Has your application for a loan been rejected? Maybe you have failed to secure a job for no apparent reason. Your FICO or VantageScore status may be to blame. This indicator affects different spheres of life. If your current status is far from perfect, follow our tips to give it a boost. The following methods work for both assessment systems.
1. Dispute Mistakes on Your Report(s)
Your score may have dropped due to some reporting mistake. Unfortunately, this situation is quite common. Consumers whose scores are unfair benefit from enlisting a company like Credit Saint — check this review for more information. Professionals will detect any inaccuracies on your records, prepare evidence, and dispute them formally.
Once the errors disappear, your score rises instantly. This is a great way to repair bad credit if it stems from technical flaws. For example, you may notice an account that does not belong to you, outdated information, or even a false bankruptcy. Sometimes, positive events are not reflected, either.
To check the score, you may use apps like Credit Sesame or websites like www.myfico.com. To understand if professional repair is necessary, collect your reports. Until April 20, 2022, you can do it for free once a week. Before the pandemic, this service was only rendered annually. To download the files, visit www.annualcreditreport.com and submit your request. You should collect information from all three bureaus:
Scrutinize the documents in search of any suspicious details. You may even find that you have been a victim of identity theft. Sometimes, scores drop because criminals take out loans in their victim’s name.
A clean report is not only important for borrowing in the future. Employers, landlords, and insurers all check the scores to compare applicants and evaluate their trustworthiness. You may be turned down for the job of your dreams just because of some reporting errors.
2. Manage Utilization of Available Credit
Around a third of your FICO assessment depends on how much you owe in total. If you have several cards, the sums of their balances and limits are used to calculate the utilization. This indicator only applies to revolving credit.
The fewer available funds you use — the better for your score. There are two ways to raise this indicator. On the one hand, you may boost the available funds by requesting a limit extension or a new card. On the other hand, you may work with your balances. Try to cover as much of your outstanding balance as possible. The proportion (balances divided by limits) will tilt in your favor, too.
Suppose you have three cards that give $10,000 in total. A balance of $5,000 means you are using half of your available money, which is well above the recommended level. According to Experian, utilization should be under 30%. Other experts place the threshold even lower – at around 10%. This is how much can be charged at any time.
In our example, to achieve the 10% goal, you would need to pay off most of your balances, so there is just $1,000 left to pay. On the other hand, you could try extending your limits to $50,000, which is far less attainable.
Try working on both fronts. If your lender refuses to give more credit or issue another card, try getting a secured card from another issuer. Applicants have to make a deposit to get it, which is why approval rates are higher. However, be careful not to submit too many applications. Ideally, you should apply for just one product and get it.
3. Pay More Often
Even if you borrow responsibly and pay off your balance completely every month, your reports may show a different picture. As the bank communicates with the reporting agency once a month, the payments you make may not be reflected in a timely manner. Thus, if you maxed out your card and paid off the balance, the report may still show 100% utilization.
Therefore, be careful with rewards cards. It is tempting to spend more to reap the benefits, but you should also be aware of this reporting intricacy. If you do need to make large purchases, pay at least twice a month to keep the reported balance down.
4. Negotiate Outstanding Balances
This method will work for borrowers with bills in debt collections. Removing those derogatories from your reports is impossible and illegal. However, you can manage the damage by communicating with the current owner of your debt. As they are more interested in getting paid than suing you, they may allow you to pay less. Following a settlement, the debt will no longer be marked as outstanding.
5. Become an Authorized User
If you know somebody with an excellent borrowing history, you may ask them to include you as an authorized user on their account. Explain that you’re not going to use the money, and this is only necessary to raise the score. If they agree, their account will be added to your records, so you will benefit from their responsible borrowing behavior. Their limits and balances will also contribute to your utilization. As a result, the score will rise.
Word of Caution
Note that in repair and rebuilding, fast does not mean overnight. Your reports are updated monthly, and every lender has its own reporting cycle. You will need to wait for a few months before your score finally begins to change in most cases.