Everyone has a few dings from the recession, particularly in their FICO credit scores. The good news is that they’re not permanent. You can take action now to help bring those scores back up; it just takes a little know-how. If you haven’t looked at your credit report in years, it’s time to order one up and find out what your score is and what is on the report. Armed with this knowledge and a few smart strategies, you can start to undo all the damage left behind by the chaos of the Great Recession.
What to Look For
Treat your credit report like an injured patient. How bad is it? You want to know just how low that score got and also why. Entries in your credit report may actually not be right. Take the time to review all the gory details and to question anything that may not be right. Your credit may be bad, but if it is someone else’s bad credit showing up on your page – it’s only your problem because you didn’t dispute it. Once disputed, you may find it can be eliminated.
Actions to Take
Now, you have to think ahead. What can you do to bring your score back up? It’s not that hard. Here are a few things to try:
- Pay Accounts Off – Pay off any account that can free up credit first. You want to keep the account open so that your debt decreases while your credit increases. If you pay off an account and subsequently close it, you can actually hurt your credit score. It’s not just about debt; it’s also about the amount of credit you have in relation to the amount of debt.
- Ask for a Credit Increase – If you can’t pay an account off, the next best thing is to inquire about an increase in your credit limit. By increasing your credit limit, you affect the score by making your debt seem smaller in comparison to your credit. It’s a very easy thing to do and all it takes is for you to pick up the phone and call your credit card company.
- Don’t Charge Too Much Too Often – This one is tricky because if you charge nothing or pay your entire balance off each pay period, you could end up looking at like a “credit card deadbeat.” That’s the term the credit card company uses for people who use their credit but don’t give them any profit. You either want to charge a little or reduce the use of your credit cards or don’t charge too much too often.
- Keep Your Old Cards – Your old accounts have a longer life and provide an easy way to consolidate your debt without it appearing as new debt. Just be sure you aren’t affecting your total credit limit combined from new and old cards as this can impact your score. As with any strategy, you have to be careful that you understand the exact way to implement it or you could do more harm than good.Don’t Scare your Lender!
Credit card issuers are mining your purchase data to get a better idea if you are a default risk. Your purchase information can clue them in that you are having financial problems and cause them to lower your limit without notice. While you’re getting a cash advance for a trip overseas, they’re watching your account and getting scared. So, for some purchases, stick to good old-fashioned cash and keep the credit for purchases that don’t frighten your creditors.
What to Avoid
Here are few items that will red flag your account to your creditors and could have unintended consequences.
- Mortgage Payments – if you decide to put your mortgage on your credit card because you’re a little short and pay it at the end of the 30 day cycle, it’s one payment that creditors do not like to see in your credit card history. Avoid paying your mortgage with your credit card, even if it makes financial sense.
- Adult Entertainment – Porn, strip clubs, or even sex toys are seen as an indication of escapism. Data from the credit companies show that people who engage in these activities default more on their accounts than other types of borrowers. So, if they see these things on your account, they are likely to red flag it. If you’re not sure what qualify, just think: If you don’t want your mom seeing the purchase, don’t put it on your charge card.
- Vice Purchases – That’s things like alcohol and gambling in the form of lottery tickets. People who are going through financial problems that can lead to insolvency tend to drink more. People who lose their jobs or go broke want to drown their sorrows and the credit company knows full well that’s the issue. Lots of people buy lottery tickets because they have dreams of winning big, but others do it because they think that’s the only way they’ll be able to strike it rich. Either way, your credit card issuer will figure that if you’re playing the lottery, you might be in financial difficulties and expect the only way out to be a sudden, unexpected, money windfall.
- Discount Stores – Everyone went somewhat frugal during the recession, but if you’re only shopping at discount stores then it could be a signal that you feel strapped for cash. Instead of shopping at more expensive stores, celebrate your frugality with cash so that it doesn’t show up to your creditors and they get spooked at your shopping habits.
- Cash Advances – There are plenty of payday lenders that won’t ding your credit just for getting a cash advance, but they’re not your friendly credit card issuer. Yes, they do tend to ply you with offers of cash advances with high rates, but oddly they also flag your account if you take them up on it. If you’re short of cash and need a payday loan, seek out lenders that won’t be able to ruin your credit because you took them up on a cash advance offer. Another option is to borrow money from family members if you need a cash advance. However, doing it from a credit card issuer is a way to unsuspectingly damage your credit profile.
This article provided by National Payday. Read more at nationalpayday.com/blog.