Your eyes trained on the FICO scores and what they may fore-tell about your future financial health? We have some tips for you so that you remain good on the books, and still have enough cash to go on living happily!
1. Pay Bills on Time – Some old conventional advice for you – don’t let the bills pile up and then panic one fine day! Keep your liabilities as clean as possible and keep up a consistently good credit score.
2. Even Out with the Companies for Any Lapses – We all have those periods when cash is just too short for daily expenses, let alone for credit card payments! If such a dry spell is pulling down your credit score, then it is time to write a letter to the card company asking for a reprieve because of your past good habits. This will of course work only if till the crunch period you had been a regular payer. The company can help put in a clause that will effectively mean that you have agreed to pay in good time and, thus, there are no holes in the credit history. Brush up on your negotiating skills!
3. Use Less of your Card – Paying bills on time is great, but what can also swing the score in your favour is actually spending less within a billing cycle period. So, if your limit is $2,000, and you regularly spend 50% of it, then even your religious and disciplined bill-paying habit will not help you from looking like a big spender! Instead, try to reduce the percentage of spending on your limit, and improve your score.
4. Make sure that all the Details are Accurate – Before you go about your course-correction, make sure that the details on your report are correct and up-to-date. Check minutely for any miscalculations and make sure that your credit card company is tagging your most recent, possibly altered, credit limit in the statements, instead of anything older or lower. One of each of Equifax, Experian and TransUnion reports can be accessed for free every 12 months through AnnualCreditReport.com. So, 1 every 4 months can be sent for so that you are always on top of the numbers.
5. Try Upping your Credit Limit – Your rating is a play of percentages, so the more you are assessed against, the better your chances of standing out well. You could request your credit card provider to increase your credit limit to achieve this. But the biggest caveat here is that your spending percentage should remain fixed in the face of this limit upgradation. If you start to view more money on hand as better spending opportunities then you risk unleashing a cyclical problem of bad scores and more severe bills!
6. Capitalise on Old Debt – The general view is to keep just the good aspects of your credit history on the records. But an alternate, and rather convincing, view is to keep your old history of debts on paper. This may seem counter-productive, but it in fact will help showcase your tendency and capacity to repay accumulated debt in good time, creating a reputation for rational understanding of credit and a non-impulsive approach to repayment.
7. Keep it Simple – Keeping multiple cards with small limits may seem like a smart idea, but what it does is cram up your report with multiple balances, and worse, multiple max-out and default information. This is a sure sign of sending out signals of being a confused, careless spender, and the reporting agencies dislike that! Pay up for all those small cards and discard them, hedging your expenses to ideally just two cards. It will give you better control.
8. Be Patient – If you have a particularly bad report, then you will have to bide time for things to straighten up. Keep up all the good habits with a long-term perspective in mind, and resist the need to find quick-fixes. Because, really, there aren’t any!