(Read through this entire post and get a free copy of the letters I used that jumped my credit score 100 points.)
Recent surveys show that more and more Americans are suffering from poor credit. Poor credit is a credit score of 620 or less. Average credit is between 620 and 680. Good credit is between 680 and 720. And excellent credit is a credit score of 720 or higher. This is just an average to give you an idea where you may stand. Different Credit Bureaus have their own numbers but this will at least put you in the right ballpark. By different Credit Bureaus I'm talking about Equifax, Experian, TransUnion, and FICO.
The highest I've ever seen was 840. Funny thing about credit scores is just by doing an inquiry, meaning fill out a credit application to see if you can qualify to purchase something, this will cause your credit score to go down, even if you didn't complete the purchase. I've learned several techniques utilizing credit. It became an obsession of mine and it taught me a lot. Now I'm going to share that information with you. Things that you can do to improve your credit as well as some secrets that the Credit Bureaus and Credit Lenders don't want you to know. So here they are! The Top 10 list of how you can raise or repair you credit score!
1) Watch out for inquiries
If a sales rep tells you to fill out a credit application to see if you can purchase an item you really want, don't do it. Doing this will definitely cause your credit score to go down. Only do it if you know for sure that you are going to need a loan. Some people that offer loans may tell you that it's only a soft credit pull. Meaning you're just glancing at it and it won't hurt your credit. Yes and no. Using websites like creditkarma.com will not lower your credit score. But it won't be that accurate either.
When you use a credit score checker by means of a car dealership, home loan lender, credit card lender, anyone offering a loan, this will cause your credit score to go down. I would recommend going straight to the Credit Bureaus yourself and taking a look. Some will offer you a free credit check once a year or for your first time. But most of the time you can expect to pay a fee.
2) Keep your credit utilization low
Another thing that people don't know is when you max out your credit cards this can cause you to lose 40 points or more on your credit score. Nobody knows exactly what causes a one point or three point gain or loss. At least I can't find any reliable information.
One time I paid off my credit cards and my credit score jumped up 80 points. Keep your credit card limits below 30% utilization. If you have a credit card with $1,000 credit limit, never keep more than $300 in there. As you continue to use more of your credit card your credit score will continue to go down. You will definitely feel the hurt once you reach 90% of credit utilization or more. Like I was saying before, this can cause a drop in your credit score of 40 points or more.
3) Credit cards
In an ideal situation you want to pay your credit card off at the end of the month. Even if you have more cash than you know what to do with, sooner or later you will need credit. Many jobs nowadays will not only check your criminal history, but they will also check your credit score. A credit card can be a good thing too, as long as you don't let it get the best of you. Remember, keep your credit utilization at 30% or less, or ideally paid off at the end of month. This will do wonders for improving your credit score. Remember too, a credit card is not extra money. It's a loan from someone else. If you don't have the cash, then you probably can't afford it. Pay it off or don't use it.
4) Stay updated with your current score
Know your credit score before you pull out a loan. Lenders, despite what you think, don't have to give you the lowest interest rate. They can mark up the interest rate if they want to. Paying too high of an interest rate can oftentimes put you in a bad situation to where you are unable to meet your payments, lowering your score. Make sure you are getting what you deserve. Ask for proof on paper. Lenders will mark up the interest rate because this gives them a bigger bonus at the end of the month. Surprise! Lenders are greedy. And at the end of the day, they only care about how big their check is. So look out for yourself.
5) Never miss a payment
This can have huge damaging effects on your credit. Sometimes missing one payment can ruin your relationship with the lender forever. Lenders keep track of everything they give out. They can look on their records and see that you missed a payment with them. You will get denied before you even have a chance to speak with anyone. Their computers won't even let you past the first step. If you're in a situation to where you are concerned about missing a payment, speak to the lender. Despite what you think, communicating with him is always the best move. They may be able to push off your payment, skip it or lower it for that one instance.
6) Know your rights
Let's say despite trying, you miss your payment. Most, if not all lenders will not report that you've missed your payment for 30 days. Some lenders even give you a 3 to 10 day grace period before sending you a late notice. But for the most part, most lenders will not report it to any of the bureaus for at least 30 days. This is because each time they report something, they have to pay for it. Do you really think the Credit Bureaus work for free? Nope. It's a business too. And most of the money that the Bureaus make are from people with bad credit. But just remember, even though they won't report it to the Credit Bureaus, they will still keep record of it, and it will most likely affect your relationship with the business.
Okay. Now we're getting into the meat. So let's say you're making all your payments. And you've brought your credit cards down to a 30% utilization. Because of hard times let's say you have debt that you're unable to pay. And you just don't know what to do. Lenders will hound you and hound you until they get their money. Basically what happens is the business that gave you the loan will sell the debt to a collection agency. This will also appear on your credit report. Then the credit collection agency will track you down until they get their money. They'll even go through a court system and deduct money from your paycheck. Sometimes they can deduct up to 30% depending on which state you live in. This is the last thing you want to happen especially if you can't make your payments. So here's a little tip for you, there are different laws to protect people like you and myself. Know the law! (FCRA, FDCPA) It's always good to pay people back if possible but even so, there are certain steps you should take to make sure that the person who claims to be collecting the debt is doing things the right way.
7) Debt verification letter
A Debt verification letter is a letter sent out to the Credit Lenders that asks them to provide proof that the debt is valid. Once they receive this letter they have 30 days to provide you proof that the debt is truly yours. If they're missing any facts, then by law (FDCPA), they have to drop the case against you. Meaning they can no longer collect the debt. I will attach a link to a sample debt verification letter to the Credit Lenders. It asks specifically for info that a Credit Lender needs to provide you.
This debt verification letter will provide you exact word-for-word details on what the lender needs to provide you in order to prove that you indeed owe them money. Some sneaky collection agencies will sometimes try to collect debt against you when it hasn't even been sold to them. This is the proof they will need to provide you. I know of some cases where a debt collection agency actually was assigned to collect the debt from the owner. However because they were not able to provide everything that the debt verification letter requested, the debt was dropped. This has given many people have a chance to start all over.
8) Debt verification letter to Credit Bureaus
I will also attach a letter of debt verification to Credit Bureaus in this blog. This is similar to the one that you will send to Credit Lenders. Similarly, you're going to send this letter to the Credit Bureaus and they will also have 30 days to provide proof that the debt is indeed yours. Many Lenders only save their information for 12 months and then dispose of it. So there is a good chance that the Credit Bureau will not be able to prove it's yours. That's not always the case, however, some do keep track of debt for longer periods of time. But it's still worth a shot.
There are certain laws that protect you under FCRA. The Credit Bureaus will need to provide proof that you indeed agreed to the loan via original copy of the loan as well as your signature. There are even more things that they are required to prove. The Credit Bureau will try to reach out to the Lender or the collection agency for this proof. It's a lot of work for them considering that they have many more things to do. Sometimes they just don't move fast enough. If they pass the 30 day marker, they are required by law to remove any negative debt from your credit report. Make sure you fill out the debt in question on the debt verification letter to Credit Bureaus as well as Credit Lenders. You need to be exact.
9) Send the letters
When you send these letters whether it's to the Credit Lenders or Credit Bureaus, you may have to send more than one. I will suggest sending at least three. Send the letter certified too. Once they receive the letter, they will have to sign for it, and mail you back proof they received it. This way they can't say they never got it. If all goes as planned, you can expect to see an increase in your credit score in roughly two to three months. I've heard countless of stories of people being able to increase their credit score 200 points or more. This is not a joke. This is real and it works.
Some people will even offer to do it for you. But they're not doing anything different than what I'm suggesting from what I know. However, they are there professionals. I know one guy in my area who charges $1,500 and makes quite a good living off of fixing people's credit. Hey, he's doing a good deed. But try doing it yourself first. It's worth a shot.
Here are the letters for each credit bureau, including the debt validation letter you send to your creditors:
Note: Under where it says 'Provide Physical Verification,' write 'Unverified Account.'
10) Open a secured credit card
Re-establish your credit by opening up a secured credit card. An unsecured credit card is backed by the full faith and credit of you. But if you don't have good credit then you'll need to put money down. You can open up a secured credit card for as low as $300 of your own money. It works just like an unsecured credit card. This will help you build credit fast. You'll need to make your monthly payment, and you can increase the balance as well. Once your credit gets up to good or better then you can close your secured credit card and open up an unsecured credit card and build your credit off of somebody else's money.
There are more little things that you can do to fix your credit, but this is the base of it. This is good for people who want to improve their credit as well as people who are feeling like they are in the dumps and there is no way out. Remember, there is always a way out. Sad but true, there are loopholes in everything. As long as you follow the law there is nothing that the Credit Bureaus or Credit Lenders can do to scare you. You can take control of your own Financial Freedom. I hope this article helps you. And I hope you'll leave a comment below. Try this out! You only have something to gain!
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