Tips for improving your credit score from someone who’s been there!
Most people understand the importance of having a good credit score when they are trying to get a credit card or get approved for a home mortgage. But what if you know your credit score is not-so-great? Or what if you have no credit score at all? What should you do?
When I was 19, I applied for and got a department store credit card. I’m not ashamed to tell you that that was back in the early 1980’s, before there were credit scores, but there were still credit ratings. No surprise – 1 year later, after I’d failed to make on-time payments, my credit rating was bad, which I found out when I tried to finance a car.
With egg on my face, I applied for another credit card with a gas station. The card had a $100 limit, so I couldn’t get into too much trouble. I spent the next 12 months diligently paying that card off completely, every month, before the due date of the payment. It worked! My credit rating started to improve and I was eventually able to finance that car.
I’ve learned a lot about credit scores in the 40+ years since that department store card. In fact, I worked in mortgage lending for 27 years before I took the leap and decided to sell real estate. I share those lessons with many of the buyers I work with who find themselves with less-than-perfect credit. Here are the things I recommend to boost that credit score:
1. Get Started Now.
If you pay cash for everything and don’t have any credit trade-lines, how can they score you? I totally get that having bills to pay is no fun, but to get a credit score, you have to ‘pay to play.’ Apply for a small charge card and pay the bill on-time every month. If you can pay off the balance, do, but don’t make a late payment. Paying the minimum payment is better than paying off the balance late.
2. Know What is on Your Credit Report Now.
There are 3 credit repositories that keep track of everyone on the planet’s credit history – Trans Union (www.transunion.com), Experian (www.experian.com) and Equifax (www.equifax.com). Each of these companies allows you to access a copy of your credit report FOR FREE 1 time per year. These free reports won’t give you a credit score, but they will show you the credit lines that are associated with your social security number. These reports may contain inaccurate information! However, you can contact the credit repositories and have things corrected. (Hint: it’s a GREAT idea to do this well in advance of applying for credit, such as for buying a house or a car).
3. Always, Always, Always Use Your Middle Initial.
I know we all think we are unique and special, but invariably, there is someone else who has the same name. Or, if you are a Jr. or Sr. or the III, you need to use those suffixes to differentiate your credit trade-lines from someone else in your family. This little step can save you from a lot of credit clean-up, especially if the person who shares your name does not pay their bills on time.
4. Clean Up Your Act.
Once you get your free credit report and you see that you have delinquent accounts, address them and get them straightened out. If you have been making payments to a creditor but haven’t been making them on time, start making them on or before the due date. After a few months of doing this, your credit score will start to respond in a positive way. If you’ve gotten so far behind with a creditor that they gave up on you and sent the account to collection, contact the creditor and find out what you can do to pay it off. You might be able to make payments or settle for a lower amount.
5. Watch Those Medical Collections.
You know and I know that the insurance company was supposed to pay that doctor bill. But what if they don’t pay it? The doctor’s office is not going to go to bat for you to get it resolved. If they don’t get the payment from either you or the insurance company, they will simply sell it to a collection agency and move on to the next patient. Guess what? Now you have an ugly collection account on your credit report, the credit repositories think you are a deadbeat and your credit score goes down. Don’t let that happen – pay the bill and then fight it out with your insurance company to get reimbursed.
6. Resist the Urge to Apply For New Credit.
You know when you’re at the check-out and the clerk asks you if you want to save 10% by applying for their credit card? Just Say No! I will guarantee you that if you give your social security number, they are pulling your credit score and the result is an “inquiry” on your credit report. Too many credit inquiries can lower your credit score, as the credit repositories view it as a risk that you might be opening too much credit. So, only apply for credit when you really need it. If you’re a good shopper like me, you’re only buying things from the clearance rack anyway!!
7. Keep Your Balances at a Maximum of 30% of Your Available Credit.
This means that if you have a credit card with a maximum limit of $5,000, keep the outstanding balance below $1,500. Credit scores are higher for people who have more ‘available’ credit than ‘utilized’ credit.
I hope you can use some of my sage advice to get your credit score on the up-and-up!
Kris Kesling-Hays, Broker
Preferred Properties of Sarasota
Direct: (941) 321-5638