Today let’s focus on the best ways to increase your credit score. Without wasting time lets jump right into it.
1. Improve the “Utilization Rate” on your Credit Cards and Unsecured Loans. Then continue to use your credit cards, pay them off in full each month and consistently increase your credit limits.
Your credit score will increase as you reduce the balances on your credit cards. Your credit score is based on a number of different factors, but one of the most important aspects of your credit score is the utilization rate factor. In other words, how much of your credit limit are you using on each of your credit cards?
It is a best practice rule to use no more than 30% of your credit limit. If you use more than 30% of your credit limit on any one of your cards, that could lower your credit score. An example would be if you had a $10,000 limit on one of your credit cards, you would want to always keep the balance on that card below $3,000.
After paying each of your credit cards off in full, now you must continue to use them, but only charge what you can afford to pay off when the bill arrives.
Don’t leave any balance on your credit cards. This will also save you money in interest!
After practicing this perfect payment pattern for 9 months straight, it is now time to ask that your creditors raise your credit limit by 20% of whatever it is now.
If you have a $10,000 credit limit today, after 9 months of using your cards and paying the bill off in full each month, ask that the bank increase your limit to $12,000. Your long-term goal should be to have high credit limits on all of your accounts.
2. Eliminate debt collection marks that are showing up on your credit report.
This next tip will clear 50% of your debt collection marks that are over 2 years old. So if you have more than 10 old collection marks on your credit report, this will get rid of at least 5 of them right away. A professional debt relief company can assist you with any remaining debts that you are unable to clear up on your own.
Here is how you eliminate debts or remove them from your credit report on your own.
Get your free credit report. For less than $10 you can get a membership at freecreditreport.com. Review your credit report and score there.
Anything negative on your credit report that is more than 2 years old, simply dispute. With freecreditreport.com they give you the ability to dispute marks on your own. Just go to the membership section and click on where it says “dispute center”. Select the reason that best fits your situation, in regards to why you are disputing the mark, and then click submit! Like magic, you will notice that most of the old marks that you have remaining on your credit report, disappear after disputing them.
After you dispute the mark, now the debt collection company has only 30 days to verify and validate that the debt is yours. Most of the time if you have a debt collection mark on your credit report that is more than 2 years old, the debt collection agency who owns that account, will no longer have all the documentation necessary to prove the debt is yours.
If they cannot prove that the debt is yours, then it cannot stay on your credit report, according to the Fair Credit Reporting Act.
3. Ask your mom, dad, husband, brother, friend or anyone that trusts you, to add you to their best credit card as a favor. What you will be doing is piggy backing on their perfect payment history, and this will raise your credit score fast!
Make sure that they add you as a “joint user”. This way you will be credited for their perfect payment history. Sometimes if you get added as only an authorized user, they will not report the payment history. Obviously make sure that you trust this person, and make sure that whatever card they add you to, has less than 30% of the credit limit used. This means that if they have a $10,000 credit limit, and a $5,000 balance, don’t get added to that card.
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Paul Paquin is the CEO at Golden Financial Services, a credit card debt relief company.