High-value men focus on growing their wealth, and one way they do this is through the cunning use of credit. They understand the importance of a high credit score. If your score is low, you will have limited access to credit, and if you do get credit, it will be expensive. This is how you can improve your score so that financial institutions will start to throw cheap money at you.
Before we start, you need to understand the concept of credit utilization. If you can keep your credit utilization low, your credit score will improve. It is really easy to calculate your credit utilization. Take a credit card. All cards have a credit limit – this is the maximum amount you can spend on the card. For example, if your limit is $1,000, and you have spent $400, you have used 40% ($400/$1,000) of the credit line. Your credit utilization is 40%.
Generally, a good credit utilization ratio is less than 30 percent. That means you're using less than 30 percent of the total credit available to you. On a credit card with a $1,000 limit, that means keeping your balance below $300. Your credit score could drop as your credit card balances rise above that threshold.
Trick 1: Small is Beautiful
If you can make small payments — often called micropayments — throughout the month, that can help keep your credit card balances down. Making multiple payments throughout the month helps to keep your credit utilization down.
Trick 2: Demand Higher Limits
When your credit limit goes up and your balance stays the same, it instantly lowers your overall credit utilization. Call your card issuer to see if they are prepared to raise your limit.
Trick 3: Check Your Score
You need to be able to see the same information that your potential credit providers are seeing. There could be a mistake on your record that is dragging down your credit score. In the US, you're entitled to a free report every 12 months from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Use AnnualCreditReport.com to request those reports and then check for mistakes, such as payments marked late when you paid on time or negative information that's too old to be listed. You then have the right to dispute these errors and get them removed if they are erroneous.
Trick 4: Get Authorized
When you get a new credit card, it doesn’t take long for the credit card company to offer you additional cards. Get a friend or relative to assign one of those cards to you. The account holder doesn’t have to let you use the card — or even tell you the account number — for you to benefit. This works best for people who have little recent credit experience, and the impact can be significant. It can fatten up your credit file, give you longer credit history and lower your credit utilization. You want to make sure that the account holder (your friend or relative), has a long and solid history. If not, their performance could actually drag you down and lower your credit score.
Trick 5: Secure It
Credit can be secured or unsecured. Unsecured credit is when institutions lend you money without any guarantees on the strength of your credit record. Secured credit is backed by an asset that serves as a guarantee. Secured credit is often backed by a cash deposit; you pay it up front (and you do not have access to this money) and the deposit amount is usually the same as your credit limit. You use it as a normal credit card, and your on-time payments help your credit score. This is not a great option because the cash you deposit is frozen and will earn you little or no interest, but it will help you to build your credit score. As your score improves, you need to convince the issuer of the card to start releasing some or all of the deposit.
Trick 6: Do Not Cancel Cards
If you're racing to improve your credit profile, be aware that closing credit cards can make the job harder. Closing a credit card means you lose that card’s credit limit when your overall credit utilization is calculated, which can lead to a lower score. Keep the card open and use it occasionally so the issuer won’t close it. This may incur an annual membership charge on the card, but the benefits may outweigh the costs.
Trick 7: Mix It Up
You want to show credit providers that you are multi-talented. There are essentially two types of credit – installment and revolving credit. Installment credit is where you borrow a fixed amount and pay that back over a fixed period. A good example is a student or an auto loan. A revolving credit, like a credit card, is where you have a spending limit. As you make your payments, your credit utilization declines and you can spend more. You need to spice up your credit mix. If you only have revolving or only installment, diversify into the credit type you do not have. This will show credit providers that you are versatile and creative.
Trick 8: Pay Accounts on Time
This seems obvious, but most people are unaware of the negative impact of late payments. If you pay a few days late, it is unlikely that your creditor is going to report you. If however, you are 30 days late, the probability of the creditor snitching on you to the bureau increases. If it was an oversight on your part, call the creditor and appeal to his/her good nature to not report.
If you miss a payment by 30 days or more, call the creditor immediately. Arrange to pay up if you can and ask if the creditor will consider no longer reporting the missed payment to the credit bureaus. Given that we are living in exceptional times, creditors are likely to be more understanding. If you make a mistake, it is not the end of the world. As in real-world relationships, lots of positive credit behavior goes a long way to offset the temporary damage that has been done.
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