain for Fourth Day on Easing Oil, Credit Concerns |
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