How to improve your credit score on your own
When the thoughts of home ownership take hold, everyone will tell you that you need to get your mortgage financing pre-approved before you go out and buy your dream home.
But before you do that, if you think you might have some credit mischief lurking in your past, spend the time, make the effort, and face the frustration that it can take to get your credit reviewed and tweaked.
Sort your credit score / history / report before getting pre-approved for mortgage financing will help determine the type of mortgage you qualify for and the cost or interest rate.
There is no shortage of companies offering to help you repair your credit and increase your credit score; some are legitimate with real results, others maybe not so much. But there are some absolutely-for-real-do it yourself credit repair strategies you can do yourself today, right away, it will have an immediate positive impact on your credit profile.
Related: How to improve your credit score
It’s not about credit repair, it’s about credit correct, and there are simple and effective solutions you can do on your own that will make a big difference in your credit score.
As a consumer, you are entitled to a free credit report every twelve (12) months. All you have to do is go to .Com Annual Credit Report, follow the instructions and presto, you have a free copy of your credit report from the three credit bureaus; Trans Union, Equifax and Experian. You may have the option of paying a fee to get your credit scores and of course you can choose to do so, but you don’t have to.
Once you have your credit report in hand, study it and familiarize yourself with its structure and the meanings of the keys and abbreviations. This will make all individual accounts easier to read and determine the condition and health of each.
In the body of your credit report, where the accounts are listed, there are letters on the far left for each account under the ECOA title. These letters are key codes for how a particular account is classified or held and by whom.
Knowing how to read your credit report and what to look for can help you determine if there are any accounts you are a Authorized User or one Cut account holder, and whether those accounts help or hurt your credit score.
Find the letters J and A, because they indicate that you are a Cut account holder or a Authorized User on the specified account.
If you are a Cut account holder or if you are Authorized user on someone else’s credit account, he can help or hurt your credit rating. In either case, these accounts belong to someone else and being a Cut holder or an Aauthorized User gives you access to the performance history of that account.
For example; if you are a Authorized User or one Cut account holder on a seasoned account that is not overused and has a good payment history, you might just want to leave that account alone. Old age is a good thing when the subject is credit; long-established accounts opened will have a positive impact on your credit score.
But if you’ve established credit (and no longer actively use those accounts – usually credit cards), you can ask the primary account holder to withdraw your Authorized user or Cut status. This is a good idea if the account is overdue or is nearing its credit limit. Here, the primary account holder can lower your credit rating just because you are a Authorized User or Cut holder. Call it guilt by association.
This is a fairly simple solution that can have a big impact on your credit score. Call mom or dad, your ex-spouse, ex-business partner or whoever it is, and ask them to make a call and remove you from the account. Maybe tell them you’re thinking about buying a home and trying to get your credit back on track. Just in case, follow up in a few days to make sure they’ve taken care of it.
On the other hand, if you don’t have a lot of credit history or if you are new to the world of credit, be added on a credit account owned by someone else as Authorized User can increase your credit score. This can be a great strategy for a new member of the workforce who hasn’t had a chance to build much of their credit history. Mom or Dad or a trusted parent can add you as a Authorized User and all assets attached to their credit account are automatically transferred to you. The age at which the account was opened, timely payments, and prudent use of credit will all be added to your credit profile to help you build your newbie credit score.
Harness the power to be or become one Authorized user or one Cut account holder may be just the boost you need to kickstart your credit profile. On the other hand, it can also be a negative hanging around down your credit rating. Having the master account holder surgically removing you can have an immediate impact on the good. This is a good place to start as it can be an easy fix that can provide a lot of mileage.
If you have unpaid credit card balances that are more than half of the approved line of credit, and you have the money to pay off those balances, do so. Credit cards with a balance greater than 50% of the approved line of credit are considered overused and credit scoring algorithms don’t like it. High credit card balances hurt your credit score.
If your credit report shows that an old collection or write-off account is unpaid and you can provide proof that you actually paid it off, contact the credit reporting agencies, send them your proof and ask. their to change the status to paid. A paid debit or collection account is preferable to an unpaid account.
You are responsible for your own credit health and some corrections may be more difficult and may take longer than others. But get and be credited correct, is a good starting point for any suitable credit profile.
Once you’ve got your credit settled, go ahead and get mortgage pre-approved, find a real estate agent, buy a house, start a family, build a career, and everything in between!