When it comes to adding points to your credit score, how do you cut through the clutter of the obvious ways everyone talks about and find easy, unique and effective ways to add points?
David Coulter is Founder and CEO of ConsumerDirect, the makers of ScoreMaster.com. Coulter brings a unique and informed perspective on the credit industry. Leveraging product design as his favourite pastime, Coulter developed an online system in 2003 that empowers consumers to control their money, credit and identity in one place. Here, he shares measurable and innovative tips for adding points to your credit score that can enhance nearly anyone’s quality of life.
If you need to get more credit score points so you can buy a car, purchase a home, refinance or get an apartment, you also need every available solution to help you achieve that goal. And although it’s easy to find a lot of related information online, there are some proven steps you may not know about.
Five Creative Solutions for a Better Score:
- Keep Your Credit Card Utilisation Under 30% and Pay Your Cards Before they are Reported to the Credit Bureaus
Maintaining a low balance on credit cards and lines of credit can boost your score. Ideally, you should use automatic payments to pay balances in full each month instead of paying just the minimum. Understandably, this may not always be possible, so do your best to keep your total outstanding balance under 30%. Then you can work on reducing it to 10% or less, which is considered ideal for an optimal credit score
How Utilisation Ratio Is Calculated (Example)
Card A has a $6,000 credit limit and a $2,500 balance. Card B has a $10,000 limit and a $1,000 balance.
Utilisation ratio per card:
– Card A = 42% (2,500/6,000 = .416, or 42%), which is too high.
– Card B = 10% (1,000/10,000 = .100, or 10%), which is awesome.
– Overall credit utilisation ratio: 22% (3,500/16,000 = 0.218), which is good.
Also, when paying your credit cards, pay them before your balances are reported to the credit bureaus. Your “pay by” date, which is when the card issuer will report to the bureaus, is usually different from your payment due date. This way, if you pay your balance in full, when your card balance is reported, it will show a 0 balance, helping you make the most of your utilisation ratio. Tools like ScoreMaster.com give you a personalised plan to provide you with your “pay by” dates and this alone can add a significant number of points to your credit score.
2. Apply for All New Accounts Within Seven Days
Each new application for a loan, credit card or line of credit can lead to a hard pull on your credit. These hard pulls may hurt your score a little. To that end, it’s best to apply for all new accounts you want within seven days. That way, negative hits to your score happen all at once, helping you avoid the lingering effects of periodically applying for new accounts over time. Newly opened accounts also decrease the average age of your accounts overall, which can hurt your score.
3. Only Use Your Debit Card at the ATM
In other words, minimise using your debit card for purchases. Try only to use it for ATM cash withdrawals. Why? Because debit cards aren’t a form of credit, therefore activity tied to them never shows in your credit report or influences your credit score. When you’re ready to apply for any loan (such as mortgage, car or student), lenders want to see how you handle credit or borrowed money. If you have no credit history, it’s harder for them to judge if you’re a reasonable lending risk.
By contrast, credit cards provide many opportunities to build credit and prove you’re a worthy risk for lenders. Plus, many come with extended retail warranties, rental car insurance, travel coverage, purchase protection and various rewards. But remember, the best way to use credit cards to improve credit is to pay them off on time.
4. Request a Goodwill Corrections Letter
You can request a negative mark to be removed from an account that has not yet gone to a collection agency. For example, if you missed a payment and it is now up to date, try asking the creditor if they will remove the late payment from your account.
They are not obligated to comply but companies are eager to satisfy their customers in an interest to keep them as their customers. This is done by going directly to your creditors. If they remove the negative mark, they will report it to all three credit bureaus, so your score will increase in this scenario with all three scores.
5. Catch Up on Past-Due Accounts and Collection Accounts
Even though a late payment can remain on your credit report for up to seven years, keeping your accounts current still has a positive impact. This approach will also prevent more late payments and fees from being added to your credit history. When it comes to collection accounts, either pay them in whole or try settling with the creditor directly. Communicating directly with the creditor ensures the three main credit bureaus are made aware of your positive payment activity.
You Should Regularly Monitor Your Credit Score
From ID theft to data breaches, your credit score is vulnerable to many things you can’t control. Credit monitoring helps catch mistakes or fraudulent activity, so you can take action and minimise damage to your credit report and score. A service that provides 24/7 monitoring along with ID fraud insurance is the best possible choice.
A Better Score Can Mean A Better Life
Very few things impact your life more than your credit score. It can decide if you get a home loan, car loan or credit card with interest rates you can afford. It can even determine if you get hired for your dream job as more than 70% of employers check credit reports in their hiring process.