Check With Your Utility Company
The majority of utility providers only report derogatory information to the credit bureaus, but if you live in Detroit and you pay your bills on time, youre in luck. DTE Energy reports all payment histories, both positive and negative. Customers who pay their bills on time benefit from responsible management of this household expense.
Not in Detroit? Contact your utility provider to find out if it reports to the credit bureaus, and if so, put the bill in your name. If not, you can still use the positive payment history to your advantage. Most utility providers are happy to provide a letter of reference for an account holder in good standing.
Build Your Credit File
Opening new accounts that will be reported to the major credit bureausmost major lenders and card issuers report to all threeis an important first step in building your credit file. You can’t start laying down a good track record as a borrower until there are accounts in your name, so having at least several open and active credit accounts can be helpful.
These could include or secured cards if you’re starting out or have a low scoreor a great rewards credit card with no annual fee if you’re trying to improve an established good score. Getting added as an on someone else’s credit card can also help, assuming they use the card responsibly.
Additionally, you can sign up for Experian Boost to add positive utility, cellphone and streaming service payments to your Experian credit report. These on-time payments wouldn’t otherwise be added to your credit report, but using Boost means they’ll be factored into your Experian credit scores.
Think About Your Credit History
Credit scoring models, like those created by FICO®, often factor in the age of your oldest account and the average age of all of your accounts, rewarding individuals with longer credit histories. Before you close a credit card account, think about your credit history. It can be beneficial to leave a credit card open even if you’ve paid it off and don’t plan on using it anymore.
Of course, if keeping accounts open and having credit available could trigger additional spending and debt, you may choose to close the accounts after all. Like fingerprints, every person has a unique financial situation, and only you know all the ins and outs of yours. Make sure you carefully evaluate your situation to figure out the approach that works best for you.
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What Is A Credit Rating
A credit rating shows how likely a typical lender would be to offer you credit.
When you apply for credit such as a loan, credit card or mortgage the lender tries to predict your future behaviour based on the way you’ve acted in the past. To do it, they look at lots of different data. This may include how many applications you’ve made recently, how much you owe, what credit products you’ve had and whether you paid them all off on time.
But the world of credit ratings is rife with misinformation and misunderstanding. Much of it’s because lenders don’t want it understood, and credit reference agencies want you to think it works a certain way so they can sell you extra products based on your fear.
Here are our 10 credit rating need-to-knows:
How I Raised My Credit Score Over 100 Points
Raising my credit score with a secured card took some disciplined, conscientious spending.
Here are the rules I followed to maximize the benefits of my secured credit card.
- Spend what you have: After I received my secured card and started spending, I made sure that I would only spend money I already had or would receive, before the next pay period.
- Pay often: I ended up paying off my credit card roughly four times a month to ensure I never carried a balance from one month to the next.
- Know your limits: I would never let my credit limit exceed $800, and I would never pay it off if the card balance was under $300 unless the pay period was coming to an end.
- Make purchases: I would put every penny of my spending on the credit card from the smallest expenses such as a drink from the gas station to major purchases such as airline tickets or hotel rooms.
- Be consistent: I repeated this process for 5 months to establish a credit history of regular use and always paying on time.
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Pay Attention To Credit Utilization
Your credit utilization rate is the amount of revolving credit youre using divided by the amount of revolving credit you have available. It makes up 30% of your credit score and is often the most overlooked method of improving your score. For most people, revolving credit just means credit cards, but it includes personal and home equity lines of credit as well. A good credit utilization rate never exceeds 30%. So, if you have a credit limit of $5,000, you should never use more than $1,500.
Sign Up For Free Credit Monitoring
Whether its with Credit Karma or someone else, keeping a close eye on your credit is essential. Signing up for credit monitoring can help alert you to important changes in your credit, so that you can check for suspicious activity. Fraudulent activity can weigh down what could be an otherwise good credit score, so its important to dispute any details you identify as inaccurate. If the credit bureau rules in your favor, the fraudulent activity will be removed from your credit report, which can help raise your credit scores.
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What My Improved Credit Score Allowed Me To Do
In August of 2011, I had to purchase a car so I could switch jobs.
When I filled out the credit application to see if I qualified for lower financing rates, my credit score came back as 731.
In other words, I raised my credit score from 621 to 731 in just five months!
This is a very big deal because, at 621, I would have been denied a loan for the car, or would have had an interest rate that exceeded 9% on the auto loan.
Since I chose to get a secured credit card, I was able to take the car loan on my own and qualify for the low rate of 3.99% financing.
The difference in the loan between the two interest rates would be $750 over the life of the loan, far surpassing the cards annual fee, and the opportunity cost of my secured credit card holding my $1,100 for five months.
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Never get too close to your credit card spending limit
Let’s say your credit card company tells you you can have a credit card with a $100 spending limit. That’s how much money you can borrow and spend. But … you actually shouldn’t spend that full amount. You shouldn’t get even close to your $100 limit. You should spend much less. Just 30% of your spending limit, so $30. If your credit card limit is $1,000, you can spend $300. If you spend more than 30% of your limit, that hurts your credit.
So if you have a good credit score and you want to maintain it, spending 30% of your credit card limit is fine. If you have a $100 credit card limit and you only spend $30 each month, that keeps you at 30% utilization of your card, and the credit score people like that.
If you want to increase your credit score, though, you need to spend less than 30% of your spending limit. Only use $20 of your credit card limit. Or $15 . That shows the credit bureau that you don’t need all of their credit. And for some reason, that makes your credit score go up.
If you do need to use your full credit card limit, one way to get around this is to pay your balance before your statement date. Your statement date is different from your payment due date. The statement date is the day that credit card companies notify the credit bureaus of your card usage. If you can beat them to the punch and pay off the card before it’s reported, you can use more than 30% of your spending limit.
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How To Raise Your Credit Score By 100 Points In 45 Days
Insurance carriers use credit scores as part of their calculations to determine the level of risk you would pose to them as an insured. They have found a direct correlation between credit scores and claim activity. Knowing that, it’s important to keep your credit scores in good shape so that your insurance premiums stay in line.
How To Build Credit Fast
Building your credit in a short period of time can be challenging, but there are a couple actions you can take that can help speed up the process.
- Improve your credit utilization. Your credit utilization is one of the few aspects of your credit report that you can change quickly. is calculated by dividing the total of your credit card balances by the total of all your credit card limits. You can improve your utilization most quickly by paying down your credit card balances. Increasing your overall credit limit can also help if your lender agrees to it.
- Try using Experian Boost. As mentioned above, Experian Boost is a tool that gives you credit for past on-time payments. With your permission, it connects to the bank account you pay bills with and looks for qualifying on-time payments. Once found, a record of these on-time payments is added to your Experian credit report and could instantly raise your FICO® Score. The average Experian FICO® Score increase among Boost users who see a lift is 13 points.
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What Is A Good Credit Score With Equifax
| Equifax credit score | |
| 0-438 | Poor |
What constitutes a “good” credit score with Equifax changed in April 2021, when it altered its scoring range from 0-700 to between 0-1000. In the new system, a score between 531-670 is deemed to be “good”, while 671-810 is “very good” and over 811 is “excellent”. There were also changes to the credit ratings, with “very poor” being replaced by “poor” and the extra category of “very good” slotted in between “good” and “excellent”. This has had the effect of making the ratings sound more positive overall, with someone who was previously rated “very poor” now just “poor” and someone who was rated “fair” now deemed to be “good”.
As it stands, someone with an Equifax credit rating of “good” should be approved for most credit products, but they could face limitations on the amount they are able to borrow or may have to pay a slightly higher interest rate. You really need to have a score that equates to “very good” or “excellent” to feel assured you will be able to access the most popular prime deals on the market. Again, using an eligibility checker or broker will help give you greater certainty, reducing the chances of you being turned down for credit, which, in itself, is detrimental to your credit score.
Get Rent Payments Reported
Renters will want to make sure their rental payments are included on your credit report.
Similar to the first tip, this is a way to show lenders that you’re a reliable borrower who’ll make payments on time.
Rental payments aren’t included automatically, instead you can use services such as PayYourRent or CreditMyRent.
The former is free but your landlord will need to be signed up, while the latter charges a fee so carefully consider whether it’s worth it.
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How To Build Credit Without A Credit Card
While credit cards are a great tool for building credit, they aren’t your only option. Since your credit score is a reflection of how well you’ve managed debt in the past, any accounts you have that are reported to credit bureaus in good standing have the potential to help you boost your score.
Even if you’re just starting out and don’t yet have any credit accounts, there are other ways you can build your score over time. Here are four strategies for building credit without a credit card:
How To Build Credit
If you haven’t already, it likely won’t be long until you encounter a life situation where someone asks to check your credit. From buying a new cellphone to getting a mortgage, credit reports and scores are used by businesses to evaluate your creditworthiness and establish your borrowing terms.
Building a good credit score can take time, but the benefits of doing so are numerous. Even if you don’t expect to apply for credit anytime soon, it’s important to start working on it now so you can build a good score for when you need it.
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Have Open Active Accounts In Good Standing
Your credit score is a measure of how well youve handled credit accounts in the past. You wont have a good credit score if you dont have any accounts or if all the accounts you do have are closed or delinquent.
Adding good accounts to your credit report will boost your credit score. That may mean starting over with a secured credit card or another credit card for bad credit.
You Don’t Have A Uniform Credit Rating
There’s no such thing as a credit blacklist. This is a myth. In the UK, there’s no uniform credit rating or score, and there’s no blacklist of banned people.
Each lender scores you differently and secretly.
This means just because one lender has rejected you, it doesn’t automatically mean others will. Though after a rejection, it’s always important to check your credit file for errors before applying again.
Of course, if you’ve got a poor credit history, or had problems, it can feel like you’re blacklisted. Credit scoring is intuitive would you lend to someone with a history of not repaying? However, on occasion there are firms that specialise in lending to those who have had past problems though they then charge a whacking rate.
The tools that lenders use to decide aren’t universal either. As well as your credit file, they also look at application information and any past dealings they’ve had with you, and use the three sources of information to build up a picture of you.
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Pay All Your Bills On Time
On-time payment history is the most important factor when building credit. Your payment history, which is one factor that makes up your FICO score, accounts for 35% of your FICO credit score. This means you should always aim to pay your bills on or before the due date.
Setting up automatic payments is the easiest way to pay bills on time. Youll connect your bank account to the provider, who will automatically charge your account on or before the due date. Creating automatic payments means you wont have to worry about missing a payment, as long as you have enough money in your bank account to cover the bill.
If you choose to not use autopay and realize youve missed a payment, contact the lender or bill provider and rectify it as soon as possible. Only late payments over 30 days are reported to the credit bureaus. The later the payment, the more it will impact your score.
Keep Old Accounts Open And Deal With Delinquencies
The age of credit portion of your credit score looks at how long you’ve had your credit accounts. The older your average credit age, the more favorably you appear to lenders.
If you have old credit accounts youre not using, dont close them down. Though the credit history for those accounts would remain on your credit report, closing credit cards while you have a balance on other cards would lower your available credit and increase your credit utilization ratio. That could knock a few points off your score.
And if you have delinquent accounts, charge-offs, or collection accounts, take action to resolve them. If you have an account with multiple late or missed payments, for instance, get caught up on the past due amount, then work out a plan for making future payments on time. That wont erase the late payments, but it can improve your payment history going forward.
If you have charge-offs or collection accounts, decide whether it makes sense to pay off those accounts in full or to offer the creditor a settlement. Newer FICO and VantageScore credit-scoring models assign less negative impact to paid collection accounts. Paying off collections or charge-offs might offer a modest score boost. Remember, negative account information can remain on your credit history for up to seven yearsbankruptcies for 10.
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