There was a time when I couldn’t buy a package of gum on credit! I found out the hard way that 330 makes a great batting average but a horrible credit score.
True story, I once applied for a charge card so I could purchase a $75 cubic zirconia bracelet to surprise a girl I was dating (it was the best I could do) and was denied! They were literally breaking a broke guys heart!
Thankfully, things changed for the better as I changed but cleaning up my credit wasn’t an overnight fix. It took discipline, determination, desire and a few days in between but here’s what worked…good old fashion work!
Below are five proven techniques that can help you raise your credit score:
1. PAY ON TIME. I realize I sound like Captain Obvious but this is one that’s still worth mentioning. I’ve helped so many people who did not realize the ramifications of what one or two late payments can do to their credit.
It creates a domino effect and once other creditors see a negative mark they have justification to raise your interest rates or deny you for better rates in the future.
Just make sure you pay all of your accounts on time. If you slip then dust yourself off and get back on track. If you have trouble paying on time you should consider setting up some a monthly reminder or automatic bill payment through your banking service.
2. KEEP A FEW UNUSED ACCOUNTS OPEN. This strategy may feel counterintuitive but it actually works in your favor. Closing unused accounts is a common myth when it comes to improving your credit score.
In fact, closing accounts can actually hurt your score. Why? Because a part of your score is calculated by determining how much debt you have versus how much available credit you have.
By no means am I suggesting you go out and create new debt but know that your unused cards are not hurting you just sitting there. Here’s a tip, if you close out your available credit, your debt becomes a larger percentage of the credit available to you and may lower your score.
3. AVOID APPLYING FOR TOO MANY CARDS. The opposite of keeping unused cards open is stop applying for additional ones! You may not realize it but your score can be affected if you fill out too many credit applications over a short period of time.
I’ve seen people get turned down for cards only to go running to the next creditor not knowing it was doing more harm than good. While you can acquire multiple cards over time, it’s just not a good idea to sign up for too many of them at once. This makes you look desperate for any kind of credit.
4. USE CREDIT OCCASIONALLY. This one may go against the mainstream voices that advise against all debt. Personally, I’m okay if that’s were you are but remember if you are trying to build your credit score back up and in most cases that means you still need to prove strong credit worthiness.
I’m not advocating being irresponsible, quit the contrary. But even if you prefer to use cash, you should still have at least one credit card account that you use occasionally.
When it comes time to use credit, having no credit can be just as detrimental as bad credit. Chances are you’ll want some good credit eventually, especially when it comes time to purchasing cars or homes.
5. CHECK YOUR SCORE EACH YEAR. People often ask me how often should they check their financial records and I tell them they should treat their financial portfolio like they treat their bodies – get a check up every year!
You are allowed to check your credit score once per year without any penalty. Some credit card companies are even making it easier for you and providing the credit score directly on your statements. Just make sure that you take the time to stay on top of your credit.
It’s such a huge part of your life – whether you like it or not - and it deserves your attention. With regular checks, you’ll be the first to know if there’s something that needs to be taken care of.
Improving your credit score can save you a lot of money, time, and frustration. Get in the habit of using these strategies and you’ll not only build your personal wealth but you will never have to worry about getting denied of purchasing a cheap valentines gift on credit!
Shawn Dorrough – The WealthShift Strategist
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