Is my credit going to be good enough? Does my debt to credit ratio matter? My score is different on all the sites I look at, which one is accurate????
There are so many questions!
I have been reviewing credit reports for more than 15 years now and I have seen every situation you can possibly think of. From perfect credit usage and scores down to the lowest FICO with lots of late payments and collections. I have learned exactly what you need to do to get your scores from blemished to perfect and I’m going to tell you the secrets. First, let’s talk about types of credit.
Revolving Debt- This is things like credit cards or home equity lines. Credit lines that don’t close when you pay them off are considered revolving.
Installment Debt- Car payments, home loans, and closed-end loans like student loans. Loans or credit that is closed after you pay it in full
Collections- Collections can be an old bill you forgot about to a medical debt that you just couldn’t pay. Bottom line is that it wasn’t paid and the original creditor has sold it to a collection company and/or reported it to the credit companies as a collection. This damages your score.
Judgments and Public Records- I put this into one category even though it is actually two separate items. The idea behind that is, these items have to go thru a judicial process in most cases to end up on your credit. An eviction you lost and owe money to would be a judgment. A bankruptcy would reflect as a public record. Other items such as back child support, federal tax liens and state tax liens would also be in these categories.
I could talk about credit all day but let’s get to the part you really want. The secrets of how to fix your credit. Here are 5 tricks to increasing your score.
Get a Secured Card – Overusing this can hurt your credit so make sure that you keep your balances low. For the best results, keep your balance under 30% of its limit. ($90 on a $300 card) Make sure the secured card you sign up for reports to all three credit bureaus. Typically, bigger banks and credit unions provide the best options for secured cards.
Request higher Limits on Credit Cards- If you find yourself in a tight position and unable to pay credit cards down enough to make an impact, this option may be for you. 30% debt ratio is a magic number when it comes to these cards.
Become an Authorized User- This can help your scores by adding credit history to your credit profile. If you have a family member or close friend who is willing to add you to their credit card, you will add all of that card’s history to your own credit history. It’s important that there are no late payments and balances are kept low for this to improve your scores.
Dispute Inaccurate Information- Sometimes errors happen. To remove these, you can write a dispute letter to the credit bureaus. This will start an investigation into the item disputed on your credit. The account will then need to be verified by the creditor reporting the item. Do NOT dispute accurate information. This will not help your scores.
Negotiating Collections- Most people don’t know that paying a collection can hurt your credit score temporarily. When a collection is paid it becomes a recent item. To avoid this, you can call collection agencies and negotiate a “pay for deletion”. Essentially you will need to exchange payment for the agency removing the item from your credit report.
Those are the 5 main secrets to fixing your credit and getting it in tip-top shape. Now, let’s be real here. Everyone’s situation is different. No one has exactly the same credit report or scores, except maybe that couple that has been married for 80 years.
If you are in California and thinking of buying a new home, or refinancing your current home and need to talk to a lender who can help walk you through your credit and possible credit repair, please call us at (916) 358-9130.