Guide To Improve Credit Score By Closing Credit Card

Do you remember the excitement surrounding your first credit card? You probably applied for a credit card when you went to college or maybe your parents offered some advice. Either way, you’ve had that card since your teens or early 20s and it’s probably not the greatest card in your wallet. It might have a high interest rate, no rewards or a lofty annual fee.

Once you starting building good credit you were likely offered better credit cards. Your interest rates are lower, you probably don’t have an annual fee or a it’s a low fee, and you probably have access to airline miles or cash back rewards. So, why keep the card that is no longer serving you?

How will closing the accounts affect my credit?

The important thing to remember is that when you make the decision to close a credit card account you’re reducing your credit utilization rate. Remember that credit utilization accounts for 30 percent of your total score calculation. You’ll need reduce your spending habits when you close a credit card account or you’re likely to go over the recommended 30 percent utilization rate causing your credit score to take a nose dive.

The average age of your credit accounts is another important factor for your credit score. This is two-fold. If you’re newer to credit, it’s best to keep old cards open because they remain on your credit for 10 years. That card, though rarely used, is actually helping your credit – especially if you have good payment history. Closing it could hurt your credit far worse than someone who has been building their credit for more than a decade.

So, what can I do?

If you have a high interest rate or a large annual fee, try negotiating with your credit card provider. Sometimes if you tell them you are considering cancelling the card due to high fees, etc, they may work with you. It costs them far more money to acquire a new customer than it would cost them to waive your annual fee or lower your interest rate.

Sometimes you have to close a card. If it’s costing you money because the credit card company won’t negotiate a waived or lower annual fee, it doesn’t make sense to keep it. Your credit might take a hit, but it will recover. You can’t however, recover lost funds due to annual fees for a card you don’t use.

Closing a credit account should not be taken lightly. Make sure to consider the factors listed above before you close your accounts.

 

Tips To Fix When Your Credit Is Stinks

Whether it was a foreclosure, short sale, deed-in-lieu of foreclosure, a job loss or just plain irresponsibility, there are some steps you can take to get your credit score back into the range where it is attractive to mortgage lenders and you can finally buy that house.

Where does my credit score come from?

Credit scores range from 300 (the worst) to 850. Although a score of 700 will get you lower rates and more credit opportunities than lower scores, 760 and above is considered prime.

If you’ve ever ordered your credit report you did so from one or all of what are commonly known as “the big three” credit reporting agencies: Experian, Trans-Union and Equi-fax.

These agencies compile massive amounts of financial information obtained from companies from which Americans have obtained credit in the past. From this, they determine each person’s payment history, the length of the person’s credit history, the various types of credit he or she has and the amount of credit debt held.

When the big three agencies turn their information over to Fair Isaac Corporation (F.I.C.O.) or, in some cases, Vantage, it’s fed into a complicated formula and out pops a three-digit number that pretty much rules your financial life. Thankfully, your credit score adjusts, according to how risky you appear.

Pay on time

The best way to repair your credit score is by paying your bills on time, every month. Yes, it sounds simple and it is the responsible thing to do, but it’s also one of the quickest ways to pump your score into a more acceptable range. Don’t believe us? According to a study conducted by Experian,100 percent of super prime consumers and 97 percent of those with prime credit have no late payments on their credit reports.

Furthermore, The Raleigh Area Development Authority says that a person with a 707 credit score can raise it 20 points, just by paying bills on time for one month.

Manage the plastic

credit score

Your use of credit cards may be the culprit when your score is at rock bottom.

First, credit scoring agencies look at the age of your credit. New credit, such as opening new credit card or department store accounts, makes them leery. Just what will you do with all this new-found credit? Since they don’t know, you become a higher credit risk and take a 10 point ding on your score.

High balances make you appear risky as well. If your cards are maxed out you may lose up to 70 points on your credit score.

Don’t close your credit card accounts, just pay them on time. Consumers with no credit cards or installment loans look risky (it’s that fear of the unknown again) and tend to be penalized with lower scores. Besides, closed accounts still show up on your credit reports and may still affect your score.

If you have the money in your budget, another quick way to raise your score is to pay down high credit card balances. Try doubling your payments for a few months or at least pay a payment and a half.

If you build it, you can buy it

Many Americans didn’t do anything to deserve a low score other than to have never used credit. To credit scoring agencies, these people are, again, unknown entities. How they will use credit when they receive it is a mystery and therefore makes them a credit risk in the eyes of the agencies.

Unlike the folks that need to slow down on their credit card usage, you need to obtain a card, use it and pay the balance on time. Ensure that you obtain a card from an institution that will report your responsible use of credit.

To make it easy on you, we’ve compiled this handy, fix-your-credit checklist:

– Order your credit reports from each of the big three agencies to determine where you stand

– Dispute any errors you find on your credit report. Some shady credit counseling companies may suggest you dispute everything on the reports, which may do way more harm than good. The Federal Trade Commission offers advice on how to file disputes on its website.

– Pay all your bills on time, every month

– Pay down your credit card balances. If you can only afford to pay one at a time, pay department store cards first, if you have them, otherwise, pay off the one with the highest balance first. Aim to get the balances within 30 percent of your credit limit.

– Use old credit cards that you haven’t used lately to keep their histories active. Remember, old credit is worth more than new credit when it comes to your score.

– Obtain a secured credit card if you have no credit history. Use the card for small purchases and pay the balance on or before the due date.

– Consider obtaining a small loan if your credit report lacks an installment loan history. Ensure that the lender reports to all three agencies.

– Ask creditors to re-age your accounts. This might be challenging but if even one creditor agrees to do so your score may improve dramatically.

Ask the credit card companies to increase your credit limit

Erika Bentley

Keeping Real Estate Simple

 

Fun Facts About Credit

We’ve all been given information regarding credit and how to use it that may be incorrect. It’s important to sift through the myths and get to the truths that will help us to maintain, rebuild, or start a good relationship with credit that will last for many years.

Most of us have been passed down information that tells us to get rid of cards that we don’t use or to only use them for emergencies. These practices are presented to many of us as healthy ways of showing good credit use. Although the myths are many, a little bit of information is all you need to right a lot of the wrong information.

Myth #1 You Should Only Use Credit Cards for Emergency Purposes

A credit card that is used frequently and paid on time shows the credit card company that you can handle credit responsibly. The more activity that a credit card company sees being handled responsibly improves your credit score.

A card that is used just for emergencies doesn’t give the credit card company enough opportunity to observe how you handle credit. The routine credit activity that is paid on time shows responsible handling of credit and these are the things that boost credit scores and credit limits.

Myth #2 You Should Close Cards that You Haven’t Used in a While

The longer you have a card the better it reflects on your overall credit. This means a card that you’ve had for 5 or 10 years that doesn’t get used much is still valuable. If you close that card your available credit decreases and this reflects negatively on your credit.

Credit age shows credit maturity, your ability to positively maintain a credit account over a long period of time. This is attractive to the issuing companies. A better approach to handling those older credit cards that don’t get a lot of use is to plan to make small purchases every few months, just to keep the card active. The loan activity is positive if the cards are being paid on time.

Myth #3 The Minute You Use Your Credit Card Interest Begins to Accrue

You don’t ever have to pay interest on credit purchases if they are paid in full within the day grace period. Interest only accrues on any leftover balances that remain after the grace period.

The more on-time payments that are made, the more your credit is improved and this is reflected by your rising credit score. Every on time payment reported to the credit bureau is a positive notch on your credit belt.

Myth #4 Merchants Can Pre-set the Required Amount for Credit Purchases

By law, a merchant can only require a $10 minimum purchase for credit cards. No more than that. Beware of merchants that require more than $10 to spent if you use a credit card, this is not legal.

Myth #5 You Should Pay Your Balance Off Before the Due Date

If you are paying your balance off before your due date you aren’t accruing a payment history because you aren’t being billed. Allowing your purchases to remain unpaid for a full billing cycle allows a bill to be created and an on-time payment to be reported to the credit bureau.

It’s OK to do this because your purchases aren’t accruing interest until the end of the billing cycle after the grace period has passed. If you allow a bill to be created and paid you are doing everything within your power to benefit your credit positively. These positive on-time payments will be reflected in your credit score and with the increase in your credit limit.

There are many credit myths out there that keep many people confused and using their credit cards in non-beneficial ways. It pays to do your homework and debunk the many myths that surround credit card use – visit us here to learn about the best credit cards and how to make them work for you.

 

How To Improve Your Credit

Credit Scores. It can be one of those touchy topics depending on how you see it. Your score can take years to build up and just months to destroy. We’ve all suffered from credit mishaps; from forgetting to make a payment to utilizing all of your credit. Sometimes, a bad score can be result of something out of our control- divorce, medical bills, and bankruptcy. Simply, maintaining your credit is a way of life. Since almost all big purchases require credit, A low score will make everything more expensive. You’ll have to pay a higher interest rate on loans over time.

A score Is used to show credit history, on-time payments, responsibility and discipline. A low credit score will improve naturally over time, so don’t lose sleep over it. However, if you have upcoming equipment financing or leasing needs in the near future. It’d be smart to try raising your score beforehand. That can be the deciding factor between boosting you into the next tier and saving money.

Let’s be realistic. There’s no miracle method to raise your credit score 100 points in a month. Some Credit Repair “Experts” will try to fool you into believing this can be done, but it’s simply impossible. You hear it all the time in advertisements – ” 1-2% APR for excellent credit “, but you’re never sure what exactly is excellent credit. Let’s break it down, There are 4 tiers of credit.

Tier 1 (Excellent Credit): 700 and above

Tier 2 (Good Credit): 660-699

Tier 3 (Fair Credit): 620-659

Tier 4 (Poor Credit): 619 and below

Credit score

Tier 1 and 2 typically get the best rates. Tier 4 is usually the most difficult to get approval for. Even if you have a Tier 3 score, it’s still advisable to try and improve your score. It’s a important part of your life and business. If you’re a newer business without cashflow statements, it can be hard to obtain financing. Many Lenders will use your score to assess you. That’s why it’s important to improve your credit score when you can.

Here are our 4 best hacks for quickly improving your credit score. The improvement can be anywhere between 10 points to 40 points which should be enough to bump your credit score up. Note: These are quick tips to boost your score up, we will have a more comprehensive guide on maintaining your credit later.

Dispute the negative marks – We get it. It’s hard to pay your bills on time sometimes. Between juggling your business and family, paying your bill sometimes slips your mind. There’s 3 major credit reporting bureau: TransUnion, Equifax, and Experian. Your credit report with all of them will vary a little bit. Contact them and dispute whatever you can. Write as much as you can with your dispute and make copies of everything.

NOTE: Spend time and be thorough – This can make a huge impact on your scores.

Open A New Secured Credit Card – According to Credit Karma: People with a credit score of 800 and above typically have 7 open credit cards. While you don’t want to open more than 1 a year, 7 is just a guideline number to aim for. No matter how bad your credit score might be, you can still get approved for a secured credit card. Secured Credit Cards are the best way to rebuild your credit. You’ll have to put a deposit down, but the lender will give you a line of credit. To pick a good secured credit card to use, we would use this Guide by Magnify Money.

NOTE: You want to keep your credit utilization under 30% usage, so monitor your usage accordingly. Only open 1 credit card as doing more may hurt your score.

Raise your Credit Limits – Call your existing card companies and ask for your limits raised. If you’re not at 100% credit utilization, it’ll be helpful to get your limits raised. Even if it’s just a 10% increase, It’ll help your overall report health.

Become an Authorized User – This one is a little tougher to do. You’ll need someone who is in good credit standing. They’ll add you onto their existing credit card accounts. You’ll be provided a card linked to their account and responsible for charges spent. Family members and Close friends are going to be the people you ask. Understandably, It’ll be difficult convincing someone to add you, so don’t take it personally. Becoming an authorized user can cause a boost in score up to 50 points!

TIP: Don’t use the card when you get added. Shred it so you won’t have any temptation.

Leveraging your credit is important to getting the most out of your money. Hopefully with these 4 hacks, you’ll get the score improvements that you need. The usual advice applies, don’t overspend with your new increased credit limits and pay your bills on time! Many people have success using the autopay feature to eliminate late payments. Feel free reach out to us and let us know how this has benefited you!