How to improve your Credit Score

 

There is no quick fix to Improve your credit score, need time and patience.

With my own experience & experience by my friends, family and colleagues suggesting below were the 7 best ways to improve your credit score.

  1. Update your rental payment through Rent Track
  2. Remove Errors from Credit Report
  3. Pay your Due on time
  4. Payoff Credit Card Balance before Generating Statement
  5. Increase Your Credit Limit
  6. Make you an Authorized Spender
  7. Secured Credit Card

 

What is a Good Credit Score?

Credit Score Range Consequence / Benefits
720+ Excellent Avail Auto Loan for 7.19% APR, Mortgage Loan at 4.853% APR for 30 Years Fixed. Eligible for Chase Sapphire Preferred Credit Card and earn $750 worth Bonus for Travels.
660 to 719 Good Avail Auto Loan for 12.43% APR, Mortgage Loan at 5.200% APR for 30 Years Fixed. Eligible for Capital One Quick Silver One Cash Reward Credit Card and get 1.5% cash back on all purchases.
620 to 659 Fair Avail Auto Loan for 22.74% APR, Mortgage Loan at 6.176% APR for 30 Years Fixed. Eligible for Indigo Nation Master Card.
< 620 Poor Not Eligible for Auto Loan and Mortgage Loan. Can avail Secured Credit Card.
  • Update your rental payment through Rent Track

Paying your rent online on time will improve your credit score without taking additional Debt. Rent Track is a secure rent reporting agency. Rent payments will show up on your credit report as another account. It appears just like Charge Card or Mortgage. It is the easiest way to improve your credit score.

Visit – https://www.renttrack.com/

  • Remove Errors from Credit Report

25% of the impact in Credit score is due to errors in the Credit report like

  • Non update of Credit account history, due to shortage of information from Lenders.
  • Update of negative marks in payment even if you have paid all credits on time.
  • Credits accounts pertaining to others but wrongly updated in your report.

To avoid these mistakes, inquire Credit bureaus for your credit report every year and check for the correctness of the details in the report. If there is a mistake, write a mail to Credit bureaus with proper justification and required proof, requesting them to change the same. If accepted Credit Bureaus will update your report accordingly.

As per US Law 15 USC 1681j(a)  All Credit bureaus should provide credit report free of charge for once in a year. To get credit Reports from all the 3 credit bureaus once in every year.

Visit – www.annualcreditreport.com

Your will get only the credit report not the credit score. To get credit report and Scores for free

visit – www.creditkarma.com or www.creditsesame.com

  • Pay your Due on time

Paying the dues on time is the most important factor will be considered by Lenders. If you are having several late payments in your credit accounts:

  • Pay all your past dues in one shot with your savings or get support from your friends or family.
  • Contact the customer care of the Lenders where you have done late payment and based on your past loyalty or earlier on time payments request them to remove the negatives marks from credit report (Possible to remove if they accept). Write a goodwill letter to the Lender with proper justification.
  • If your late payments were due to any Medical conditions or not received your payment reminders due to change in address, politely explain to the customer care to get the negative remarks removed from the credit report.

If your dues were unpaid for significant period of time, those balance will be moved to Collection agencies. Collection agencies is a separate external entity dedicated to make pending due collections from delinquent customers.

Removing the account from collections will improve your score by 30 to 40 Points. Follow the below strategies to remove your accounts from collections:

  1. Pay for delete negative entries in credit Reports – For any smaller payments up to $500 of Medical Bills can be negotiated with collection agencies to remove the negative entries by paying the whole amount.
  2. Debt Validation – Debt Validation is your federal rights granted under the Fair Debt Collection Practices Act (FDCPA). You have the rights to force the debt collector to prove you owe the money. You should send a written request to the debt collector within 30 days of being contacted by the collection agency. For details refer the below link https://www.thebalance.com/debt-validation-faq-960602
  3. Partial Settlement – If the collection amount is > $500, negotiate with collection agency to accept partial settlement and remove negative remarks from the credit report.

Dispute – Consider if you don’t have any other option & if you are confident enough to justify.

  • Payoff Credit Card Balance before Generating Statement

To reduce the credit Utilization, pay off large balance in your credit cards before statement generation. All lenders will report only the balance credit at the end of the period to credit bureaus. Ensure the Credit utilization is less than 30% every month.

  • Increase Your Credit Limit

If you are having credit card with lesser limit usually $500 to $1000 and using it for more than 2 years. You can request the concern lenders to increase your credit limit based on your credit history. Increasing the limit will reduce your credit utilization and thus improve your credit score.

30 to 40 points can be increased by paying off your total outstanding and increasing your credit limit.

  • Make you an Authorized Spender

If you are not able to get credits from any lenders due to poor Credit Score or not holding any Credit Card, approach your family members or friends or colleagues who ever is having Credit card with higher limit and with good credit score to add you as their Authorised Spender.

You will receive new credit card with the same number. Even You don’t want to spend with the card but it helps in improving your credit score based on the credit history who owns the 1st card.

  • Secured Credit Card

Will be beneficial for Students and housewives, those who were not holding any credit card at present. Those who are holding Credit Card and having Credit Score less than 620, can avail Secured Credit Card to improve your Credit Score.

Issued by many lenders. Lenders issue Secured credit card based on your deposit with the bank. Usually your deposit amount will be the line of credit. Utilize them for any small requirements and pay back the same before due date.

Ensure you get the secured Credit card from lenders who report the credit history to Credit Bureaus.

Shop Secured card online which has low annual fees and low Interest rate, some lenders were providing the same with annual fees and interest rate on the higher side.

Try Federal Credit Union – 703-706-5000, they are providing secured credit card with $0 Annual Fees.

Additional Tips:
  1. If you more than 1 credit card and find it difficult to track on your spending. Register with mint.com it is free to register and track your spending.
  2. Planning to close your unused credit card to avoid annual fees from multiple credit cards, transfer the limit to another card if you are holding credit card with the same lender to reduce credit utilization and maintain the credit history.
Bottomline:

Are you ready to Take action from the learning on the ways to improve your credit score? Start with downloading your credit report from  www.annualcreditreport.com. Check for errors, negative remarks in payment, Credit Utilization and action accordingly.