How to instantly increase your credit scores with a simple plan
Most people don’t know what their credit scores are, or understand what they mean. Knowing about your scores and having information on the three bureaus is a powerful tool you need to arm yourself with!
Here’s how it all goes …
Payment History: 35%
Payment history makes up the largest piece of your credit scoring model. It reflects how timely you make payments to your creditors.
Credit Utilization 30%:
The percentage of available credit used. Keeping your account balances below 50% of the available credit limit will maximize your scores. For the purpose of this article, this is where we will find the most room to quickly increase your scores.
Credit History - 15%
Your credit history reflects how long your credit has been open. Older accounts receive more positive weight than newer accounts.
Recent Inquiries 10%:
Whenever you apply for any kind of credit, a credit inquiry is reported. Too many of these, and they can negatively effect your scores.
Types of Credit In Use: 10%
Types of credit in use lists both the amount and type of accounts that you have.
Now that we have a little knowledge under our belts, here are the 2 things you can do in the next 30 minutes to gain some points very quickly
Raising Your Limits -
It’s often easier to raise your limits than you think it might be. You might not realize that most times, all you have to do is ask that your limit be increased and your wish will be granted. Call the customer service department of your credit card company and let them know you’re looking into transfering your balance to another card with a lower interest rate and a higher credit limit and that you’d like to keep your account with them, but only if they are willing to make the concessions you are asking for. A lower interest rate might just come with your new, high credit limit! A lower interest rate won’t help your credit scores, but it will definitely help your financial situation.
Let’s say for example you have a credit card with a $5,000 credit limit, and you currently have a $4,000 balance on it (80% utilized). After your quick phone call, they agree to raise your credit limit to $6,500 (now 62% utilized). This alone will immediately increase your credit scores. Remember in the “Credit Utilization” section above, we want to ideally keep our balances below 50% of the credit limit. This brings us to the next powerful tip.
Lower Your Balances -
Using the existing example, your credit card has a 62% credit utilization on it. You can still maximize your scores on this card. Paying $750 down will bring your balance down to 50% of the credit limit, or having $3,250 balance on a $6,500 credit limit credit card. Even if you can’t afford to pay the $750, you’re still sitting pretty because you’ve already increased your scores by having your limit raised. Keep in mind, though, if you are trying to purchase a home or a car, you can save thousands of dollars in interest on your new loan, and you can also get an even lower monthly payment, just by paying down your existing accounts. That will result in even better credit scores and the terms of your loan will be even better than before!
These are very powerful techniques. I have seen this work for clients time and time again. One client recently was able to raise the credit limits on 3 credit card accounts and raise their scores by 105 points immediately.
Keep in mind that these techniques work best for those who have a good credit history, and at least 3 open, established credit accounts. For those with more challenged credit or a negative credit history, a more aggressive approach and credit repair strategies may be more appropriate.