Improving Your Payment History
You dont have as much control over your payment history as you do with your overall debt utilization.; The main thing to remember is to make sure you meet your monthly payments and you clear up any outstanding delinquencies on your credit.
If you have any older credit accounts that have been referred to a collection agency, you may be able to contact that credit agency and request that they stop reporting that delinquency to the credit reporting agencies in return for your payment.
Make sure that if a collection agency agrees to stop reporting the delinquency that you ask them to provide the request in writing.
Delinquent and late payments can remain on your credit for 7 years, but late payments are only reported to credit agencies if they are late for at least 30 days.
So if you miss a credit card payment by a day, dont stress out about the missed payment date getting reported if you make payment as quickly as possible and before 30 days from the payment date.
How Can I Check And Monitor My Credit
You can;check your own credit it doesn’t hurt your score and know what the lender is likely to see.
You can get a free credit score from a personal finance website such as NerdWallet, which offers a TransUnion VantageScore 3.0.
It’s important to use the same score every time you check. Doing otherwise is like trying to monitor your weight on different scales or possibly switching between pounds and kilograms.;So, pick a score and get a game plan to monitor your credit. Changes measured by one score will likely be reflected in the others.
Remember that, like weight, scores fluctuate. As long as you keep it in a healthy range, those variations wont have an impact on your financial well-being.
How Is Your Credit Score Calculated
If youre looking for ways to boost your credit, you should start by understanding how your credit score is calculated. Your FICO credit score is calculated based on the following five sets of criteria:
- Payment history: Your payment history tracks whether you have a pattern of paying your creditors on time. If you have a poor payment history, this makes you a bigger risk to the lender. Your payment history accounts for 35% of your credit score, so its one of the most important factors to focus on.
- Amounts owed: If youve taken on debt, your lender wants to see how much you owe in proportion to your available credit. This is whats known as your credit utilization ratio. If youre maxed out on most of your credit cards, this could indicate that youre overextending yourself. This category accounts for 30% of your credit score.;
- Length of credit history: The more credit history you have, the more it will boost your credit score. You may have a history of making on-time payments, but thats not going to mean as much if you only have six months of credit history. The length of your credit history counts for 15% of your credit score.
- New credit: If youve recently opened multiple credit accounts within a short period of time, this is a red flag for most lenders. The amount of new credit youve taken on will count for 10% of your credit score.;
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How Your Credit Score Is Calculated
Your FICO credit score is calculated using an algorithm created by FICO.
Payment History; 35% Payment history includes on-time payments, late payments, account status, and collection accounts. Late payments negatively affect your score for 36 months.
; 30% The total amount of debt you have includes car loans, mortgages, credit card balances, and any other loan. Collection accounts that have been charged off arent included.
Length of credit history 15% This includes the average age of your current open accounts. If you have a bunch of accounts you recently opened, it will shorten your average account age and lower your score. Keep revolving accounts such as credit cards and lines of credit open for as long as possible.
New Accounts 10% This is made of credit inquires and recently open credit accounts. The more credit inquires you have in the last 24 months; the lower your score will be. The good news is that after 24 months, the inquiry drops off your report and no longer affects your FICO credit score.
10% The different types of credit accounts you have impacted your score. It is not good to have five credit cards open and nothing else. If you have credit cards, student loans, a mortgage, a personal loan, an auto loan, it shows credit mix diversity.
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If You Already Have An Installment Loan But No Credit Card
Ten percent of your FICO Score comes from the mixture of account types on your credit report. Having a diverse is better for your score than having just one type of account in your credit history.
Having installment accounts on your credit report can be a good starting pointas long as you pay on time. But you may be missing out on additional credit score points you could earn by adding revolving accounts to your credit mix.
If you decide that youre ready to open a credit card, its wise to apply for accounts youre likely to qualify for based on your credit rating. With bad credit or no credit, a secured credit card may be a good place to start.
Can I Buy A House With A 619 Credit Score
The most common type of loan available to borrowers with a 619 credit score is an FHA loan.
FHA loans only require that you have a 500 credit score, so with a 619 FICO, you will definitely meet the credit score requirements.
We can help match you with a mortgage lender that offers FHA loans in your location..
Consolidate Credit Card Debt
Paying down balances is the simplest way to lower your credit utilization. There are a couple other options, though. You could consolidate credit card debt with either of the following financial products:
- Balance transfer credit cards: These cards offer a 0% intro APR on balances you transfer over from other credit cards. The benefits of opening a balance transfer card are two-fold. You’ll have time to pay down debt with no interest charges, and that new card’s credit limit will add to your total credit. More total credit means your credit utilization will decrease.
- Debt consolidation loans: These are loans you can use to pay off your credit cards. Your loan will likely have a lower interest rate than your credit cards, and you’ll be able to pay it off in fixed monthly payments. This also lowers your credit utilization, because installment loans dont count toward your credit utilization ratio.
Whichever method you choose, your credit utilization will decrease, which should increase your credit score.
Keep in mind that you still need to work hard on paying off debt even after a balance transfer or loan. Don’t make the all-too-common mistake of relaxing and spending more just because you’ve gotten a lower interest rate for your debt.
Can You Raise Your Credit Score 100 Points In 3 Months
For most people, increasing a credit score by 100 points in a month isnt going to happen. But if you pay your bills on time, eliminate your consumer debt, dont run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.
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Use Your Secured Credit Card Sparingly At First
As you get used to using credit, youll want to use your card sparingly at first.
Dont rush in and begin charging items until you get a grasp on what you can truly pay back.
You dont want to end up with a revolving balance you cant afford to pay off every month, and you definitely dont want to pay interest on your purchases!
If You Have No Active Credit Accounts
With no active credit accounts, theres a chance you might not have a FICO Score at all. The minimum requirements to qualify for a FICO Score are as follows:
- You need at least one account that has been open for six months or longer, plus
- At least one of your accounts has been reported to the credit bureau in the last six months, plus
- Your credit report cannot indicate that youre deceased.
In this situation, your credit might benefit from adding an installment account, revolving account, or both to your credit report. So, a and a credit builder loan could be worth considering here.
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Dispute Any Negative Information
It is not all information forwarded to the credit bureaus by your financial institutions is correct. There may be serious errors that need rectification. However, you will not know about them if you do not check on your credit report. It is always important to check your credit report once per year and see if there are issues.
Settling any negative information with both your bank and the credit agency can boost your score up. The following are channels to make disputes on any wrong information in your credit report.
- Experian Dispute
- TransUnion LLC Consumer Dispute CenterP.O. Box 2000 Chester,
Dispute Inaccurate Information On Your Credit Reports
Sometimes, your credit score might suffer because something wound up on your credit reports that shouldnt have been there. Of course, you wont know unless you check them.
Under normal circumstances, consumers are entitled by federal law to one free credit report every year from each of the credit bureaus Equifax, Experian and TransUnion accessible through annualcreditreport.com. However, during the coronavirus pandemic, the bureaus are allowing consumers to access their reports weekly through April 2021.
If you spot legitimate, incorrect information while reviewing your reports, such as accounts that arent yours, a name mix-up with another person or incorrectly reported payments, you can file a dispute. The Consumer Financial Protection Bureau, a federal agency responsible for protecting consumers and offering financial education, provides dispute instructions for each bureau.
Its worth taking a look at your reports, even if you have no reason to suspect there might be a problem. According to a report from the Consumer Financial Protection Bureau, 68% of credit or consumer reporting complaints received by the bureau in 2020 dealt with incorrect information on peoples credit reports.
How much will this action impact your credit score?
Whether your credit score changes and how much it changes depends on what you are disputing.
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How To Maximize The Benefits Of Your Secured Credit Card
When I first checked my credit score with MyFICO in March of 2011, it was sitting at 621.
I set up my new secured credit card with a credit limit of $1,100. The credit limit should be a function of what cash you have, and also what you plan on using the credit card for.
According to many bankers and friends I talked to, you should try to run a 75% utilization rate on your credit card to maximize your potential to raise your credit score.
So, if you only spend around $300 a month, you should give your secured credit card a $500;down payment so that you are utilizing your credit rather than having a $1,000 dollar limit and only spending $300.
My expenditures were approximately $700 dollars a month so the $1,100 dollar limit fit my needs.
Identify The Negative Accounts
Now that you have your credit report go through it and highlight accounts with a negative status. Highlight any late payments, collection accounts, or any other negative information. Make sure your personal information is correct, including your address, employer, and phone number.
Items to focus on
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Optimize Your Credit Utilization Ratio For Huge Credit Score Improvements
A large part of your credit score 30 percent of the popular FICO scoring model comes from your credit utilization ratio.
A credit utilization rate above 30 percent is likely pulling down your FICO score and your scores with the three major credit bureaus.
So how much of your credit are you using? You can find out by checking your credit report. For many consumers, credit card debt can be the huge problem here.
Keeping Credit Card Debt Low
If you have a credit card with a $1,000 credit limit and your balance is $800, youre using 80 percent of your available credit. This will hurt your credit score.
Simply put: You want to keep your below 30 percent on all of your credit cards.
So does this mean you could average 30 percent by having a 60 percent balance on one card and a 0 percent balance on another card?
Nope, each card should be under 30 percent individually. This is a very important thing to keep in mind if you want to improve your credit score.
So to see quick credit score improvements, pay down credit cards with a balance above 30 percent of the available credit.
Attacking Credit Card Debt From the Other Side
Theres another way to improve your credit utilization rate: by raising your credit limits.
Lets look at that $1,000 credit card limit from above. If you have an $800 balance an 80 percent credit utilization ratio you could lower this ratio by getting a higher credit limit on the card.
Dont Always Close Accounts
Get A Secured Card With A Reasonable Limit
We have seen people jump 70 points with this tactic alone. Every situation is different so your credit may jump 20 points, or it can jump 75 points- you have to try it and figure it out.;
You arent looking to go on a shopping spree so a credit limit of $500, maybe even less will do. Although, If you are disciplined with your finances, it wouldnt hurt you to get a higher credit limit.;
The card doesnt have to be perfect. All you want to do is gain and establish god credit for your credit building efforts.;
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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.
Negotiate A Lower Interest Rate
A lower rate can help you pay off your balance faster, because more of your payment can be applied to your principal balance than interest. Lower balances can mean a lower credit utilization ratio . Learn more about how to negotiate a lower interest rate.
Increase Your Credit Limits
This tip goes hand-in-hand with the previous one. You can reach out to your creditors every six months and request a credit limit increase. If you have a solid history of making your payments on time, this shouldnt be a problem. Once approved for a higher credit limit, youll automatically lower your debt-to-credit ratio and credit utilization talk about two birds, one stone!
What I Learned From Being Denied For Credit Cards
When I was finally prepared to get a credit card on my own, none of the banks I applied to would give me a chance.
It went like this: I am unemployed, have no credit history, and have a couple of thousand dollars in college debt that I will have to start paying on in the next year or two.
Not exactly a winning pitch to convince someone to give you a line of credit! Two banks denied me, but one banker was kind and shared some info that has helped me raise my credit score over 100 points in the past five months.
First, I should stop trying to apply for credit cards that would get denied. His reasoning was simple: when you apply, they do a hard credit check which, in turn, can lower your credit score even more.
His second piece of advice was to get a secured credit card.
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