The Truth About Boosting Your Credit Score

by Neal Frankle, CFP ®

There is so much hype about credit scores that it’s easy to get fixated on your number.  It’s true that your score is important and it helps reduce your cost of borrowing.  But let’s not go overboard.  Most people don’t have to go to extraordinary lengths to boost their score – and you probably don’t need to pay a cent to track or improve your scores.  Here are 4 steps you can easily take that will keep your score high without costing you any money and won’t eat up much of your time.

1. Find out where you stand.

Once in awhile it’s important to get your score.  This alerts you to any problems that may have to be addressed.  You can write to the credit bureaus of course and get your score.  That is a good solution because it keeps your information private.  Another alternative is to use a service I like very much.  It’s called Credit Karma and they provide your report for free and without signing up for any “trials“.

I like it because they send me a free monthly update and they let me know whenever there is a big change to my credit score.  That’s great because it acts like a proxy for identity protection to some extent.  Win-win.  Downside?  You have to give them your Social Security number in order to sign up.  If you don’t dig dishing out that info, just write to the credit bureaus and you’ll get your report (they already have your SSI number).

Regardless of how you get your credit report – get it every now and then so you can make sure you know where you stand.

2. Clean it up for free.

Nobody can get rid of negative data on your credit report if the data is correct. Nobody.

But you can fix most credit report mistakes. Many people will suggest that you write to the credit card bureaus and ask them to fix the problem.  The truth is that usually won’t help you too much.  If a creditor claims you owe them money in error you have to get that vendor to inform the credit bureau to clean up the mistake.  The bureau won’t take your word for it.

Often, creditors won’t give you the time of day and you can easily get very frustrated with this process.  If that happens, the best solution is to take your creditor to small claims court and force them to clean up their act if you have the proof that they are mistaken.  Don’t be intimidated by this idea.  It’s very easy and it turns the tables on the creditors.  They aren’t set up to appear in small claims court and they’ll usually be very willing to come to an arrangement with you once you slap this suit on them.  It costs less than $100 to file a small claims suit and it’s a great way to get to the people who make decisions.

3. Open new accounts for free.

Once you’ve cleaned up any mistakes, your next step is to open new accounts with high credit limits but keep your balances low. Use less than 30% of the limit and pay those balances off every month no matter what. Your credit score will improve dramatically and very quickly. Everyone loves you when you pay off your bills fast.

4. Don’t pay anyone to add accounts with good credit.

There are companies that can add accounts to your credit file, but they charge an arm and a leg to do it. Also, it’s not honest.  Don’t go this route.   Be patient.  The steps outlined above will work.  It won’t take all that much time and you don’t have to spend any money to get a great result.

What have you done to improve your credit score?

 

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