Here are some great tips to improve your credit. If you have credit issues, now is the time to fix these so that you can get approved for an elite travel reward card. Credit cards can be one of the easiest ways to leverage rewards to travel for free. We’ve previously explained how you can travel for free using credit card rewards. Travel reward credit cards come with many more additional benefits such as elite airline loyalty status, hotel loyalty status, and complimentary lounge access, amongst other things. True, these are great benefits, but you may need some credit repair services if you suffer from poor credit before you see approval.
There’s not a credit repair company out there that can legally– even deleting incorrect information – do anything for you that you can’t do for yourself. And the cost of hiring such a company can be considerable hundreds of thousands of dollars. You are paying for the experience dealing with the matters, which may be worth it for you. In this article, we will highlight what you can and cannot do so you can decide if you want to take steps on your own first before you consider shelling off cash to pay for the service.
Know Your Score
Credit scores affect everything from auto, credit, and mortgage interest rates to insurance rates and whether you get hired for specific jobs. Three main credit reporting agencies collect the information that creates your credit score., Equifax, Transunion, and Experian. All three agencies can have different information. They each use different scoring systems, so you will most likely have a different score for all three agencies. A credit score is technically a summary or grade given to your credit report.
The Fair Isaac Corporation (FICO) produces the most standard personal credit score. Over 90% of lenders use FICO Scores as the first metric to evaluate credit liability risk. The FICO range is between 300 (bad) and 850 (excellent). In general, having a higher score makes you a more appealing loan candidate. The average credit score is 711. “Good” credit covers 680 or greater, and “poor” credit covers about 620 or less. Top-level or ‘excellent’ credit starts at 740-750 and gives you a good chance of getting approved for top-tier travel reward credit cards and other credit.
Tips to repair your credit
First, make sure that your reports do not contain errors. Correcting a major error in your report can quickly add points. You will be surprised how often incorrect information is reported to the credit bureaus. If you have been the victim of identity fraud, it may be helpful to review your credit reports more frequently. Some companies you may pay to dispute your mistakes, but understand the advantages and drawbacks before you choose this option.
To get a free copy of your credit reports, go to AnnualCreditReport.com. Your free credit score will not tell you what your FICO score is. Your FICO scores can be purchased from https://www.myfico.com/. Also, check with any existing credit cards you have in your bank; many financial institutions offer free credit monitoring services that include FICO score numbers. Credit is even more important as we move through this pandemic. At this time, the three key credit reporting agencies are providing weekly reports free of charge until April 2021. So, check your credit regularly and quickly notify the respective agency if you find any discrepancies. Consider these six tips to improve your credit reports and score.
Pay Your Bills on Time
Pay bills and any current credit lines on time if you can. Paying just the minimum is perfect if you can afford anything. If at least minimum payments cannot be made if you see that, at least for the time being, contact your creditor to see whether any provisions can be made. Make sure you do not pay any bill more than 30 days beyond its original due date. Credit card bills are not reported late until they exceed 30 days late.
Why: the single largest factor impacting your credit score is your payment history. You cannot afford to get a payment registered late as you rebuild credit. Late payments remain for up to seven years on your credit records, so they take longer than any other credit errors.
Tip: If you have received a recent late payment, you can request a courtesy waive of the late reporting from your creditor. This will be a YMMV (your mileage may vary situation). What typically works is to google an email address for the CEO of the company. Most companies have a team of high-level customer service agents handling all contact with the CEO. Explain what has happened, explain how you plan to handle the account moving forward, and request a courtesy deletion of the late payment. You will be surprised by how understanding some of these companies can be.
Do not carry high balances on your cards
Utilization of “credit use” is another criterion that is heavily weighted on your credit score. The amount you use has a strong influence on your credit score – payment is only more important in time.
Most experts recommend not surpassing 30 percent of the credit limit to avoid lowering your ranking. Check all your credit cards for credit use (you can check your NerdWallet credit score profile) and concentrate on lowering the balances under this threshold. When your issuer reports to the credit bureaus lower balances, your score will increase.
Get a Secured Credit Card
Lack of credit or poor credit history can leave you in a position where the only option will be secured cards. Especially if your credit card accounts are closed, a secured credit card may be needed. These cards need a deposit in advance. You are literally securing your credit risk by prepaying in cash the revolving credit line that you will have. Since you are considered high risk, by credit loan standards, you will have to pay a deposit to secure your credit line. This credit card will work like any other credit card.
Your payments are reported to the credit agencies, so ensure that you pay on time — your credit can be further damaged by a late payment on a secured card. After many on-time payments, this will let creditors know that you have developed the financial behaviors to pay back your debt obligations. You will then be able to get approved for many non-secured credit cards. Select one of the issuers that have no annual fee and that report payments to all three major credit reporting agencies like the Discover IT Secured Card. Plus, remember once you have a secured card, you can rent car vehicles with much less hassle than using a debit card.
Get a Secured Loan
As the name suggests, a credit creator loan aims at helping you improve your credit profile. You will most likely find one in a bank or a credit union. You must be a member or client and display evidence of income and the capacity for reimbursement. The lender will keep the money back and release it to you as soon as the loan is completely refunded.
If you have money in deposit, you can buy a share or certificate-backed loan against it. This is a form of a guaranteed loan, funded by savings capital, money market, or CD account. The bank or credit union keeps the money until you pay it back. Some financial institutions unlock the funds gradually as you pay off the balance.
Become an Authorized User
You can ask someone to add you to a credit card as an authorized user. Your credit benefits only from being on the account; no charges or access to the account are necessary. Some cards allow primary cardholders to set expenditure limits for authorized users which could make it easier for the account holder to add you. You can also ask someone to add you without giving you the actual card.
The effect on your score can be modest as you are not legally responsible for debt on the account. Two things you should be aware of: If the account holder does not pay the bill on time, being an authorized user can also hurt your score, so ask somebody with good credit practices.
Get someone with a high score to co-sign on a loan with you
If it is difficult to obtain a loan, ask a family member or friend to sign a loan or credit card for you. This is a BIG favor: you are asking this person to place his credit reputation on your line and accept the full responsibility for paying back if you do not pay according to your agreement. The co-signer may also be denied if further credit is sought later since this account is taken into account in determining their financial profile.
Use this choice carefully to be sure that you will reimburse. If this is not achieved, the credit credibility of the co-signer and your relationship with them may be harmed.
You have control of your credit score and will improve your score if you concentrate your efforts on steps that have the greatest effect. Significant changes – such as going from very poor to outstanding – take a while. Do not become discouraged; remember that slow and steady wins the race. You pay a lot to have bad credit, now is the time to improve it if needed. If you plan and you’re your credit responsibly and stick to a game plan, you can achieve your credit score improvements and maintain your new score for the long term sooner than you think.