Many people today have blemishes on their credit reports. Whether it’s a dreaded case of identity theft or failure to pay bills on time, these credit mishaps can cost a person thousands in interest if left uncorrected.

We’ll see:

What constitutes a credit score? A credit score is made up of five components. Payment history (35%), carried balances (30%), credit history (15%), account mix (10%), and inquiries (10%).

Payment history is based on paying invoices as agreed and on time. Most of the payment history is based on the last six months and the greatest weight is on the highest payment history. For example, a home loan would be scored first, and then the next largest payment, whether it be a car loan or a high-payment credit card, would be scored next.

Balances held are classified based on the relationship between the balance and the limit. Since this component accounts for 30% of your credit score, it’s best to keep your balance-to-limit ratio low. Let’s take a look at an example.

Let’s say a borrower has two credit card accounts, a Visa with Citibank and a Visa with Bank of America, and both accounts have credit limits of $10,000, but one is maxed out and the other has a zero balance.

Leaving credit accounts as is will result in a lower credit score because the balance to credit limit ratio is 100%.

On the other hand, if the borrower spreads the balance between the two accounts and owes $5,000 on each, the ratio of the balance to the credit limit would only be 50%, which would have a positive effect on the credit score and create a higher credit score.

It is important to note that mortgage and/or installment loans do not require the same approach, as they have less of an impact with the balances carried component.

Credit history simply means that the longer the account has been open, the higher the credit score. However, to achieve the highest credit score, bills must be paid as agreed.

Also, many people have been advised to close accounts they never use. It is not the case! This can actually have a negative impact on your credit score. Never close old credit accounts, especially if the accounts have long histories.

mix of beads The ideal credit score is made up of revolving and installment accounts and looks like this:

– Mortgage loan

-Car loan

-3-5 credit cards (or more)

Additionally, when obtaining an Equitable Line of Credit, it applies for a loan amount greater than $40,000. If the HELOC is greater than $40K, it will fall under the mortgage category. If the HELOC is equal to or less than $40K, it will be classified as a revolving account. Max out the HELOC and it will have a negative impact on your credit score.

Consulted has several factors to consider. First, if they are looking for a mortgage or a car, borrowers have forty-five days to complete their shopping spree. If all credit reports are pulled within a forty-five day period, it will only count as one inquiry. For example, if a borrower applies with one mortgage company and decides to switch to another mortgage company, both inquiries will only count as one as long as the second mortgage company obtains the credit report within 45 days.

However, if the borrower is looking for both a mortgage and a car, one inquiry will be counted for each.

Each query averaged about five points. After ten inquiries per year, inquiries will no longer affect your score.

Various types of inquiries do not affect the credit score at all. When applying for a job, a job-related inquiry does not affect the score. When submitting an insurance application or to start a new utility account (for example, phone, cable, etc.). When a lender automatically reviews your credit account to confirm that other accounts have been paid on time and credit limits are not maxed out. When an individual obtains a personal credit report through http://www.annualcreditreport.com. And, when pre-approved credit card promotional offers are received in the mail.

Bad credit can be very costly and can result in higher interest rates on home loans, auto loans, credit cards, and insurance premiums. By taking the following steps to improve your credit score, you could save millions, even thousands of dollars over the life of a loan.

Here are five simple steps to increase your credit score 100 points in forty-five days. 1) Pay past due bills, 2) get rid of late payments, 3) increase credit limits, 4) become an authorized user, and 5) don’t close old accounts. Let’s take a look at each one.

Pay all bills that show a past due balance on your credit report. Past due accounts do not necessarily mean 30 days past due, past due accounts can be 1 day past due and show up as past due on a credit report. This can severely damage a credit score. Pay all past due bills as quickly as possible to increase your credit score.

However, past due accounts do not include judgments and collections. It is best not to pay judgments or charges when applying for a mortgage. Wait until escrow closes, if possible, and pay at closing. Paying judgments or collections could have a negative impact on your credit score, as the “recent activity” date will update if the account is paid and the collection will appear more recent than it might have been, causing a negative impact on credit. score.

Have the late payments cleared by contacting creditors and requesting that the late payments be cleared. If your first attempt is unsuccessful, try again and work your way up until you reach a manager. Be persistent, as each time you call, a new representative will answer the phone.

If you are successful and the creditor agrees to clear the arrears, be sure to request a letter. The letter must be on the letterhead of the creditor’s company, must be signed by an employee, and the letter must document your name, address, account number, and the specific late payment(s) to be cleared.

Also, be sure to get the name of the representative you spoke with, as well as a contact number and extension, in case you don’t receive the letter and need to follow up.

Increasing your credit limits can increase your credit score. Every six months or so, call each creditor and ask that each one increase your credit limit. Be sure to ask for the increase based on your excellent credit history. If the creditor insists that a credit report be obtained, think twice before agreeing, as this will count as an inquiry and will negatively impact your credit report.

Become an authorized user on a family member’s or friend’s credit account. But if they do agree, be sure to confirm that the account was paid on time and that the ratio between the current balance and the limit is less than 10%. If the account is late or has a high balance-to-ratio limit, it will create a negative impact on your credit report.

Be sure to tell your relative or friend that there is no risk as the credit card is mailed to the account holder and they cannot use the card unless they provide it to you.

Don’t close accounts even if you’ve heard that old accounts you no longer use should be closed. Keep accounts open and use accounts that have become inactive periodically. However, if you charge the account, be sure to pay the balance in full as soon as the bill arrives. Buying a tank of gas and paying for it will activate dormant accounts and report them current and current. Closing accounts can actually lower your credit score, especially if the account has a long credit history.

Summary. To achieve a high credit score, be sure to do the following. Borrow money when you don’t need it, when you need it, creditors won’t give it to you.

Keep the balance-to-limit ratio low; don’t run out of credit cards. If you have to use credit cards, be sure to spread it out over multiple accounts.

To quickly increase your credit score, when a creditor clears a delinquency and provides a letter, request a credit score. For a fee, in just a few days your credit score will go up and this could help you get a better interest rate.

Never pay a judgment or fee when applying for a home loan. Try to negotiate that the account will be paid in escrow.

Raising a credit score by just 10 points will save you $100,000 in interest on a $500,000 mortgage over 30 years.

In general, it is worth investing the time to clear up blemishes on your credit report.

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