Credit Advice
Keep in mind that nothing in the world of consumer credit happens at a “lightning rate,” but I have personally seen the following strategies implemented – and have seen Fico scores
pop up 40+ points in under 2 weeks.
So, let’s get to it:
1. Get a tri-merge of your credit report. This is one report that consists of your credit
information from the 3 major credit repositories: Equifax, Experian, and TransUnion. If
you must, spend the extra couple of dollars to see your actual scores — if you don’t
know what your beginning scores are, how can you tell if they’ve improved?
2. Get a “quick sense” of your credit. If it’s bad, why? This is not as hard as it seems,
and you don’t need to be an expert to figure it out. Some examples are collections,
judgements, tax liens, bankruptcies, slow/late payments, mortgage lates,
repossessions…that’s the sort of thing. Figure out what’s taking the biggest toll on your
scores. We’ll come back to this in a moment.
3. Count up your active accounts…you need at least 3. The credit agencies like a blend
of accounts: revolving credit, installment, and long-term installments like a mortgage.
But for now, you need at least 3 active accounts. If you don’t have any open accounts,
do not start applying for credit cards! New lines of credit like this will actually drop-kick
your scores. Instead, here’s the lightning fast solution: Piggyback off of someone’s good
credit card. Here’s how you do it: identify someone in your life — family and/or friend —
who you trust, and most importantly, who trusts you. Tell them that you’re working on
improving your credit scores. Ask them if they have a credit card that meets the
following criteria: at least 2 years of unblemished, never-been-late payment history; a
balance that is no more than 40{cd210233548fb516dd6eab2e63a2cae88670bfe7300aa34854d1648ca717978d} of the credit limit (ie, $400 balance on a $1000 limit
card). If they have a card — or ideally, a couple of them — that fits this bill, then you’re in
luck! Now, here’s where the trust comes in: You’re going to have them add you to this
credit card. They will call their card company and ask that you be added as an
authorized user of the account. Again, the trust factor is paramount! You will not be
receiving a copy of the card in the mail; you will not be using the card…it’s not your card.
You are merely being added to the account, and in turn, this nice, credit friendly account
is being added to your credit history. It will appear as a Joint Account…and the credit
history — as long as it is — will appear on your credit report, just as if the account had
been yours all along!
4. Pay down your debt! When I speak to people about their credit scores, they always
want me to magically fix their scores without any effort on their part. Well, you ran up the
debts, it’s your responsibility to pay them down. Here’s the formula: your first goal is to
pay down the balance to 50{cd210233548fb516dd6eab2e63a2cae88670bfe7300aa34854d1648ca717978d} of the limit (so a $1000 limit card needs to be paid down
to $500). Do this for all of your accounts before you take aim on a single account and
decide to pay it off entirely. At a 50{cd210233548fb516dd6eab2e63a2cae88670bfe7300aa34854d1648ca717978d} balance, you should no longer be penalized for out
of control balances. Second step: knock those balances down to 30{cd210233548fb516dd6eab2e63a2cae88670bfe7300aa34854d1648ca717978d} of the limit. If you
do this, your scores will really soar! It’s a fact that the credit agencies reward you with
positive points when you balances are at 30{cd210233548fb516dd6eab2e63a2cae88670bfe7300aa34854d1648ca717978d} or less.
5. Finally, DO NOT CLOSE YOUR CREDIT CARD ACCOUNTS ONCE YOU’VE PAID
THEM. This is a huge mistake that I see committed again and again. If you can get your
balance down to zero, throw yourself a party (pay with cash, not credit), but don’t close
the accounts. Closing accounts hurts your credit because it’s bridge you’re burning:
you’ll never receive any more good credit points from a closed