Is your credit less than perfect now?Would you like to build it up a little?A common misconception is that once your credit has gone down the drain, it will stay there.
There are some components to poor credit that can keep your scores down for an extended period.
However, there are things that you can do to put your scores on an upward trend.
Your credit report typically does not change too much from month to month if you do not open new accounts, make payments late, file for bankruptcy, etc.
Your credit scores (FICO) however, can change a few points from month to month.
I'm going to explain some of the quick and easy components of your FICO that you can use to your advantage.
Revolving account balances are better known as credit utilization.
Credit utilization simply measures how well within your means you live.
If you have three credit cards each with credit limits of $1000 ($3000 total), and you have them all maxed out, creditors view you as someone that doesn't manage their spending well.
However, if you have balances of $100, $400, and $300 you are viewed as a more responsible consumer.
Another plus to keeping low balances is that you have the available credit in case of an emergency.
The magical number with credit utilization is 30%.
You should keep your balances at or below 30% of the limits.
It is also believed that 30% of your FICO is based on credit utilization.
So, one quick way to bump up your FICO is to reduce your account balances.
If you can pay down some cards - do that.
If you can't, there is another way to better your credit utilization: call your credit card companies and ask for a limit increase.
This can be dangerous if you are not responsible though.
Just because you have a higher credit limit, you must not use it!If you do use this new credit, you can worsen your credit, and put yourself in more of a financial bind.
Please note that your card companies may not increase your limits.
You should also transfer balances throughout your cards so that they are all roughly the same.
You do not want two cards with no balances and one card that is 80% maxed out.
Transfer the funds so all three cards are at or below 30% of their limits.
One big mistake to avoid is to close out accounts once they are paid off.
If you just got that credit card paid off, great!Keep it open!This will add to your available credit.
Pay all of your payments on time.
Even if you have had late payments in the past, you can help your credit by not repeating the same mistakes.
Late payments will typically drop off of your report in a couple of years, and creditors don't put as much weight to the older ones.
If you have filed bankruptcy in the past, this is even more important.
Absolutely do not make payments late after a BK!Creditors want to see how you have managed your credit AFTER the bankruptcy.
Did you learn your lesson and straighten out your financial situation, or are you a repeat credit risk? Some other things that you can do include disputing erroneous items, removing duplicate collections, and rapid re-score.
You should consult with a credit professional for assistance with these.