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15 May 2012

Improving Your Credit Score Without Gimmicks

Credit Score No Comments

Tristan Powys (Credit Counsellor) @ Lucid Living

Chat boards and web sites are filled with tricks and gimmicks to improve your credit score.

One gimmick that gets a lot of attention is the practice called credit piggybacking. This is where one person, sometimes for a fee, agrees to add you as an approved user on their credit account. This is typically an account with a good history and lots of available credit. The result is that their credit account and history is added to your credit report.

This increases your credit score and in some cases the increase can be dramatic. It amounts to buying another person’s good reputation and posing that it is your own. While I’m sympathetic to the folks who want to improve their credit score, it’s simply the wrong way to go about it.

But what if you have a few late payments or other negative information on your credit report?

First, get a free copy of your credit report from LUCID. Don’t assume your credit score is doomed. There are steps you can take that can boost your credit score. Some of these steps can increase your credit score by 20 points or more in a single month.

Pay Recent Arrear Accounts

The first thing to do is to pay the arrear amounts on the accounts that recently fell a month or two behind. That’s because the more recent the late / non-payment, the more it will lower your credit score.

Request Credit Report Corrections

After bringing arrear accounts current, contact the creditors who reported late payments on your credit report and ask them to make a good faith adjustment to remove or update the late payment information from your credit report. Not all creditors will do this, and it often is a very frustrating procedure. Speak to LUCID (010 590 5617) and they can attend to this for you – they know who to talk to and can get the right result for you.

Paying Debts Make Them Vanish

Pay off accounts where the collection agencies agree to remove all references to the accounts from the credit bureau files, gives you credit score an instant lift. Make this a requirement of your offer to pay off the account. This is best achieved when you have a lawyer negotiating for you and the agreement is in the form of a binding contract. LUCID’s attorneys have extensive experience in negotiating discounts on old debt and can attend to this for you.

Spread Debt Evenly

Evenly spread your balances over your accounts with the lowest interest rates and the highest credit limits. The objective is to not have more than 50 percent of the credit limit used on any one account. That’s because having one credit account nearly maxed out can reduce your credit score significantly. You can also request the creditors to increase your credit limits on your accounts which may help as well.

Check Credit Limit Reporting

Some of your credit accounts may not accurately report the credit limit to the credit bureaus. This reduces your credit score because when that information is missing, the credit score counts the account as being maxed out or if the limit is lower than the actual, the credit score interprets this as high utilization and drops the credit score. Ask the creditor to provide this information to the credit bureaus. In terms of the National Credit Act, credit providers are obligated to report accurate information to the credit bureaus.

Keep Good Credit Accounts

Major bank credit cards, held for a long time, with good payment histories help boost your credit score. Also, don’t close down your cards that have the longest history and the highest credit limits available because these help boost your credit score. Instead, close down those department store charge cards. Revolving department store cards have the lowest credit limits and when used will have a higher debt to limit ratio, which detracts from your credit score.

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