Here are some strategies for improving your credit score.
(Some new. Some old. And maybe a gem or two.)
Pay at least the minimum on-time.
Old, old advice. But the number one most important credit building issue. Here are some late payment reasons and solutions:
| The procrastinator: |
Store all bills in one place. Set aside one day per week, or bi-weekly to pay all the bills. Best if timed to be right after pay-day. |
| The forgetful: |
Use above or sign-up for online payment processor like CheckFree. |
| Bad timing: |
Call your credit issuers and ask to have your due date moved to a more convenient date. Make sure to find out if a new number will be issued as online accounts will need to be changed also. |
| Tight budget: |
Consolidate as much debt as possible into one account. A new low-interest balance transfer account can help. |
And for everybody, use a checkbook software program like Quicken, one of the most time-saving programs of all time.
Pay as much as you can.
Focus on the highest rate line of credit and pay as much as you can. A little sacrifice today can save a large amount of money over time.
Don't spend too much.
Here is an all-time-favorite, contrarian suggestion to those tempted to spend their available credit: Make your primary card an American Express Green, Gold or Platinum card. Why? Because you MUST pay any balance at the end of the billing cycle. No chance here to over-extend. Every time you use the card you will think "I have to pay for this in 15 days." Great way to curb a materialistic appetite. And one of the best credit building cards out there.
Focus on quality issuers.
Already have 14 credit cards? Fine. But are they Quality cards? Credit-reporting agencies place more emphasis on quality issuers. A rewards card from 'Tumbleweed Flea Market' will not carry as much weight as a CitiBank card. Drop the newer and low credit lines cards issued by local merchants. Replace them with an American Express, Bank of America, Chase, CitiBank or Discover Bank you do not have. This also consolidates any rewards and makes them more likely to be redeemed.
Lower you interest rate.
Amazingly simple way to lower your interest rate. ASK! Call the customer service number on the back of your card and ask them to lower your rate. Tell them their competitors are offering a lower rate and ask if they will match it. Shoot for a 3-4% drop and see what happens.
Expand your credit.
Call your issuer and ask for an increase in credit. This can be done over the phone and is generally instant. Verify they will not make a current request for your credit report. Ask for a small increase every year or so. Again, over time this will add up.
SpareCredit.com, as a service to it's visitors, can send you an email every year as a reminder to request a limit increase. The form for this free service is here.
Start early.
Now. Today. That's the best time to start enhancing your credit. 15% of your credit score is based on the age of your credit lines. The only way to solidify this area is to start now and hold any existing quality lines of credit.
Start earlier. (Parents, Grandparents pay attention).
The information on this site can be of extra help to those under 21. With the help of parents or grandparents, even those under 18 can start building their credit at a very early age. A parent or grandparent can co-sign for cards for their children or grandchildren. A few strategies:
- Get a few cards in the child's name, as a co-signer and use the cards yourself.
- Get a few cards in the child's name, with low limits. Rotate the one card the child is allowed to use every six months.
(Note:Since FICO is changing their formula to remove any benefit of authorized user accounts, the card needs to be in the child's name.)
Get your free credit report annually.
Visit www.annualcreditreport.com. This site was mandated by the Fair and Accurate Credit Transactions Act (FACTA), an amendment passed by Congress in 2003. It allows consumers to get a free copy of their credit report once per year. You can also call
1-877-322-8228.
SpareCredit.com, as a service to it's visitors, can send you an email every year as a reminder to get your free credit report. The form for this free service is here.
Dispute any inaccuracies.
A recent study reported that over 70% of consumer credit reports had errors. Fortunately, these errors can be disputed and corrected. The Federal Trade Commission published an article explaining the process here.
Protect against identity theft
There is an abundance of information and ideas of how to protect your identity and prevent identity theft. Most require subscription to services.
Here is an idea you can implement yourself in less than 10 minutes:
Get a credit card for Internet use only.
With more and more purchases being made on the net, a separate credit card with a relatively low limit will protect you against theft. Even if your number and information is stolen, the Internet-only card would quickly reach it's limit preventing major charges and your primary cards will remain available for use and unaffected.
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