Helping Good People With Bad Credit
Helping Good People With Bad Credit
Review Your Credit Report
Begin by investigating your credit report for negative information and have it removed. Yes, such things are entirely possible.
Sign up for Experian Boost
If your low score primarily results from being new to the credit-seeking game and you are timely with your utilities and cell phone payments, ask the lender to pull a report from Experian using its “Experian Boost” plan. This hybrid model draws on what the industry calls “alternative credit data” — non-traditional payments that provide lenders helpful insight into an applicant’s creditworthiness.
The way forward gets steeper, so knowing what you’re up against is good.
Game the FICO System
Of the five categories influencing your credit score, there’s only one you can control significantly short-term: your credit utilization ratio.
Pro tip: Make sure payments arrive before the statement closing date. Lower balances get reported to the FICO and the big three.
Most other factors being equal, consumers with scores in the upper 600s — the bottom of the “good” range — have credit utilization ratios between 40 and 50%. To get into the 700s, your utilization must sink below 30%. If you’re in a hurry to help your score, use under 15%. The less you use, the better.
Fixing this is a cinch if you have a fat savings account or maybe a wealthy (and generous) uncle. Otherwise, you need to find extra money in your budget (or additional monthly income), combined with spending discipline, to whittle down those balances.
Another way to attack high balances is with a debt consolidation loan — if you can swing it. Present your plan to a bank or credit union, or go online to any assorted peer-to-peer lenders. You may be able to zero out your credit-card balances while you secure a lower interest rate than you were paying Visa.
We’ve read here and they’re another way to lower your credit utilization ratio is to seek a boost in your balance limits from your current lenders. The mathematics of this gambit is undeniable, but the idea of seeking higher balances when we’re having trouble managing our proportions can make our stomachs ache.
Become an Authorized User
If you have a mystifyingly benevolent parent with impeccable credit, ask to be added to their account as an authorized user. This will help your credit utilization (ideally, the added performance doesn’t have a high balance) and lengthen your credit history. Remember, this card is strictly for a credit boost, so do not use it when it arrives in the mail.
Establishing a Credit Score
If you don’t have any credit history, get started! A favorable credit history helps out nearly every aspect of your financial future, whether purchasing a car, renting or buying a home, or even applying for a job.
The easiest way to start is to apply for a line of credit. Credit cards for gas stations or department stores are generally easy to obtain and are good ways to build solid credit. Use them responsibly, being careful not to overcharge. The key is to pay your bill on time each month.
If you can’t get approved for a traditional credit card, sign up for a secured credit card. These cards require a deposit, often equal to the credit limit you will be extended with the card. For example, a $500 deposit will get you a secured credit card with a $500 spending limit.
These cards act the same as unsecured cards in that you receive a monthly bill, and payment is expected each month. Ensure the spending on the secured card is reported to the credit reporting bureaus.
In most cases, as long as you pay each month, your deposit will be refunded when you finish the card. Your deposit can’t be used to make the monthly payments.
Becoming an authorized user is another way to establish a credit score.
Being an authorized credit card user is the best position in the credit world: you get all the benefits and none of the responsibility. You spend, someone else pays, and everybody’s credit improves.
This obviously-lopsided arrangement usually happens with a spouse, parent, sibling, or a close friend. It takes nothing more than a phone call to the card issuer by the cardholder, permitting one to use the card without paying the bill.
That is the sole responsibility of the cardholder.
In the meantime, you not only acquire the purchasing power of a credit card but also have the cardholder’s credit history added to yours.
That provides an opportunity to add three positives to your credit report: an increase in the number of years you are using credit, an increase in the average age of credit cards you use, and an increase in the credit utilization available on your cards.
Combining those elements could raise your credit score from 50–100 points.
On the other hand, if the cardholder is late with payments, maxes out the card every month, or does anything else negative, it will hurt the credit scores of both the cardholder and authorized card user.
And any harmful activity you create can impact the cardholder’s credit score. If you max out the card and the cardholder is late with payments or can’t make them, it is negative on their account — and at some point, on yours too.
If you have a job, another way to start a credit history is to take out a loan or buy a used car. Making regular payments will help positively establish your credit history.
Real Credit Deal is a credit repair company. We help people rebuild their credit, so they can buy the things they need and want in life. Our mission is to educate people about credit, help them understand their credit reports, and provide them with the tools they need to improve their credit scores. We believe everyone deserves a second chance and are here to help people get started on their journey to better credit.
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