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Credit repair - CMG Credit solutions How to improve your credit score

How to Improve your Credit Score

How to improve your credit score to significantly increase your purchasing power and creditworthiness?

So, I will discuss a few tips on how to improve your credit score, don’t worry – this is all pretty basic stuff.

So here’s a really boring pie chart to show you the different pieces we will discuss.

But as a reminder, no part of your credit score is based on your income, or where you live or went to school, okay?

First, let’s talk about your payment history. 35% of your credit score is based on your debt payment history. Debt such as your credit cards, home loan, and car loans report your payment history to the credit bureaus on how well or how poorly you pay on time (this fact alone means that some people are totally screwed). If you were reported as paying any late payments, this could drop your credit scores dramatically and that could mess up your scores for a while – so don’t do that. If you were not late, but your credit report ways you were, you might want to consider credit repair, because we all know the credit bureaus never make mistakes, right? If you have no credit history, you’re not totally screwed, so you can start by opening an account with the same institution where you do your banking.

Next, is your balance-to-credit-limit ratio. 30% of your credit score is based on your balance-to-credit-limit ratio, or in other words, how much of your credit limit is debt? To figure out your ratio, divide the balance by your credit limit, and will give you the percentage of your balance-to-credit-limit ratio. For example, if you have a $1000 credit limit, and your balance is $500, that would mean you have a 50% ratio, and that’s too high. To obtain the best credit score, your balance should be a minimum of 5% to a maximum of 25% balance-to-credit-limit ratio. Any higher than this means it is risky to the lender and it means your score goes down. Any lower than this means the account may not be included in the calculation at all. This only applies to unsecured lines of credit, so your car loan and home loan are not included in your ratio. Sometimes if you miss a payment, your lender may drop or reduce your credit limit, which will make your ratios go down.

On this next one is the age of your credit – this counts for 15% of your credit score. The longer you manage your credit history the higher the credit score rating. Older accounts that are open with no balance are the best way to age and improve credit scores. To add some age to your credit history, talk with your parents or close friends about them adding you as an authorized user to their older credit accounts with no balance. Their account will then show up on your credit history. This way you can improve the age of your credit history and increase credit scores immediately.

The next one is 10% of your credit score is based on the types of credit. A mortgage and a car loan are types of installment loans. Credit cards and department stores are types of revolving loans. These are just two types of many. It is generally best to have a healthy mixture of types of credit to increase your credit score.  A loan from your bookie doesn’t count. 

And finally, 10% of your credit score is based on new credit. A new account can both help and hurt your credit score rating. A new collection account can hurt you. A new account with a high balance-to-credit-limit ratio can hurt you, a new account with a low balance-to-credit-limit ratio can improve your credit score. Excessive inquiries can also hurt your credit scores, so don’t get all crazy and apply everywhere because it will backfire.

To achieve the best credit score, pay down your balances, shift or transfer some of that debt to other accounts, and of course, pay your payments on a timely basis, and don’t be afraid to challenge credit reporting errors to repair your credit.

It is helpful to note, that if you pay off all your debt, your credit score will go down. Remember, your credit score is based on your credit and debt repayment history. So, if you have no debt, your credit scores can totally take a nosedive. If your credit score rating needs improvement, maybe because you have some late payments, you can repair your credit yourself.  We have an alternative for you: Our DIY E-book, with our DIY E-Book, you can learn how to repair your credit by yourself.  It is the ultimate guide to fix our own credit, complete with sample dispute letters and worksheets.


Or better yet, hire us

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