Introduction
It is important to understand that credit management is the key to becoming financially healthy and having good credit rating open a variety of doors and opportunities and more reasonable interest rates on loans, better insurance rates and more. Nevertheless the process of trying to manage credit score is not always easy and is a challenge which most people face. Thankfully, there are a few tricks that are not so well-known but they can skyrocket your credit. Here, we reveal six steps which, if taken, should enable you shape your credit and potentially enhance it overtime.
1. Improve your credit utilisation percentage
If there’s one thing that many of us fail to consider when it comes to credit score boosting, then credit utilisation is that thing. This ratio compares your balance with how much credit the credit card company has granted you. Different credit scoring platforms like FICO consider this ratio as one of the ways of evaluating your credit worthiness. Actually, to get the best outcome for credit score, you should keep the amount of credit utilised below 30% and even better below 10%.
How to Apply This:
Pay Down Equalizations Habitually: This proportion can be controlled through making more than one installment on your credit cards as compared to holding up for the month to month articulation.
Request a Credit Limit Increase: This can easily be done over the phone because sometimes they will ask you why you require an increase and you can tell them it is due to higher expenses now that you are married. So in order to bring down the utilisation ratio, you do not have to cut on your expenses even though this is a good way, as long as you do not raise your expenditure levels.
Open a New Line of Credit: This involves applying for a new credit card account in order to use it in increasing your available credit which in turn will reduce the utilisation percentage if your credit score is good enough.
The most effective way is to keep credit utilisation rates low proving the credit worthy behavior and with time this can bring significant positive shift in credit score.
2. Ride On the backers of a good credit
Another hidden trick for increasing the credit score is to take on an active account of someone else’s credit card. This technique is commonly known as ‘piggy backing’ and lets you leverage on a positive payment record and a lengthy credit history of another individual who is usually a close relative, or a colleague.
How to Apply This:
Choose Someone With Excellent Credit: This is the approach to take when it comes to credit: The most important thing here is to find a person with a strong record of timely payments, minimal credit utilisation. The positive history will be reported to your credit reference facility and this will improve your credit status almost instantly.
Ensure They Remain Financially Responsible: When you are an authorised user you do not make any payments but if bad activity is conducted on the account it will reflect in your scores. Ensure that the holder of the account prevents himself from incurring more debts that they cannot repay.
It is more effective particularly if, for instance, one needs to establish a new credit record, or just emerged from a credit blacklist.
3. Contest Mistakes on Your Credit Report
It also may come to your surprise that there could be mistakes on your credit report which could be affecting your credit score negatively. FTC’s survey revealed that least one error in the credit report existed for an average consumer with one in twenty consumers having erroneous information. Some of these errors may be as a result of identity theft, the records may be outdated or some clerical errors could have been made and that when corrected could see the score shoot up immediately.
How to Apply This:
Request Your Credit Reports: Under the law, you are allowed to get one free credit report each year from the three major credit reporting agencies namely; Equifax, Experian and TransUnion. These reports is available on AnnualCreditReport and one can request them. com.
Look for Errors: 38: Carefully read each report produced. Mistakes that can be made include entering the wrong details of the account, creating duplicate accounts and having wrong derogatory information such as the account being reported as having made a delayed payment or turned over to a collection agency.
Dispute Inaccuracies: If there is anything that seem so wrong to you do not hesitate to challenge the credit bureaus. This can usually be accomplished through the internet and the bureaus are expectant to investigate your report within 30 days.
Learning to fix mistakes on the credit file will improve the credit score in a big way and this is because, it eradicates wrong information that should not have been included in the first place.
4. The other thing that you can do in your credit repair strategy is to negotiate with the creditors to have the late payments removed.
Late payment is one of the most detrimental things that one can pay on his credit report. These can appear on your report for as long as seven years and as widely known can have a long lasting impact on your credit score. But there is one other method that you have never heard about which can be beneficial for getting these negative marks off your credit file.
How to Apply This:
Goodwill Adjustment Letters: Composing a goodwill letter to the creditor informs him or her of the reason for being late in paying and asks them to have it erased from the credit report. This is possible only if you have not been defaulting in your payments regularly and if the delay in payment was due to some one time reason.
Negotiate Pay-for-Delete: If you can find out another way and explain your problems to the creditor or the collection agency with which you have an account in collections, try asking for the negative mark to be removed on the account provided that you pay all the amount in full. This kind of arrangement is called a pay-and-stay, while the aforementioned type is known as a pay-for-delete.
These strategies are not always effective, but when, they help to do a credit score somewhat, if the late payment heavily influenced the credit.
5. You might want to consolidation credit card debt with personal loan.
If you have problems with high interest credit card balance, one useful trick to have in your credit repair arsenal could be using a personal loan to pay it off. Personal loans normally have a better interest than credit cards, meaning you’ll spend less money and get debt free faster. Lastly, credit scoring models, can preferably differentiate between an instalment credit like the personal loans in this case compared to the revolving credit like a credit card balance.
How to Apply This:
Shop for Low-Interest Personal Loans: There are a lot of personal loans out there in the market with low interest rates and which has no penalty in case the loan is paid earlier than required by the lending companies. It is possible to find affordable interest rates from most online lenders and most credit union and bank for those who have fair or good credit scores.
Use the Loan to Pay Off Credit Cards: When you have borrowed the money, the next worthwhile action is to use it to clear your credit card balances with higher interest rates. Make sure to keep credit cards active, however, don’t start charging on them and accumulate outstanding balances.
Repay the Loan Diligently: On time payment of personal loan will also guarantee good payment history and add on the score line on credit.
It is particularly beneficial if your credit utilisation percentage is high, thus the chosen strategy will actually reduce this percentage and prove that you can handle credit responsibly.
6. Always Make Sure That You Time Your Credit Applications Properly
Quite a number of people are not aware that timing of their credit applications affects their score in a big way. When you apply for credit according to latest credit record, they usually pull up your record, which tends to make your record lower by around 5 points. Also, application for new accounts has a negative effect on the average accounts’ age and thus deteriorating the score. Nevertheless, with an effective and efficient strategic application approach, personas’ impact in producing new applications is reduced.
How to Apply This:
Space Out Your Applications: Do not apply for credit accounts with several other accounts within a short a time span. So, if you have plans of taking a large loan, for instance a mortgage, do not apply for other credit in the 6 months to the time you are planning to apply for the big loan.
Research Pre-Approval Offers: Most of the lenders use pre-approval or pre-qualification features which means that they pull your credit report as soft pull, which does not affect your credit score. It will be of benefit to use this and see what you are eligible for before applying formally.
Limit Applications to When You Need Credit: As you have seen, you should only apply for new credit when you have no other option. Being able to open additional accounts just for the sole purpose of increasing your available credit line is not wise at all as this will only complicate things if you are not able to manage them well.
To avoid continuously harming your credit score each time you apply for credit the best we can do is to be very selective on when and on which opportunity we apply for credit.
Conclusion
Building credit is not an overnight thing, but by the application of these six secret techniques, one can be able to move closer to a better credit rating. This is because credit utilisation rate, mistakes on credit report and the defence of late payments whether through legal means are all capable of improving the stated score of consumers. However, the way in making it work is by persistence, passiveness, and plenty of planning. The fast solutions are not very frequent, however, such practice is really helpful and enables improving one’s credit steadily. When you use these techniques in your financial life, not only will most of these changes make your credit score better but also make you access more satisfying and less stressful financial opportunities. If one is willing to work hard enough then one can take charge of his/her credit and live a financially responsible life.