By Danielle Pierce
We have all seen advertisements for those self-proclaimed credit repair companies claiming to be able to raise someone’s credit 50, 100, even 200 points practically overnight. On the other hand, I am sure just as many of us have seen those warnings to beware of those very same companies. These messages are definitely conflicting and definitely confusing. So, which one is right? Well, the answer to that is both messages are correct! Read on to find out why because no matter if you are how to invest in real estate, beginning investing, or getting your personal finance investing together, you are going to want to build your credit score.
Fair Isaac and Company, the creators of the FICO score clearly state on the website that many of the so-called credit repair companies out there are scams. They go on to reiterate that individuals can perform the exact same steps as a credit repair company and hold on to their hard earned money. So, if you are a consumer with decent credit now and are trying to find a way to raise your score between 50-100 points to qualify for that next major purchase, the following steps outline the fastest ways to raise your FICO scores legally.
Step #1) Pull your credit reports and review them for accuracy. We have all heard this a thousand times, but some studies show that more than 2/3 of consumer reports have errors. You want to make sure your report is 100% correct even down to your previous addresses. This is a critical, but often overlooked step that most people fail to take. An address mix-up now could lead to more serious errors down the line. A collection on your credit report that does not belong to you can cost you anywhere from 30-50 FICO points. Take the time to perfect your reports now! Visit www.myfico.com to obtain copies of your credit reports and scores. Cost is $15.95 per bureau.
Please note that Experian is no longer affiliated with myfico.com. In order to access that report, visit www.experian.com for a copy of your credit report and VantageScore. (If you are wondering what the VantageScore is, check out next month’s article for a discussion on credit scoring).
Step #2) Do NOT apply for any new credit! Excessive inquiries will hurt your score. Granted, the total point reduction is not significant, but these are points that you can easily hold on to. So, the next time you are at Wal-mart, Target, Costco, Express or your favorite clothing store and you are asked to apply for a card to receive 10-20% off your next purchase; your answer needs to be an emphatic NO!. Whatever savings you receive at the register are greatly exceeded by the interest you will pay on the life of your card. Note: Don’t fool yourself into thinking that you will just pay the balance each month in full. The fact is, most of us will never pull this off as very few people have the self-discipline required to accomplish this. It’s just too easy to keep paying that low minimum payment of $29 dollars per month! LOL!
Step #3) Pay down your credit card balances to ZERO. STOP carrying them with you for everyday use. This one step alone, if followed properly, will easily raise your credit score at least 50 points, depending upon the extent of your credit card debt. The point increase for those individuals that are close to their credit maximum on more than one account will be even more significant. Maxing your credit cards signals to creditors that you are what I call “credit-thirsty.” This means that you are not disciplined enough to carry those cards around without constantly using them. Credit cards are a necessary evil, but they are absolutely not for everyday use. If you are not in a financial position to reduce (and maintain) your balances at ZERO, shoot for paying down your balances to 25% or 50% of your maximum credit limits. Your score won’t go up as dramatically, but you will definitely see an increase.
Hopefully, these 3 easy steps will put you on the road to higher credit scores over the next 30 days. Stay tuned for my next article on credit scoring!
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