A good credit score ranges from 700–749. An excellent credit score is 750 and above. Both good and excellent credit practically guarantees approval with the best interest rates as long as you do not carry too much debt. Adding positive credit accounts to your credit history is a pretty simple way to rebuild credit.
In fact, according to a report by the Consumer Financial Protection Bureau, 58% of the information on credit reports comes from credit card issuers. That’s a huge chunk of information but it’s easy to see why. Most consumers are likely to have more credit cards than a mortgage, auto or personal loan on their reports.
Here are a few ways to build credit scores by using credit scores. But keep in mind when adding credit accounts you must keep balances low. FICO credit scoring formula likes to see as much space as possible between your credit limit and account balance. The rule of thumb is to maintain debt ratios at 30% or less of your available credit limits.
1. Add an unsecured credit card
If your credit report contains mostly negative information it will be difficult to improve your scores. Get an unsecured credit card that will report on-time payments to the 3 major credit bureaus. Many credit cards now offer monthly free credit scores to cardholders which can help keep you on track with rebuilding credit scores. Pre-qualify now without affecting your credit score.
2. Add a secured credit card
Depending on your credit score, it may not be possible to get an unsecured credit card. Secured credit cards have the same benefits as unsecured credit cards and report payment history to the credit bureaus. The First Progress Platinum Elite MasterCard® Secured Credit Card is designed to help individuals build or rebuild their credit. This full-feature platinum secured MasterCard to rebuild credit offers worldwide acceptance and a credit line based on a security deposit, rather than on a credit score. The security deposit can be as low as $200 up to $2,000.
3. Get a Retail Credit Card
Retail credit is typically easier to qualify for than other revolving credit options; however the interest rates may be slightly higher than credit card interest rates. You have to weigh the pros and cons and decide if a higher interest rate is worth it to build credit. Fingerhut is an established online retailer offering more than 20,000 name brand products from electronics to furniture. Find out if you are pre-approved for a Fingerhut credit account.
Gettington is another online retailer with thousands of name brands. They offer flexible payment options and lower interest rates. There is no annual or over-limit fees; you get fraud liability protection so you can shop with confidence; an easy account management online; and you will get an instant credit response. Apply now the Gettington Credit Account
4. Authorized buyer credit
Family members with great credit can help you boost your credit scores with authorized buyer credit. A credit card company can allow an account holder to add you as an authorized user on an established account. The account holder’s information, including payment history, account balance and credit limit becomes part of your credit history. Authorized user accounts can instantly improve your credit scores and offer those rebuilding credit an established account to add to their credit history.
5. Add an Installment Loan
Adding an installment loan such as an auto loan, personal, mortgage or even a student loan to your credit files will give your credit score a tremendous boost. The credit scoring system rewards consumers who have a good credit mix and an installment loan will give you a good credit mix. Installment loans require multiple payments over time which helps create a history of repayment. When timely payments are made it may help improve credit scores. Quickly qualify for a personal loan, even with less than perfect credit. Apply online for a personal loan.
6. Request a Deletion for settled negative debts
If you pay a collection or settle a debt make sure you obtain a deletion and not a “paid collection” entry. This also applies to paying a debt directly to the creditor. Paid collection entries or settled accounts do not raise your score. See Get Deletions. Building credit may also involve disputing negative credit items. Here is a guide on how to dispute negative credit.
7. Decrease credit card balances
Amount of debt owed is 30% of your credit score which is significant when you are attempting to improve and rebuild your credit scores. Keep your credit balances within 30% or less of your total credit limit. Let’s say you have a credit card with a $5,000 limit and your balance is close to that limit. Your credit scores are going to suffer because you have a high balance to limit ratio.
Decreasing your balance to 30% or less of your credit limit will increase your credit scores immediately. The great thing about this technique is that it works whether it is a $5000 limit credit card or a $500 limit credit card. Decreasing your account balances to 30% or less of your credit limit on accounts will instantly improve your credit scores. Even better would be to reduce your credit card balances to 10% of your credit account limits. Your overall credit score will increase by keeping your balances within 10% of your credit account limits.
8. Retain old credit
Older credit is vital to credit scores, even if the account is inactive. A credit score contains five major elements: payment history (35%); amount of debt owed (30%); length of credit history (15%); mix of credit (10%) and new credit (10%). Maintaining older credit is vital to improving credit scores as credit history constitutes 15% of your overall credit score. Do not close older accounts, they show stability.
9. Limit the number of hard inquiries
Rebuilding credit involves adding positive credit to your files; however, once you are approved for a few new credit accounts stop seeking new credit. Hard credit inquiries can take between 5-10 points off your credit score. Limit the number of inquiries you have in a 12 month period and if possible, spread the inquiries among the three major credit bureaus.
Before applying for new credit try calling the credit card issuer, bank or lender and inquire as to which credit bureau or bureaus they pull your credit report from. Most lenders do not mind revealing that information. If you have a lot of inquiries on your Experian credit report then apply for lenders that use Equifax or Transunion instead.
10. Pay your obligations by the due date
Only add new credit if you are able to make timely payments. A late or missed payment can drop a good credit score by as much as 100 points. It may not make sense but if you already have negative entries on your credit report adding more will not hurt as much and your score may only drop by 30 points. Regardless, paying on time can raise your credit score because payment history constitutes 35% of your credit score.