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Thursday, 1 May 2014

Improving Credit Score – 20 Ways to Repair Credit File and History

While this site may be about millionaires who give money I do get a lot of questions from subscribers about improving credit history. Before we start looking at all the different ways to improve credit score we must understand that this process takes time. There are a lot of unscrupulous internet marketers who promise to raise your score profoundly overnight in exchange for vast sums of money. These offers are scams designed to extract money from poor people.

Improving your credit score can open many financial doors. You will get access to cheaper finance. You can avoid expensive payday loans. You could even invest the borrowed money to buy assets which pay income thereby improving your financial situation. It goes without saying that improving your credit score can have a dramatic impact on your financial lives.

In this guide we look at 20 ways to repair a credit file. Some of the suggestions are actions you can take today. Some tips are actions you need to repeat over a period of time. You need to be patient when you start improving your credit score. Over a period of 24 months you could remove all the stains on your record and put in place a robust credit history so your credit score rises considerably.

1: Get a Free Copy of Your Credit File


The first step towards improving your credit score is getting a free copy of your credit file. There are a number of financial companies who offer a credit report for free. These companies also offer credit repair tools to help you improve the credit score. Any additional service requires a fee which is why you should only take up the offer for free credit file. Once you have your report go through every page to understand your financial history. Understand how the creditors see you. Are you seen as a risk? Study the report properly

2:  Reduce the Number of Creditors


People receive a bad credit score if they have too many creditors. Look through your credit report and instantly improve your credit score by paying off the smaller balances therefore reducing the number of creditors you really have. If you have 2 major debts and 10 smaller debts pay off the smaller debts. Contact the creditor once you paid off the debt and ask them to put a note on your file to show the account has been paid in full.

3: Wrong Information of Credit Reports


There are times when you’ve paid off your debt yet the debt remains active on your credit file. During these times the creditors forget to clear the debt from on your credit file. If you find any anomalies on your file you need to challenge the creditor and demand that they fix the information. You can also contact your ombudsman if they refuse your credit score. Removing debt that’s been paid off will improve your credit score significantly.

4: Consolidate Your Debt


If you are able to consolidate your debt it is better to have 2 major debts compared to 10 minor ones. Consolidation will also lead to lower monthly payments which mean that you can pay off your debt quicker. Creditors will also view this as a positive move in the right direction. Call up all your creditors and ask them for an opportunity to consolidate your debt. Work out what you’re average interest rate is and try to slash this significantly. Transfer the balance and them lock away your other cards to avoid getting into more debt.

5: Ask for a Rate Reduction


When you’ve made payments on time you can call your credit card company and ask them for a rate reduction. Explain that you’ve managed your account well and now want to be rewarded. There are many cards which have offers and once your credit score reaches a certain threshold you get access to these offers. By asking for a rate reduction you will save money. The creditor will also reflect this on your credit file. When total APR on a file is low the credit score rises because you are considered lower risk.

6: Close Superfluous Credit Accounts


You can improve your credit score by closing down superfluous credit accounts. If you have excessive plastic close these accounts down especially if they’ve been dormant for a while. Not only will this stop you from getting into further debt this step will also be viewed as positive on your credit file. Superfluous credit accounts are seen as a risk which is why the creditworthiness drops.

7: Improving Credit Score by Paying Balance off in Full


Never let a balance linger on. Do your monthly shopping on your credit card and then pay it off straight away. Personally I do all my shopping using my credit card and then pay it off as soon as I get home using online banking. Creditors love debtors who pay their balance off in full. This is rewarded by raising the credit score on your file. For greater convenience use mobile banking to pay off your credit card as soon as you have an outstanding balance.

8: Pay Balance Off Immediately when Improving Credit Score


This might sound anal but paying off your credit card balance immediately has an impact on the credit score. Don’t let the statement come and don’t pay a few hours before the due date. Instead pay the balance off the very same day of the next day. This shows commitment and urgency to pay off debt which ultimately improves your credit score.

9: Always Use a Few Credit Cards


It is better to have a few credit cards with large facilities compared to lots of cards with small facilities. Only keep 3 accounts and shut down the rest. Work to improve the facilities three cards rather than 10 cards. Companies which determine creditworthiness prefer debtors to have less cards with higher facilities. This shows that debtors are able to manage their accounts effectively and are less likely to get into financial trouble.

10: Improving Credit Score by Having a Small Credit on Account


Paying off your balance in full with a slight credit can help when improving your credit score. When speaking to a lot of credit analyst this seems to have a positive effect on credit history. Regardless of whether this has a positive impact or not it doesn’t hurt to pay off the balance with a few extra dollars.

11: Send Financial Statement to Creditors


When your financial position changes positively let your creditors know. Send them a financial statement showing your income and expenses. Find ways to increase income perhaps by working more hours or starting a side business. Find ways to trim expenses. Ask the creditors to act on this information. Ask the credit history companies to reflect the information on your credit score. What you will notice is you’re limit in increased and your rate falls which is taken as a positive sign by credit companies

12: Disassociate With People with Bad Credit


 If you live under the same roof with someone with bad credit their creditworthiness has an effect on your score. You can financially disassociate yourself from these people which goes very far when improving your credit score. If people have lives with you in the past you need to financially disassociate them too.

13: Set Up Automatic Payment System from Bank Account


When you first apply for a credit card you can set up an automatic payment system from your bank account. You can choose to pay the balance of in full or the minimum payment. Always set up an automatic payment as this will prevent you from forgetting to make payments. Choose to pay the balance off in full. This action is seen as an additional layer of safety which also contributes towards improving your credit score.

14: Use Pre Paid Cards to Improve Credit Score


Pre paid cards are offered by MasterCard and Visa. You can load these cards with money and then spend like normal plastic. There is a annual fee associated with these pre paid cards however it’s a fee worth paying to build creditworthiness. Using these cards religiously will show credit history companies that you are disciplined and can manage your money effectively.

15: Use Buy Now Pay Later Catalogues to Build Credit


You can also build credit worthiness by applying for buy now pay later accounts from online catalogues such as Fingerhut and Sears. These accounts offer small financial facilities and are perfect for raising credit scores. These accounts have easy credit application process which means there’s a greater chance of being accepted. Once you’ve been approved start shopping on essential items and then pay the balance off in full. You could even purchase items and then pay for them and return them for a full refund. Your credit score will be marked as positive.

16: Remove Overdraft Facility from Bank Account


If you’re always living in your overdraft you need to stop this. Pay off the balance and remove the facility. Always keep a respectable balance on your bank account. If you go overdrawn then call your bank immediately and explain. If there is a legitimate one off reason the mark could be prevented and your credit score will remain intact.

17: Never Miss Mortgage Payment


A missed mortgage payments has a profound effect on your credit score. It is imperative to ensure that you keep in pace with your mortgage payments. If you miss one accidently then call your credit immediately and explain what’s happened. Again if it is a one off you could get away with a slap on the wrist. Try to make a few overpayments to show that your committed to removing this debt quickly. Overpayments are your friend when you’re improving your credit score.

18: Living Within Your Means to Improve Credit Score


Living within your means and understanding affordability is important when improving credit score. When you have clear daylight between expenses and income you’ll always make payments on time thereby ensuring your credit score is constantly improving. People get in trouble when their lifestyle exceeds their income. Whenever you feel like uplifting your lifestyle you need to reflect this with a raise in income.

19: Invest in Financial Software to Keep Organised


Being organised is the key when improving your credit score. Use software such as Quicken Intuit to know exactly what your financial state is at any given time. You’ll see your balance, your debt and payments coming in and going out. This will help to keep you in control. Let your creditors know how you manage your money and there is a chance this might be reflected in the credit file.

20: Maintain Good Relationship with Banks and Credit Card Companies


Always have a great relationship with the financial institution you are dealing with. Let them know if they’re doing a great job and keep them fully informed of your financial position. The bank manager and credit manager have the use of discretion and keeping a good relationship might be useful when you get into a tight spot with regards to your credit history.

Debt Spiralling Out of Control


When you have debt spiralling out of control you need to contact the credit company immediately. Let them know that you can no longer service the debt and request that they stop the interest on the account. The creditors will want to see your financial statement. You need to show them. Once the interest is stopped you need to sought the service of a free debt counselling service which will help you determine how to pay off your balance. The excess income that you have will be spread among the creditor on a pro rata basis. Do not be afraid to contact your creditors. Financial institutions are required to help people who get themselves into debt.

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