Increasing credit scores can lead you and your clients to lower interest rates, better insurance rates, better borrowing opportunities, and overall 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.
In this article, you will learn about:
Strategies to raise your credit score
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 by the bureaus/creditors, they must remove it. Our software makes this super-fast and super-organized.
Build Positive Credit
Building on good credit is easy, and 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 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 determine if they deserve a credit line increase. Make sure you tell your clients not to be shy and wait for them to offer more credit. Advise them to 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 technique 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.” Some companies 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. The bureaus will add all of the credit history to the recipient's credit, and ultimately their 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 crucial 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!
Having a mix of different types of credit is not as important as paying your bills on time or keeping your utilization low. However, credit scoring models love to see that you have a diverse credit report. For example, they love to know that you can manage different types of accounts such as revolving credit cards, personal loans, installment loans, auto loans, or home loans.
Hard inquiries will appear on your credit report, which has a short-term negative impact. This is an important factor that you need to be aware of if you start applying for new accounts.
Opening new accounts has a short-term negative impact as well. With that 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 see the positive impact.