Build Your Credit with Do-It-Yourself Credit Tricks

January 26th, 2012

Okay. You want to build your credit score, but you don’t want to pay a bundle.

Here are a few tricks that will help turn a bad score into a good credit score.

An obvious place to start is with your credit cards.

Here’s a little trick that can really boost your FICO score. (By the way, even though it’s perfectly legal, not one consumer in a thousand knows this technique.)

Most credit cards have a limit: a maximum credit line.

You are allowed to borrow against that credit line up to the maximum amount.

But, you should NOT!

Why not?

Lenders don’t like to make loans to consumers who are constantly “maxing out” their credit cards, because they consider them spendthrifts.

In fact, if the balance on any one of your credit cards is more than 30 percent of the credit line, your FICO score will be penalized.

So how do you reverse that trend … and raise your FICO score?

Here are two easy methods that work and won’t cost you a dime:

Transfer balances from one credit card to another, so that none of the balances exceed 30 percent of the credit limit. If necessary, obtain another credit card and transfer some of your balances to it. (But keep in mind that you should never have more than five credit cards, and that you should transfer your balance after you have secured the credit card and know the limit.)

Ask the credit card companies to increase your credit limit so that your current balance falls under 30 percent. If you can get the credit card company to raise your limit from $10,000 to $25,000, then you can safely borrow up to $7,499 – and not just $3,000 – on it without jeopardizing your credit.

Now here’s another trick …

You probably don’t know this, but credit card companies routinely under-report the limits on their customers’ credit cards – or, even worse, don’t report them at all. Let’s say your true limit is $10,000. The credit card company might report your limit as only $5,000 to the credit bureaus .

So if you have a $4900 balance, you appear to be “maxing out” the credit card, which will hurt your score.

Why do credit card companies do this? Because it keeps their competitors from offering you other cards.

When competing credit card companies see high limits from another card issuer, they have found credit-worthy borrowers whom they can solicit through the mail.

On the other hand, customers with low limits are not as desirable.

So many credit card companies report incorrect limits just to protect their customer base. But this could be hurting your credit score by causing the bureaus to think you are closer to maxing out your cards.

So what should you do? Simple: Just check your credit report to make sure the bureaus have the correct information. If not, call your credit card company and tell them they must correct the mistake – knowingly reporting incorrect limits is illegal. If you raise heck, the credit card companies will report the correct information.

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Married or Engaged? Here’s the 411.

September 22nd, 2011

One of my readers recently sent me a great question:

“If I marry someone who has declared bankruptcy this year, will it lower my credit score?”

She went on to say that her credit is currently golden. So when she marries her fiancé, what is going to happen to that great credit?

It’s a common worry, but the good news is that you and your spouse will retain separate credit files. Marrying someone with bad credit won’t hurt your credit in and of itself. And if you are already married to someone who experiences credit issues, your score will not be affected, so long as you protect yourself.

It works like this: If Joe has a credit card in his name only, his credit score will suffer if he makes a late payment, but his wife Jane’s credit score won’t be affected at all. But if Jane and Joe have a joint credit card, and Joe makes a late payment, both of their scores will suffer.

This is one of the reasons I always tell married people to keep separate credit files. This way, if one person in the marriage defaults, the other spouse still has strong credit, which the couple can then leverage. But if you have joint credit cards, mortgages, and car loans, what one person does on those accounts WILL affect the other person.

So no need to worry about your fiancé’s past mistakes. There’s no way it will hurt your credit score. But to protect yourself from any future credit problems, I strongly suggest that you don’t open joint accounts with your soon-to-be spouse. Instead, have him apply for secure credit cards and start the process of repairing credit after bankruptcy.

Cash-Only Is Dead Wrong

July 9th, 2011

Many so-called experts say that if you want to build credit, you should adopt a cash-only policy. But here’s the truth …

They are dead wrong.

Avoiding credit won’t make life easier. In fact, it will make life a heck of a lot harder.

If you adopt a cash-only policy, you won’t be able to build credit. In fact, you’ll end up with no credit. And no credit is just as bad as poor credit.

You see, the credit-scoring bureaus want to see that you can responsibly handle many different types of credit before they award you a good credit score. If you don’t accumulate a proven track record, you won’t get a good credit score.

This is why I always say that having no credit score is just as bad as having a poor credit score.

No credit score means …

You’ll have a hard time getting great insurance premium rates.
You might be unable to find a job.
Landlords might not want to rent to you.

And if you ever need a loan (and you probably will!), you will get lousy terms and pay an arm-and-a-leg in interest.

Most likely, the banks are spreading vicious rumors!

Here’s the cold-hard truth …

The banks have intentionally kept consumers in the dark about credit scoring.

The banks fare better if your score is lousy. Simply put, the lower your credit score, the more you will pay in interest.

But what if you learned all the secrets and beat the banks at their own game?

Click here for an article I wrote about the biggest misconceptions of credit scoring. And feel free to pass the article on.

Oh, one last thing. Here’s a pop quiz …

Is the following statement true or false?

“If you shut down some of your credit card accounts, your score will go down.” Click here to read the full answer.

Tags: build credit, credit scoring myths

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Build Your Credit: A Summer Resolution

June 28th, 2011

I know that it’s a little weird that I ask you to make a “Summer Resolution,” but I’ll take any opportunity I have to get you to take action. The solstice was a few days ago, and there’s no time like today…

So why not resolve to clean up your credit? I know how scary it can be to face financial problems, but if you join my 14-Day Credit Challenge, your credit score will be significantly higher by the end of summer.

All that panic, all that financial strain… GONE!

Like my friend Dean Graziosi always says… “If you keep doing what you are doing, you will keep getting what you are getting.” Do something different so that your financial situation can change once and for all.

When you join the Challenge, you’ll learn:

How to make sure you have helpful and not hurtful credit cards in your wallet
The seven things you can do that will always cause your score to increase.
How to stop lenders from reporting incorrect information
How to manipulate your utilization rate so that your score increases
Using installment loans to your advantage
Reestablishing credit after bankruptcy, foreclosure, or short sale
Building credit from zero
Renegotiating your interest rates
Plus, all the dirty secrets hidden by banks and credit bureaus.

Click here to join.

Tags: build credit

Teaching Children About Credit: An Introduction

June 6th, 2011

I’m about to say something about teaching children about credit cards. And you are probably going to think I’m crazy.

Here goes …

If you have teenage children, you should give them access to your credit accounts.

Now, I know what you are thinking …

What? My teenagers can’t even pull their pants to their waists, much less manage credit responsibly.

And this is exactly why I think you should give kids access to your credit accounts.

Because most minor children never buy homes, apply for lines of credit, or purchase cars with installment loans, most have no credit. And credit bureaus assign really terrible credit scores to people with no credit. In some ways, no credit is just as bad as poor credit.

So if your kids go out into the real world without first establishing credit, they will pay higher car insurance premiums, and they will pay higher interest rates on their first car loan and credit cards. Landlords might not want them as tenants (or you might be required to co-sign), and some employers might not hire your kids.

In other words, your children will be at a disadvantage when they leave the next.

So while I might sound a little crazy for suggesting that you give your teenager access to your credit, weigh the dangers associated with not teaching children about credit cards.

Teaching Children About Credit? If you aren’t, here is Danger Number 1:

As soon as they become adults, your kids will be heavily solicited by credit card companies. They will receive offers for credit cards with astronomically high interest rates and fees. Your kids might walk by booths on their college campus, pick up a credit card application, fill it out, and agree to lousy terms with interest rates that will cost them an arm and a leg.

Teaching Children About Credit? If you aren’t, here is Danger Number 2:

If your kids don’t know about credit cards, and have experience using them, they will likely try to establish credit by using methods that don’t work. So they will end up with lousy scores, and overpay on car loans and credit cards. And, like I said, they might even be turned down for job opportunities.

Teaching Children About Credit? If you aren’t, here is Danger Number 3:

Guess who your kids will turn to when they need financial assistance? Probably you, the parent. And if they are paying high interest rates and unschooled in debt management, they will likely need to borrow money from you.

But as the old adage goes, if you give them the tools to fish and teach them how to fish, you will never need to give them fish again.

Over the next few weeks, I’ll take you through my seven-step plan for teaching children about credit! Stay tuned!

Related Articles

Teaching Children About Credit: Step One

Teaching Children About Credit: Step Two

Tags: build credit, c, children & credit cards

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