For example, if a person has a low credit score or bad credit rating, he or she may get annoyed that such small progress is so hard to achieve. Although it is very important to develop good credit scores, it is not very hard to achieve this and it requires some time and effort to clean up the score. Before we continue with the article let me quickly summarize some of the quickest ways to improve your credit score.
First of all, you should review your credit reports as they can contain mistakes.
The first thing that needs to be done is to review your reports in search of any errors. There is nothing wrong with ordering a credit report and you are allowed to get one free credit report every 12 months from the three main credit bureaus; Equifax, Experian, and TransUnion. Visit AnnualCreditReport.com and obtain your free reports, and if the credit reports contain erroneous information, then challenge these with both the credit bureau as well as the creditor.
Other mistakes that you are likely to come across include accounts that are not yours, payments that have been noted as overdue, and wrong balances. Since errors are given a much higher penalty than the correct answers, this single step could bring up the score significantly. And usually, the creditor has up to 30 to 45 days to make a further inquiry if you have objected. This is the quickest way of addressing the inaccuracy problems since it will only involve the preparation of writing material and the identification of the areas of inaccuracy.
Reduce on the Balances and Cut Down on the Utilization Ratio
The credit utilization ratio is the total of all your accounts’ balances found concerning the total credit limit offered. A ratio below 30% is preferred by experts for a healthy practice of supply chain management. Even better is a lower ratio of 10-15% of students, which will help you improve your score faster. Try to look for ways how to reduce the balances on cards with the highest interest rates, most often credit cards.
For instance, if you have a credit limit of $10,000 on your credit card and have used $6,000, your credit utilization will be 60%. If you pay this down to $3000, your ratio will be 30/90 = 33. As you reduce this important ratio, your score will increase in line with your actions on the credit front. Then, going forward – when’s the last time you remember charging up new high balances!?
As a matter of policy, it is always recommended that payments be made on time every single month.
Payment history is the largest factor in credit score as it enjoys the highest percentage allocation of 35%. Make sure that all current bill payments are made punctually in line with the due date as well as the minimum amount due. Some services will allow you to pay automatically or at least create a reminder on your calendar or phone so you remember.
If there are any active credit accounts that you have missed and considered as delinquent or generally lagging – contact the creditors to make them current again. Find out if they will delete them provided you pay for the amount you were supposed to pay earlier or if they offer a goodwill adjustment policy. Please remember, that creditor policies may differ from one another. And to avoid similar issues in the future, put up auto pay from now on.
Do not close your old credit cards though it may seem like a good idea to do so.
While it is true that credit card use affects an individual’s credit score, some people believe that having their non-used cards closed would be beneficial to them. It might have just the opposite effect particularly if you have cards that have already been in existence for some time. Another factor is Credit history length, and it contributes to 15 percent of the credit score. Closing off old cards can also reduce the average age of the accounts which the length of history factor does not like.
However, general knowledge is not advisable to be closed; it is better to keep them open and use them often. Sometimes, it makes sense to buy a small item for the household every few months to prevent the account from interpreting a lack of activity as negative. If a particular card does not attract any annual fee, then it is wise to have the card in your name to enhance your score. Utilize the cards you got recently more frequently for the overall spending, but do not shut down those first few credit accounts.
If you are dealing with a client who has not paid outstanding bills on time, you may attempt a Goodwill Letter.
If there is a negative record in the past few years such as a collection or a missed payment, you can compose a goodwill letter to the credit bureau. This is just stating that you have been back on course and are now able to pay on time again and questions whether the creditor would be willing to delete the negative credit entry.
Ensure that if you want to write a goodwill letter to make payments, link it to the present positive payment activity so that they see that you are a changed person. Of course, they are not obliged to do it but some creditors will make a customer remain their client. It is always good to courteously attempt this out.
In conclusion, based on the information provided in this article, individuals can clear their credit reports and boost their scores more than they could imagine. Put into practice the recommendations highlighted here such as the error, to get out of delinquency, to pay off balances, and to keep old accounts open. If you can get this started, then you’ll already be on the right track!
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