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How to raise your credit score over 730 |
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Understanding how the credit scoring system will benefit you greatly in our society.
As mortgage rates decline, many would-be buyers and refinancers are missing the opportunity to lock in loans at record lows. The reason? Their credit scores aren't high enough to qualify for the best rates and in some cases are too low to qualify for any loan at all.
Credit scores are three-digit numbers lenders use to gauge your creditworthiness, and in recent years a 700 FICO credit score was enough to get the best rates and terms. Even people with lower scores could get a decent deal, and at the peak of the lending boom it seemed no score was so low that it merited a rejection.
Today, some lenders demand a 730 score for the best available mortgage rates. Lower scores mean higher rates; if your scores are below 580, you will not qualify at all.
Missing out on what may be the best interest rates of our time, is painful enough. But less-than-stellar credit can hurt in other ways. After all, credit information is used:
- By insurance companies to evaluate applicants and set premiums.
- By landlords to decide who gets rental properties.
- By employers concerned about higher risk of theft from those with troubled finances.
Clearly, cultivating good credit scores is an essential 21st-century skill.
The good news is that it's possible to boost your credit score if you have a handle on your finances and you know how credit scores work. Amazingly, the median credit score is 700 on a range that spans 300-to-850 on a FICO scale. This means that half of the adult U.S. population has a higher score and half has a lower score. Roughly 40 percent have scores over 750, and 13% have scores above 800, according to Fair Isaac, the company that created FICO scoring.
Plenty of people are handling their credit well enough to earn good scores. You can, too. But first you need to recognize that:
- It’s highly unlikely that you will raise your score if your finances are still unmanageable. If you're unable to pay your bills, it will be difficult fixing your credit score. Real credit score repair will have to wait until your financial crisis has been resolved and you have enough money to cover your expenses, plus some extra to begin paying down your debts.
- You can't raise your scores if you don't use credit. Credit scores try to predict how well you're likely to use credit in the future by how well you've used it in the past. So, though it’s admirable living with a cash-only lifestyle, it won't increase your scores. In fact, without continual use of some type of credit, eventually your credit reports won't even generate credit scores.
- You don't have to pay credit card interest to achieve great scores. "Using credit" is not the same as "carrying a balance on your credit cards." Carrying a balance is expensive and often bad for your finances. Actually, carrying a balance is unnecessary. Many who have achieved 800-plus scores pay off their balances religiously, and they know they can build and keep great credit scores without ever paying a dime of credit card interest.
- Please don’t expect overnight results. You're likely to see improvement in your scores within 30 days if you pay down significant chunks of your credit card debt. But otherwise, credit repair takes time, and how much time depends on the many details of your credit reports. If you have serious black marks, such as bankruptcies or foreclosures, you can see significant improvement in your scores as time passes but you may have to wait until those negatives drop off your credit reports before you can join the 700-Plus Credit Score Club.
Hopefully, you understand the basics, so you can use the following techniques to get your scores over 730.
Decide to be thorough with the basics
Monitor your credit reports. Your credit scores are based entirely on the information in your credit reports on file at the big three credit bureaus: Equifax, Experian and TransUnion. If the information is wrong, your credit scores could suffer. You can get your reports once a year for free from the government-run AnnualCreditReport.com. Dispute any serious errors, such as:
- Accounts that aren't yours.
- Reports of late payments when you paid on time.
- Bankruptcies older than 10 years or accounts that were wiped out in bankruptcy but are listed as still due.
- Other negative information that's older than seven years (the seven-year clock typically starts 180 days after the account first went delinquent).
Get a major credit card. Retail cards and gas cards can help you build your credit history initially, but to get your scores into 700-plus territory you'll want at least one card with a substantial credit limit: Visa, MasterCard, Discover or American Express. If you can't qualify for a regular card, consider a secured version, for which you make a deposit with an issuing bank. Just make sure the card reports to all three bureaus and that it converts to a regular credit card after 12 to 18 months of on-time payments.
Arrange automatic payments for every card or loan. Credit scores are extraordinarily sensitive to whether you pay your bills on time, so don't let travel, a busy schedule or any other nuance, decrease your score. Most lenders will let you set up automatic payments that take an amount you specify -- the minimum payment, a set dollar amount or the full balance -- every month from your checking account.
You need to have great credit to take advantage of today's lower interest rates.
Don't let disputes go to collections. You cannot let a commonplace problem escalate because your account will be turned over to collections and that will for sure, impact your scoring.
Give your limits a wider path
Spread out your debt. More than a third of your FICO score depends on how much of your available credit you're using -- your so-called credit utilization. The FICO formula likes to see the gap between your balances (whether you pay them off each month or not) and your limits, especially on credit cards. (You're rewarded for paying down installment debt, such as mortgages and auto loans, but your scores improve much more dramatically when you pay down revolving debt such as credit cards.) In short, it's better to have small balances on several cards than a big balance on one card.
Balance Management 101. You have to worry about your credit utilization ratio even if you pay your balances in full each month. The balance that's reported to the credit bureaus is typically the one on your last statement, not the balance that's left over after you pay your bill. So if you charge $9,000 on a $10,000 card, it's going to look like you're using 90% of your limit (which is really, really bad), even though you paid off the balance in full when you got the bill.
Aim for 10%. The less of your available credit you use, the more FICO rewards you. Keeping your credit utilization below 30% on your cards is good; getting it below 10% is even better. If you regularly use more, ask for a higher limit, spread your charges out on more than one card or make two payments every month -- one just before your monthly statement closing date to lower the balance reported to the credit bureaus and a second one just before the due date to avoid late fees.
Push back against lower limits. Credit card issuers are reducing limits right and left; in fact, one banking analyst estimated that the newly risk-averse companies would slash $2 trillion of the $5 trillion in existing credit limits. This can be awful news for your credit scores, but you can and should try to push back. If you can't get the issuer to reverse its decision, move your balance elsewhere.
Strategies for lowering utilization
Move debt to installment loans. If you have high balances that you can't pay down quickly, consider transferring the debt to a personal installment loan. The interest rate you'll pay is typically higher -- 13% or so for people with good credit, compared with less than 10% on many credit cards -- but the scoring formula treats installment loan balances more kindly than the same debt on credit cards.
Move debt off your credit reports altogether. You can make debt seem to disappear by paying it off with a loan from a friend, family member or retirement plan, none of which typically show up on your credit reports. If you're tempted to use funds from your retirement account, though, just know that if you lose your job, any unpaid balance can quickly become a tax nightmare. It's an especially bad idea if your finances are on the edge, because credit card debt can be erased in bankruptcy; 401(k) loans can't.
Play the home equity card cautiously. Moving a credit card balance to a home equity loan or line of credit may improve your scores but put you at greater overall financial risk. If you fail to pay the bill, you could lose your home. Also, as with a 401(k) loan, you're turning unsecured debt that could be wiped out in bankruptcy into secured debt that typically can't.
Manage your plastic intelligently
Don't close accounts or let them be closed. Closing accounts can't help your scores and may hurt them. Yet many issuers these days are slamming shut inactive cards rather than continue to carry these unprofitable accounts. If you've got cards you haven't used in a while, take them out for dinner or a movie, and pay the balance promptly. Better yet, use them to charge a regular expense, such as your electric bill, and arrange for automatic payments.
Apply for credit sparingly. Applications for credit don't ding your scores as much as some people fear; typically, you lose five points or less. But when every point counts, such as when you're in the market for a mortgage or a car loan, you don't want to squander any of your scores. Wait to apply for any other credit until you've secured the loan you want.
AMEZNews
(Contributions by MSN)
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September 8-12, 2010
St. Paul AME Zion
700 Muscogee Road
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850-937-9001
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September 21-26, 2010
Zion Temple AME Zion Church
205 North Church Street
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McCalla Chapel AME Zion Church
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September 26, 2010
As a symbol of unity, all women of the A.M.E. Zion Church are requested to wear white. Contact the A.M.E. Zion Church Department of Overseas Missions for information concerning this observance.
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October 6-9, 2010
Covening at Lomax-Hannon Junior College
725 Conecuh Street
Greenville, AL 36037
334-382-2115
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Camp Dorothy Walls Conference & Retreat Center
495 Cragmont Road
Black Mountain, NC 28711
Ph: 828-419-9200
Fx: 828-419-9222
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Oak Street AME Zion Church
1500 Oak Street
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334-263-3200
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4414 Salem Road 35
Panola, AL 35477
205-462-1458
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Shiloh #1 AME Zion Church
4970 County Road 24
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334-725-0045
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October 2010
On this occasion, programs shall be observed in memory of Anna L. Anderson and each member of the Society is asked to contribute five dollars ($5.00) to the Council.
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October 29-31, 2010
Connectional Lay Council
"Equipping The Laity For Evangelism"
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November 9-14, 2010
Ford Chapel AME Zion
212 West Mitchell Road
Memphis, TN 38109
901-785-6630
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Covening at Small Memorial AME Zion Church
19 County Road 21,
Jefferson, AL 36732
334-289-5565
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Pilgrim Rest AME Zion Church
125 Greer Avenue
Whistler, AL 36612
251-456-5629
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November 2010
The Young Adult Missionary Society Annual Observance, shall be celebrated to recognize Dr. Willa Mae Rice as the Founder and Dr. Adlise Ivey Porter as the Organizing Coordinator. This program is developed by the General Coordinator, YAMS.
Visit www.whoms.org for more information.
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November 25, 2010
I will praise God's name in song and glorify him with thanksgiving. Psalm 69:30
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Saturday, December 25, 2010
For unto you is born this day in the city of David a Saviour, which is Christ the Lord.
Luke 2:11
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