Credit Score Boosts

Everyone wants to boost their Credit Score, right? I mean, why would anyone want to pay a higher Interest Rate, whether it's for a home, a car, or the credit cards? Whether you have good credit, or are credit challenged, the following information is designed to help you boost your Credit Score significantly over a period of months. Are you ready to form a few good habits? Let's get started. First, we'll take a look at what your Credit Score (aka FICO Score) is based on. In other words, these are the factors the Major Credit Agencies use to compute your rating. Payment History 30% Outstanding Debt 30% Length of Credit History 15% Recent Credit Inquiries 10% Types of Credit In Use 10% We can see immediately that Payment History and Outstanding Debt determines a full 60% of your Credit Score. We'll take a look at Outstanding Debt first. In the eyes of the Credit Rulers that be, there is Good Debt and Bad Debt. Yes, Good Debt and Bad Debt. Good Debt is anything with underlying value, or the potential of either a return on the investment, or investment growth. Real Estate Debt (home loans and mortgages, yes, even your Time Share) and Education Debt (Student Loans, College, Trade Schools) are Good Debt and (when paid on time) actually increase more than your social standing. They increase your Credit Score, as well. What about that sports car or luxury sedan in your driveway? Isn't that valuable? Wouldn't that be considered Good Debt? No, it's value decreased appreciably the minute you drove it out of the Dealer's Lot. Unless it's a world recognized collector's item, in the credit world, it is nothing more than a beautiful ride and it falls directly into the Bad Debt category. Bad Debt is the Luxury Car, the retail jewelry purchased with a credit card, the unpaid credit card balances - in short - Bad Debt is consumer debt, which is usually incurred via credit cards. Don't worry, almost everyone has some Bad Debt. If it isn't out of hand, it can also be used to boost your Credit Score. Good Debt usually carries a fixed balance. No problem. Pay it early, or on time, and it will be the firm foundation of a good Credit Score. Bad Debt is a bit different. Let's take a look at using it to boost your score in a relatively quick period of time. First of all, if you have more than two or three credit cards, single out those you can afford to pay off completely - as soon as possible. Next, you want to make sure that you never carry more than 30% of the maximum balance on any one credit card. In other words, if your credit card maximum is $3,000.00, never allow yourself to max it out. Keep it at $900.00 to zero, at all times. This applies to every card you have. Many people pay their bills on time, but keep their credit card balances over 30% or have charged them to the very limit. Though they never miss a payment, their Credit Scores are significantly lower than those who keep their balances to a minimum. Spread your balances out, using whichever cards can bear part of the credit load. If you can manage to lower the balances carried to 30% or less on each credit card (and, of course, pay the payments early or on time) you will watch your Credit Score jump in just a few months. An even greater strategy, if you can afford it, is to completely pay off those credit cards, but keep using them - every month. Yes, I said every month. You will also pay the full balance owed every month. It goes like this: Charge everything with your cards (even groceries). Pay every balance off monthly using the cash you would have spent for those same expenses. Keep using the cards, keep paying the cards, keep the balances at zero. Even if you have a few credit dings, this strategy alone will boost your Credit Score 40 - 50 points in no time. Now let's talk about Payment History. If you are used to paying your bills on time, this part is easy. Simply pay them a week or so earlier. In addition, if you've only been making the minimum payment, pay a little (or a lot if you're able) extra toward the balance. This is the "Early and Over" strategy. If you are using the "Charge and Pay" strategy above, paying "Early and Over" will boost the results even higher. Whether it's Good Debt or Bad Debt, no Lender will have a problem with a larger payment. Yes, even your Mortgage Company is happy to apply an extra $100.00, or even $50.00, towards your home loan balance every month. If you're just one of those people who has the money, but sometimes forgets to put the check in the mail on time, make a phone call and have the bill scheduled for automatic debit from your Checking Account, and request an early payment date. If you'd rather, you can even arrange to pay your bills online. Do it a week early, and watch your Credit Score jump. The "Early and Over" strategy will also boost your Credit Score significantly in a matter of months. Okay, almost done. Let's take a look at those last two credit rating factors: Credit Inquiries and Types of Credit. Remember that time you were in the Department Store and they offered you a discount on your purchase if you applied for their credit card? Good. Don't do it ever again, please. It hurts your Credit Score, and it's another bill to manage, or debt acquired. Thanks. Now, Credit Types were already covered, but it's worth saying again: Please have only two or three major credit cards open and carrying balances. If you have more than that right now, that's okay. Use the strategies provided, get them paid off, and keep them at zero balances. Request their closure, if you'd like. Please just don't let it be the Credit Company that closes the account due to non-payment or dreadful payment history. Another Thank You. This about sums it up. Not only will the above strategies give you fairly rapid Credit Score boosts, they are excellent life time habits, worth developing as soon as possible. Practiced long-term, they will not only produce a stellar FICO Score, they will help you manage your finances, keep your options open, and pay your debts off faster. "Keep my options open? What does that mean?" you ask. Well, someday you may need unplanned for funds. With a stellar FICO Score, all doors are open to you, and at a far lower Interest Rate than to those with lesser scores. "But what if I have Bad Credit? Can these strategies help me?" Even if you're somewhat credit challenged now, implement these techniques as soon as possible. Make them lifetime habits. Eventually you will have better credit, and all it cost was paying the bills you had to pay anyway. Not a bad deal. In fact, not a bad deal, at all.