How to Improve Credit: Score in the Highest Credit Score Ranges

How to Improve Credit: Score in the Highest Credit Score Ranges

Posted in Articles by Jessica

How To Improve your Credit Score

 

Trying to raise your credit score? There are a variety of ways to improve your credit score, starting with studying your most up to date credit report. By being aware of the information that creditors have access to when determining whether to extend credit to you, or to change your interest rates, you can make positive changes to attain the highest credit score possible and narrow down your credit score range to one that is ideal. 

The first step to improving your credit score is to be an informed customer. By ordering your current credit report, you can review items that the three major credit bureaus use to determine your creditworthiness. Federal law allows US citizens to receive one free copy of their credit report per calendar year. Annualcreditreport.com will allow consumers to view reports from each of the three credit bureaus. Once you have a copy of your most up to date report, carefully review each item to ensure its accuracy. Each item on your credit report must be a verifiable debt or loan account - if your credit report shows a debt you owe to a company that is no longer in operation, or if a previous bank has merged or been bought out by a larger one, make a note of these changes to dispute them with the credit company.


It may seem ironic, but having a credit card can be a major factor in rebuilding your credit score and increasing your likelihood of future loans and credit extensions. Prompt payments are essential to having a credit card work in your favor. If you have less than perfect credit, consider opening a secured credit card. These cards allow customers to pay a certain amount of cash as collateral, which then acts as their credit line. Be cautious, however; secured credit card purchases will charge interest against items charged to the card, and the minimum monthly payment must be made in order to appear favorably on your credit report and improve credit score. Credit cards, both secured and unsecured, regularly report to the three major credit bureaus responsible for determining your credit score.


On a typical credit report, there are two types of debt: revolving and installment. Revolving debt includes items such as credit cards, and store charge accounts. Lenders will look at the ratio between the balance on the account and the actual credit line given to you to determine your credit score. By having a balance that is 10-30% of the total credit line extended, you will greatly improve your credit score to lenders. An installment loan, or installment debt, refers to items such as home mortgages, auto financing, and student loans. While timely payments for these services are also essential, creditors and lenders tend to pay closer attention to the balances on your revolving credit items as opposed to higher balances in installment debt. Take note of your highest balance revolving credit items and work to pay them down as quickly as possible to improve credit score and creditworthiness to potential lenders in the future. You may also consider applying for a credit card with a no-to-low interest rate on balance transfers. These credit cards allow you to pay down high balance accounts quickly due to the 0% interest charges for a set, promotional, amount of time.

If your current credit report only has revolving credit, it may be in your best interest to add an installment loan. By proving that you are creditworthy in revolving and installment debt, your credit score will increase with timely payments to each kind of loan. If you do have student loans, auto financing, or a home mortgage, be sure to make consistent, monthly payments to prove to creditors that you are a responsible consumer. If you are not financially able to purchase a home or a car, many banks offer small, personal loans that you may pay back in installments over a period of months. By borrowing a low amount and paying back the loan in monthly installments, you will be able to increase your credit score. If you decide to take out a small personal installment loan, be sure that the loan’s repayment will be reported to the three major credit bureaus - your timely payments will help reach your highest credit score potential. Community banks and local credit unions traditionally offer borrowers the lowest interest rates on personal installment loans.

Using older cards will benefit your credit score range in the long run. While it may be tempting to apply for new credit cards, lenders will look favorably on an older, more established, credit history. If an older credit card is unused for a period of time – which is predetermined by the issuing credit card company or bank – the account may be closed due to inactivity or dormancy. Even if these older accounts do remain open, credit accounts that are being actively used, and paid down, are the accounts that lenders will pay the closest attention to when deciding to improve credit on your report. In order for your older, more established credit cards to help boost your credit score, use them for a small purchase or two each month and pay the balance off in full so that they remain active.

Another way to improve credit is by working with creditors to request a goodwill adjustment. If your overall relationship with a credit card company or bank has been a positive one and you have proven yourself to be a responsible customer, you may request for an isolated late or missed payment to be forgiven. Once confirmed, this will be passed along to the credit reporting bureaus, and your credit score will improve respectively. These requests must often be made in writing, and there are many templates of letters making this request available online. Key points to mention when requesting a goodwill adjustment include: why it benefits the credit card company or bank to keep you as a customer, and an outline of your progress and/or responsibility as a borrower. Be polite and professional in addressing this letter, and follow up within thirty days of sending it to the institution.

You may also actively dispute old negative items on a credit report with the credit bureau. For instance, if you have had an account be forwarded to a collections agency in the past, you may be able to prove that the collection attempt was unjust, or even unnecessary. If you have a negative item with an organization, bank, or creditor that has since merged with another institution, you may be able to challenge the item to great success. Often a merger will leave old records disorganized, and the new institution unlikely to challenge your dispute with the credit reporting bureau. By getting these old, negative, items removed from your credit report, your credit score will likely increase as a result.

In order to improve credit score and attractiveness to lenders, it is important to proactively research your own credit report. By resolving outstanding issues and clarifying old and potentially incorrect items on your credit report, you will become a more informed borrower and likely increase your credit score as a result.

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