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Improving your credit score can significantly increase your purchasing power and credit
worthiness. So I will discuss a few tips on how to improve your credit score, don't worry
– this is all pretty basic stuff. So here's a really boring pie chart to show you the
different pieces we will discuss. But as a reminder, no part of your credit score is
based on your income, or where you live or went to school, mkay?
First, lets talk about your payment history. 35% of your credit score is based on your
debt repayment history. Debts such as your credit cards, home loan and car loans report
your payment history to the credit bureaus on how well or how poorly you pay on time
(this fact alone means that some people are totally screwed). If you were reported as
paying any late payments, this could drop your credit scores dramatically and that could
mess up your scores for a while – so don't do that. If you were not late, but your credit
report says you were, you might want to consider credit repair (cuz we all know the credit
bureaus nnnneeever make mistakes, right? Yeah, uhuh). If you have no credit history, you're
not totally screwed, so you can start by opening an account with the same institution where
you do your banking. If you don't have a bank account, stop the video and go get one.
Next, - is your balance-to-credit-limit ratio. This is a little nerdy, so I will break it
down for you. 30% of your credit score is based on your balance-to-credit-limit ratio,
or in other words, how much of your credit limit is debt?. To figure our your ratio,
divide the balance by your credit limit and will give you the percentage of your balance-to-credit-limit
ratio. For example, if you have a $1000 credit limit, and your balance is $500, that would
mean you have a 50% ratio – yeah, that too high! To obtain the best credit score, your
balance should be a minimum of 5% to a maximum of 25% balance-to-credit-limit ratio. Any
higher than this means it is risky to the lender and he will give you the stink eye
(that means your score goes down). Any lower than this means the account may not be included
in the calculation at all. This only applies to unsecured lines of credit, so your car
loan and home loan are not included in your ratio. Sometimes if you miss a payment, your
lender may drop or reduce your credit limit, which will make your ratios go all cattywompus
(for you nerds out there, that means it will drop your scores, mkay?).
On this next boring slide is the age of your credit - this counts for 15% of your credit
score. The longer you manage your credit history the higher the credit score rating. Older
accounts that are open with no balance are the best way to age and improve credit scores.
To add some age to your credit history, talk with your parents or close friends about them
adding you as an authorized user to their older (but perfectly paid) credit accounts
with no balance. Their account will then show up on your credit history. This way, you can
improve the age of your credit history and increase credit scores immediately. Don't
do this with just any willing bozo, because if they screw up, it will mess up your credit!
On this next unimaginative slide, we see that 10% of your credit score is based on the types
of credit. A mortgage and a car loan are types of installment loans. Credit cards and department
stores are types of revolving loans. These are just two types of many. It is generally
best to have a healthy mixture of types of credit to increase your credit score. A loan
from your *** doesn't count.
And finally, 10% of your credit score is based on new credit. A new account can both help
– and - hurt your credit score rating. A new collection account can hurt you. A new
account with a high balance-to-credit-limit ratio can hurt you, conversely - -, a new
account with a low balance-to-credit-limit ratio can improve your credit score. Excessive
inquires can also hurt your credit scores, so don't get all crazy and apply everywhere
because it will back fire.
To achieve the best credit score, pay down your balances, shift or transfer some of that
debt to other accounts, and of course, pay your payments on a timely basis and don't
be afraid to challenge credit reporting errors to repair your credit.
It is helpful to note, that if you pay off all of your debt, your credit score will go
down! I know – that is really messed up, but it's true! Remember, your credit score
is based on your credit and debt repayment history. So if you have no debt, your credit
scores can totally take a nose dive.
If your credit score rating needs improvement, maybe because you have some late payments,
(or worse) your can repair your credit yourself, or better yet, hire an affordable credit repair
company.
These are just a few simple steps to help you achieve the best credit score possible!
740 to 800 hundred is possible, I did it, so can you. Good luck to you.