Having bad credit, frankly, it sucks! You feel embarrassed, every time your credit is checked. And you know you are throwing real money out the window on sky-high interest rates.
On the rare occasions, when you’re approved for a new line of credit. If you’re sick of living this way, good. Below, we have reviewed exactly how to raise your credit score.
Did you know there are really only three ways to improve credit score information? This includes building good credit lines and removing bad credit from your credit report.
1. Positive Payment History
Your payment history is the most influential piece of your credit score. According to myFICO, the credit scoring company for most lenders, your payment history accounts for 35% of your credit score.
This includes any good credit accounts, you currently have. It also includes the derogatory and bad credit information on your credit reports.
One common strategy folks use to improve credit, is to get a secured credit building credit card. This type of account will report monthly to all three major credit bureaus. If you make on-time monthly payments you will create a trail of positive payment history.
Also, you don’t have to live with bad credit information on your credit report for seven long years. It is your right to challenge any inaccurate and questionable information on your credit reports. You can do this yourself by sending a dispute letter to each credit bureau, or often many individuals turn to a professional credit repair service.
2. The Biggest Mistake
The biggest mistake we hear folks make when taking action to fix credit, is to just pay off old debt accounts. Just paying off old debt will not remove it from your credit report. At best, the listing will be changed to a paid collection. This is still a very damaging item to have on your credit report.
Instead, you must negotiate with the collection agency to have the item removed, in exchange for your payment. The collection agency will likely agree to stop reporting your information to the three major credit bureaus.
3. Show Open Unused Credit
If you get a credit card for building credit or have other open accounts, it is vital that you show unused available credit or money to borrow. One easy way to do this is with a credit card and keeping a monthly balance of about 30% of your credit limit.
If you had a limit of $1,000 then you’d want to keep a monthly balance of roughly $300. This helps to show you are in a secure financial position. If you weren’t, your credit cards would be maxed out. This is your ‘Amounts Owed‘ according to myFICO and is worth approximately 30% of your overall credit score.
There are three remaining influences on your credit score, but these are relatively insignificant. So you know they are length of credit history, new credit or how often you’re applying for financing, and the types of credit you use.
This represents the last 30% of your credit score. But, we would encourage you to only focus on improving your payment history and showing available credit.
Look, your credit score is a lot like your Grade Point Average in school days past. It doesn’t matter if you’re acing all your classes, if you’re failing underwater basketweaving it’s still going to mess up your entire, and overall GPA. This same principle applies to your credit score.
Because in just 2016 alone, over 9 million negative items were removed from consumer’s credit reports. One of the best firms is The Credit Pros. They’ve helped client’s successfully remove late payments, collections, charge offs, judgements, liens, and many more negative credit report items.
Get a free credit consultation with a certified FICO professional by calling toll-free 1-877-418-7596. And for more tips, techniques, and strategies on how to improve credit score with Dan Willis, sign up for our free newsletter and join our congregation.
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