If you haven’t been in the market for a new car, apartment or home recently, you may not have paid much attention to that three-digit magical number—your credit score. But if you have, you realize how valuable it is to securing the best deal possible and lowest available payment. Also referred to as a FICO number, it’s a vital tool to maintaining your finances and living a comfortable lifestyle.
The highest possible FICO or credit score you can get is 850. The lowest is 300. And there are variable ranges in between. In addition, every lender is different with their criteria and requirements depending on the loan you’re applying for. Yes, it can get a little complicated. And truly it really isn’t cut and dry.
A high FICO score is worth its weight in gold! It gives you the buying power and clout you need to get ahead in life. Did you pull your score only to realize the number is on the low side? This can be troubling because raising your score is not an easy feat, and it doesn’t happen overnight.
Everyone knows that late payments and a big debt load cause FICO scores to plummet. But are there any other ways to raise it fast? There actually is. Let’s focus on what NOT to do.
Don’t Ignore Existing Debt
Multiple credit card obligations, monthly utilities, car payments and a large mortgage. The bills just keep rolling in. An income loss or even a temporary layoff due to the pandemic can cause a trickle-down effect with late payments. Credit collectors start calling and sending letters to your home. Yikes!
People overwhelmed with debt want to get out from underneath it as quickly as possible. In fact, a high debt-to-income ratio or DTI can lead to a low credit score.
The ideal DTI is around 35% or less. It pertains to all of your monthly debt obligations divided by how much income you have. This is one important factor in keeping your score high.
Bottom line, if you have late payments, don’t ignore your creditors. Try to work out a reasonable repayment agreement. You don’t want debt going to collection. This can really cause your score to nosedive quickly.
Don’t Hire a Credit Repair Company
When you have a lot of credit cards and payments going out each month, it can seem impossible to get it paid off and start rebuilding a solid credit score.
Turning to a credit repair agency may seem like the light at the end of the tunnel, or a fast fix, but it can make matters worse. Many are not out for the consumer’s best interest. They may charge huge fees and are sometimes scam worthy.
Here are telltale signs that a credit repair company may be a scam:
- They want a large up-front fee.
- Offers to raise or erase your existing credit score.
- Wants to keep credit reporting agencies out of it.
- Discourages you from running your credit report.
A scam company will promise you the moon and to banish all your debt overnight. If you need help with your debt, select a reputable credit counselor who can assist you with managing your credit and obtaining solid resources.
The best solution? Work on your own debt-repayment program. The debt-avalanche is a good one to start on.
Don’t Apply for Secured Credit Cards
When your credit score pummels into the 500 or 600 range, you may suddenly find yourself with a lot of new credit card offers. Or companies that want to transfer your existing balances to a new card to reduce your debt load. This can be very tempting, especially when you’re broke. The problem? They are often secured cards with charge colossal amounts of interests and fees. The really bad news? They don’t raise your FICO score, they lower it.
To improve your score, avoid these tempting new credit card offers.
Don’t Extend Credit Limits
You already have an established credit card and they are offering to raise your limit and buying power. Don’t fall for it. While you could really use the cash to pay for your weekend getaway, giving into temptation will cost you your credit score.
Don’t Accumulate New Debt
This goes beyond credit cards. It pertains to a new car loan, cell phone or anything that will come back as a hard credit inquiry on your credit report. Maybe your daughter applied for a new phone using your personal information. Just one quick application can drop FICO points fast.
There are many things we can do to build up our score and boost credit worthiness. But avoiding some pitfalls is essential in making sure we can reach the top of the FICO realm sooner rather than later. With a little hard work and perseverance, your best score awaits!
Here’s to Saving and Thriving Daily!
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