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from it.How to Instantly Increase Your Credit Scores With a Simple Plan
One of the most powerful pieces of knowledge you can have is understanding how the three major credit bureaus assign your score to you. Most often, people are never taught about their credit scores.
To explain what makes up your credit score in as simple terms possible, this is how it works
Payment History 35%:
This is the largest contributing factor for your credit scores and represents your history of making payments with your creditors.
Credit Utilization - 30%
Your credit utilization is how much of your credit you’re currently using. An easy way to boost your scores is to keep your balances below 50% of your total credit limit.
Credit History: 15%
Credit history indicates the length of time your credit has been open for. Newer accounts aren’t regarded as well as older accounts are.
Recent Inquiries: 10%
Recent inquiries let you know which prospective creditors have looked into your credit. Scores can be lowered by too many inquiries.
Types of Credit In Use: 10%
Types of credit in use lists both the amount and type of accounts that you have.
Now that you know a little bit more about credit scores, here are a few things you can do in the next half hour to add some more points to your score!
Raising Your Limits: Raising your limits is probably easier than you think. Often, all you need to do to get a higher limit is to ask! Call your credit card company and tell them you’re considering a balance transfer with another company that’s offering you a lower interest rate and a higher limit. Mention that unless they are willing to make the same offer, you’ll cease your business with them. If they lower your interest rate, you’re likely to receive a higher credit limit right along with it. Keep in mind that a lower interest rate won’t add points to your credit score, but it’ll still be great for your overall financial health.
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!
Continuing from the example above, you are now 62% utilized on your credit card. This means you still have some room to further maximize your scores. If you pay $750 on this credit card, you will bring the balance down to 50% of the new credit limit ($3,250 balance on $6,500 credit limit). Now, you might be saying that you don’t have $750 to pay down your credit card. That’s ok, you could stop here, you have already increased your scores, and you can get the limit raised for all your credit card accounts. However, if you are trying to buy a home, or even a car, you can potentially save thousands in interest on your new loan and get a lower monthly payment, just by paying a little down on your current accounts. When that results in higher credit scores, you may qualify for much better loan terms.
All of the tips listed above have shown to be effective and powerful in helping to achieve even better credit scores. One past result showed that these tips helped to increase the credit limit on 3 credit cards, and scores were boosted by 105 points!
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.
About the Author:
How to instantly increase your credit scores with a simple plan
Jon Ochs | Credit Repair |
Tags: Credit Repair, credit score
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