Increasing credit scores can lead you and your clients to lower interest rates, better insurance rates, better borrowing opportunities and overall much lower costs of living. Overall you want to make sure you are paying your bills on time, but there are other strategies that can help increase your scores. We have outlined some of the most effective strategies below:
Remove Negative Credit
Up to 79% of all credit reports have errors and removing those negative items is the fastest way to improve a credit score. You can dispute any item on a credit report. If that item can't be verified, it must be removed. Along the way, letters need to be generated. Our software makes this super-fast and keeps it super-organized. If you have a credit repair business, that's why you would use our software.
Build Positive Credit
Building on good credit is easy, banks love to give money to those that don't need it - because the risk is lower, however; building positive credit can be tricky if your score is low. It may be difficult to even get approval on a low limit credit card. If your clients have poor credit and are not approved for a typical credit card, they might want to set up a “secured credit card” or “secured loan” account. This means that they may have to make a deposit that is equal to or more than their limit, which guarantees the bank that they will repay the loan. There are also ways to build credit by paying a company to report your utility and rent payments to the credit bureaus.
Creditors periodically pull credit reports to see where your clients stand with other creditors, assess their risk on the money they borrowed and also to determine if they deserve a credit line increase. Make sure you tell your clients to not be shy and wait for them to offer more credit, go ahead and give them a call every few months to request a higher limit on revolving credit cards and loans. Each time a limit is increased, it reduces your clients’ utilization and builds their credit.
Inherit Positive Credit
A fast and simple strategy to help your clients add years of positive credit history is called “piggybacking”. This is a technique that allows you to inherit someone else’s positive credit by being added as an authorized user or joint account holder to a credit card that belongs to a family member. Without getting too deep into this technique, please note that I said “family member”. There are companies that rent spots on strangers' credit cards, they are bad news - stay away from them! On the other hand, if your client has a family member willing to help, simply find out if there’s a card with a long credit history, high limit, and low balance. If so, call up the creditor and get them added to the card. All of the credit history will be added to the recipient's credit and history, utilization of the new card will be taken into consideration and ultimately the credit score will adjust accordingly.
Get Those Balances Down!
The scoring system wants to make sure you aren’t overextended, but at the same time, they want to see that you do use your credit. Every dollar of debt on your credit report is a risk factor and reduces your score. The lower your balances are, the higher your scores go. As a general rule, you should use your credit cards at least once every 90 days to keep the reporting active, but keep your balances as low as possible, preferably your utilization should not exceed 30% of your total credit limits. When onboarding new clients, I think it’s critical to educate them about this important factor and encourage them to not only pay down balances but to remain as debt-free as possible to optimize their scores.
Mix it Up!
Although having a mix of different types of credit is not quite as important as paying your bills on time, or keeping your utilization low, credit scoring models love to see that you have a diverse credit report, meaning you are able to manage different types of accounts such as revolving credit cards, personal loans, installment loans, auto loans or home loans. For example, if you only have two credit cards and no other types of accounts reporting, your report is lacking diversity so we recommend that you work to open at least one or more additional, different type of an account, preferably an installment loan - this will help improve your credit diversity and help your overall score. One important factor that you need to be aware of, if you start applying for new accounts; hard inquiries will appear which has a short term negative impact. Also, new accounts being opened also has a short term negative impact - so with that being said, don't expect a sudden boost to your score just because you opened a different type of account; however, as the new inquiries and new accounts age - long term you will start to see the positive impact.